Organizational Transformations Fail Over 74% of the Time!

McKinsey & Company 2015 Study Findings

According to a 2015 study by the global consulting firm McKinsey & Company, just 26% of executives feel that the Organizational Transformation programs undertaken by their firms have been successful.   Think about that for a moment and let it sink in….74% of executives believe that their organizational transformation programs failed!

To make matters worse, these figures were comprised solely of completed organizational transformation programs, and do not include programs that were cancelled by executives prior to completion (likely due to their overwhelming failure).  There is no way to quantify this number, but if a 74% failure rate looks bleak, after adding in programs that failed to reach completion this number could easily be a failure rate of 80-90%!

How To Give Your Organizational Transformation The Best Opportunity For Success?

It’s not all bad news! The same study referenced above, found there to be 4 key factors that were present in successful organizational transformations.

  1. Leadership & Communication
  2. Empowering the Right People
  3. Accountability & Responsibility
  4. Creating a Culture of Continuous Improvement

Leadership & Communication

For organizational transformation programs, the term leadership relates to executives that are regularly engaged in the program.  Employees need to see that the organizational transformation is a top priority for these executives.  In this way, the executives need to be role models for the entire organization, “if these busy executives are taking the time from their schedules to regularly participate in transformation related activities, it must be important”!  McKinsey found that organizational transformations are 5x as likely to be successful when executives and senior leaders role model the behavior they are asking of their employees.

When embarking on an organizational transformation, executives must not underestimate the power of communication and being role models.  At every opportunity, the executives should look to communicate their vision for what the firm should look like after the organizational transformation is completed.  As the organizational transformation is underway, executives need to continue to communicate, highlighting progress and successes of the programs to date.  In this way participants will feel a sense of pride as their successes are acknowledged by the executives, and this will keep organizational transformation at the forefront of employee’s minds.

Empowering the Right People

Organizational transformation does not happen on its own, individuals need to be allocated to the transformation effort.  The individuals that are chosen to work on the transformation will make or break the entire effort.  When choosing resources, it is key to keep people resistant to change out of influencer roles.  Nothing can sap the energy from a transformation effort quicker than people with a lot of influence that don’t believe in the change!

Who should be chosen?  High performers and active supporters of the transformation effort.  Executives should look down the ranks for individuals that have been identified previously as high performers with high potential.  Who better to work on the future of the company than the individuals that have been identified as the future leaders?!  They will be the most engaged, will want to prove their leadership skills, and best of all will want to build a better company for the future when they are the leaders!

One other thing to note here, is that McKinsey found that organizational transformation programs where individuals spend more than 50% of their time on the program are twice as likely to be successful as programs where less than 50% of time is spent.   Clearly, the individuals assigned to work on this organizational transformation will need to spend a significant amount of time dedicated to this effort.    This leads many executives to create a centralized “Transformation Office”.  This Transformation Office is a mix of 100% dedicated resources and partially dedicated resources, the entire goal of which is to ensure the successful outcome of the organizational transformation effort.

Accountability & Responsibility

The first step in creating a culture of Accountability is to explicitly define roles and responsibilities.  Firmwide goals should be created based upon the vision of the future state firm set out by the executives.   Goals for individuals must be aligned with the overall firmwide goals.  By spending the time and mental energy to trickle down the firmwide goals into individual goals, it inherently creates a company where everyone is rowing in the same direction, toward the same overall goals.

This goal alignment also has another beneficial side effect; individuals understand how they fit into the overall corporation.   Employees will know what their role is in the firm and how their individual contribution affects the firm.  Said another way, employees will know what they do and why they do it!

Once these goals are set, it is crucial to setup a mechanism to track how individuals are performing in meeting these goals.  This tracking needs to be transparent so everyone knows their goals, the priority of each goal, as well as the criteria for considering the goal to be achieved.

Creating a Culture of Continuous Improvement

After the initial organizational transformation program is completed, the change effort does not end.  Companies need to embed a culture of continuous improvement into the organization.  The organizational transformation program is a perfect first step toward this; as the employees learn how to properly perform change management activities, this will become part of their day to day thinking.

Executives must not rely upon this organic culture of change however, and must make this a core value of the firm.  In the McKinsey study referenced above, over 40% of the respondents said that “they wish they had spent more time thinking about how their organizations would continue to improve”.   For firms that established a Transformation Office, this can be as simple as re-tasking a modified version of that team to become the “Continuous Improvement Office”.  This Continuous Improvement Office can work with the influencers and executive leadership to identify areas of needed improvement, and apply the company’s change management approach to improve these areas.

Want To Learn More?

The discussion above is just the tip of the iceberg when it comes to Organizational Transformation.  To assist our clients, Your Chief Advisors has developed an Organizational Transformation Roadmap as well as a standardized Project Management Approach that can be utilized for each of the individual projects within the Organizational Transformation Program.

Contact us today to learn how to utilize the expertise of Your Chief Advisors to make your Organizational Transformation effort a success!

How can we help you?

Contact us today to begin exploring the different ways that we can work together.

Don't forget, you can reach out to us any time!