IN BRIEF:
- Companies are engaging in transformational activities at an accelerated rate, making the ability to transform successfully and continuously in response to disruption essential for an organization’s survival.
- Human factors were commonly identified as a primary reason for the result of transformations.
- To take their transformation efforts to a higher level, organizations must focus on placing humans at the heart of their strategies.
PULL QUOTE: “The complex factors that determine whether a transformation succeeds or fails are deeply connected to the human element.”
Transformation is important for the enduring success of any organization. However, there has recently been a noticeable shift in its frequency and pace. The EY Global Board Risk Survey revealed that 82% of board members and CEOs believe market disruptions are happening more frequently, and with greater impact. As a result, companies are engaging in transformational activities at an accelerated rate – making the ability to transform successfully and continuously in response to disruption, essential for an organization’s survival.
EY and the University of Oxford’s Saïd Business School collaborated to look into more modern and effective methods for driving organizational change. The approach placed a greater emphasis on human factors, which was commonly identified as a primary reason for the failure of transformations. It was observed that not only is the rate of transformation failure excessively high, but it also imposes a human toll that organizations can no longer tolerate.
The research indicates that 85% of senior leaders have participated in at least two major transformations in the past five years. Furthermore, 67% of those surveyed acknowledged that they have been part of at least one transformation that did not perform well during this period. While not surprising, it was astonishing that companies continue to accept this high rate of failure as the cost of change. By any other measure or in any other scenario, such a level of performance would be unacceptable.
This research underscores that the complex factors determining whether a transformation succeeds or fails are deeply connected to the human element, a pattern that holds true across various industries and geographies. Adequate support can transform the increased stress associated with transformation into a catalyst for enhanced performance and drive progress. To optimize their chances of success, organizations must become proficient in these key areas.
Cultivate essential leadership skills
In the study, employees identified leadership as the primary factor influencing transformation outcomes, regardless of whether it was successful or not. Leaders themselves considered leadership to be the most critical element in successful transformations, but deemed it insignificant when the transformation did not meet expectations.
It's essential for leaders to confront their own fears, worries, and uncertainties about the path that lies ahead. For instance, 47% of participants from highly successful transformations reported that leaders were open to ideas from junior staff members, compared to 29% from less successful transformations.
Inspire through a shared and compelling vision
The vision is the cornerstone of any transformation. Leaders should extend their search for an inspiring vision beyond their personal scope, their organization, and even their industry. They should cast a broad net to employ future-oriented planning to uncover bold new possibilities, shaping a vision that garners widespread support and resonates emotionally with everyone involved. Close to half (47%) of participants from highly successful transformations acknowledged that the vision was clear and persuasive, in contrast to just 26% from transformations that did not perform well.
For the vision to take hold, leaders must effectively convey the reasons behind the need for transformation, rather than merely dictating the actions required. Nearly half (48%) of employees from successful transformations reported that leaders successfully communicated the reasons for organizational change, as opposed to 25% from unsuccessful transformations.
Foster a culture that encourages input
In the qualitative analysis of the research, employees involved in unsuccessful transformations expressed feelings of being ignored, unsupported, and stressed both during and after the process. Subsequent discussions found leaders surprised at these findings and their lack of awareness regarding the significant emotional impact an unsuccessful transformation has on employees.
Leaders must channel the appropriate emotions to keep employees committed and driven, while also offering sufficient emotional support to stave off worry and exhaustion. According to the predictive model used in the study, increasing emotional support raised the average probability of a successful transformation by 17%. By being attuned to the emotional state of employees throughout the transformation, leaders can detect early signs of trouble and implement changes to steer the transformation back on course.
Empower through clear responsibilities
There will be unexpected developments, and intermittent pauses in any transformation journey. Leaders must strike a balance between providing structure and discipline while allowing space for creativity and innovation. Over half (52%) of participants from successful transformations reported that employees had well-defined roles and responsibilities, and 49% indicated that decision-making powers were distributed clearly and suitably throughout the organization.
Leaders should promote a culture of trial and error by shifting from a mindset of avoiding failure at all costs to one that embraces rapid learning from failures. Minor setbacks can pave the way for significant achievements, while a fear of failure often results in lost opportunities. Forty-six percent of respondents from successful transformations said they established a process that fosters innovative experimentation without the risk of such experimentation adversely affecting careers or compensation.
Leverage technology and skills to drive action
Technology is not the end goal, but it is instrumental in bringing the vision to fruition. Selecting the appropriate technology is essential to achieving the vision and streamlining the transformation process. Leaders identified the effective deployment of technology as the second most important factor for a successful transformation and its ineffective use as the second leading cause of poor performance. Nearly half (48%) of those from successful transformations reported that their organizations had made the right technological investments to support their transformation goals, as opposed to 33% from less successful transformations.
It's vital to consider the emotional reactions that come with the introduction of new technology. Employees from underperforming transformations are 25% more likely to associate transformation with concerns about job stability (49% compared to 39%). Others might view technology as a substitute for human interaction, which is crucial for the emotional health of employees and the smooth functioning of the organization.
Leaders should focus on demonstrating progress rather than striving for perfection. By combining recruitment, upskilling or reskilling, partnerships, and outsourcing, leaders can foster the appropriate digital mindset and skills to actualize the potential benefits of technology. Forty-nine percent of participants from successful transformations indicated that their organizations possessed the necessary digital skills and mindset for the transformation, compared to 35% from less successful transformations.
Collaborate to connect and create
In contrast to traditional corporate cultures that favored a directive, top-down hierarchy with employees carrying out a vision dictated by their leaders, the current continuous state of transformation demands mutual reliance and teamwork. Leaders must cultivate a culture that promotes connectedness and inventiveness, creating an environment where employees feel secure to explore new methodologies — both digital and agile — that foster innovation, engagement, and rewarding work experiences.
Forty-four percent of those from successful transformations reported that their organization's culture supported the adoption of new work practices, as opposed to 28% from less successful transformations. For new work practices to thrive, leaders and employees must work together to recalibrate the dynamics of delegation, ownership, and empowerment. Forty-two percent of participants from successful transformations noted that a new organizational culture was intentionally defined and put into practice as part of the transformation initiative.
Harness the human element to achieve transformation success
Leaders are aware that their organizations must undergo change, yet the challenge of transformation can leave many feeling inundated. In a time characterized by relentless change, complacency is not a viable option.
By tapping into the collective strength of their employees and by applying best practices in relation to each of the factors mentioned, leaders can steer their organizations towards a successful transformation. To take their transformation efforts to a higher level, organizations must focus on placing humans at the heart of their strategies.
Rossana A. Fajardo is the Consulting Leader of SGV & Co.
This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinion expressed above are those of the author and do not necessarily represent the views of SGV & Co.
