Change Management - Why and how to do it!
Why should we talk about change in the first place?
As human beings we are always striving for more, but we are resistant to change in the way that we would like to achieve everything while keeping our current habits and lifestyle. And, if for a single person changing can be difficult. How about for organisations that have thousands of individuals working for them? It becomes exponentially harder due to the complexity that the change process is generating.
But is avoiding change the smart thing to do?
Let’s see what happened to some of the giants that at some moment in time said no to change …
Xerox
In 1959, Xerox launched the 914 photocopier and revolutionised the document-copying industry. This is something that you maybe already know. What you maybe don’t know is that Xerox also had a fantastic research centre.
Their inventions include: the mouse, the laser printer and a windows icon-based user interface. Sound familiar? …
For years Xerox management did absolutely nothing with their cutting-edge inventions and continued to profit from the 914 photocopier. Meanwhile, Apple, Microsoft and HP ”borrowed” their technology and made billions.
Other two great examples come from mobile-phones industry.
Nokia
In 2007 Nokia was earning more than 50% of all the profits in the mobile-phone industry and in 2008, Nokia was said to have one of the most valuable brands in the world.
Strange enough, Nokia had been a surprisingly adaptive company, moving between different businesses like: paper, electricity or rubber shoes. They also made a great move anticipating the rise of cell phones and got rid of everything but the telecom business.
Nokia came up with the first smartphone back in 1996 (11 years before the Iphone) and built a prototype of a touch-screen - internet-enabled phone, at the end of the 90s. Also Nokia continuously spent enormous amounts of money on research and development.
So, where they managed to fail?
Nokia focused mainly on hardware and decided to ignore software and also underestimated how important the transition to smartphones would be. They overestimated the strength of its brand and believed that even if they are late to the smartphone game, they would be able to catch up quickly. Long after the iPhone’s release in fact, Nokia continued to insist that its superior hardware designs would win over users.
Blackberry
In 2007 it had more than half of the market share of phones in the US. But even after the Iphone release in June 2007, Blackberry ignored for a significant period touch screen based technology insisting their phones would remain the de-facto standard for enterprises.
Polaroid
"Instant photography at the push of a button!" During the 1960s and '70s, Polaroid was maybe the coolest technology company on earth. They were an innovation machine that launched one must-have product after another. Polaroid grew from being a garage start-up in 1937 into a billion-dollar company.
What they failed to realise was that digital cameras were going to be the way of the future and once they did it, it was too late. Polaroid filed for bankruptcy in 2001.
Yahoo
In 2005, Yahoo owned 21% of the online advertising market, It was no #1 among all players. Yet today, they are struggling to maintain their #4 position behind Google, Facebook and Microsoft.
Where did they go wrong? Yahoo decided not to be a dominant search player and outsourced their search engine to Microsoft Bing. Also very interesting is that Yahoo had the possibility to buy:
? Google in 2002 for $5 billion dollars. Google is now the No 1 brand value in the world, worth over 245 billion (50 times more).
? Facebook in 2006 for $1 billion dollars. For some reason they lowered their offer during negotiations and Mark Zuckerberg backed out. Facebook is now the No 5 brand value in the world, worth over 129 billion.
But how about the ones that actually decided to change?
One of the most legendary shifts in social media history is the transformation of Odeo into Twitter. Odeo started as a network where people could find and subscribe to podcasts, but the founders feared to continue when iTunes began taking over the podcast niche.
After giving the employees two weeks to come up with new ideas, the company decided to make a drastic change and run with the idea of a status-updating micro-blogging platform.
Starbucks
Starbucks started off in 1971 selling espresso makers and coffee beans. After Howard Schultz (current chairman, president and CEO) visited Italy in 1983, he decided to actually brew and sell Starbucks coffee in a European-style coffeehouse and transformed Starbucks into the worldwide sensation it has become today.
Suzuki
Suzuki is the automotive company that may be best known today for the high-performance motorcycles and vehicles they produce. But from 1910 to 1935 Michio Suzuki was best known as the inventor and seller of machines that powered Japan’s silk industry.
HP
HP started as an engineering company in 1947. It began by creating electrical testing products, including audio and signal generators. In 1968 they introduced the first large-scale personal computer but it was only in the 90’s when this idea started to pay off. Since then, HP focused mainly on home computers and printing-scanning accessories.
As a conclusion we can say that the need for change appears when internal and external environment is constantly changing and the company strategy stays the same. This phenomenon is also called strategic drift. The environment and the strategy are basically drifting away from each other.
So companies need to adapt is order to survive or thrive from opportunity. And, as we could see in the previous examples, what seems today just another opportunity can actually lead tomorrow to a fight for survival.
I believe that there is no discussion if one should change together with the environment, but rather how to do it the proper way …
Change Management is basically the discipline that helps making this transition period a successful one and it guides us how to prepare, equip and support individuals to successfully adopt change in order to drive organisational success and outcomes.
And the word I would like to focus on is individuals. Before we continue you need to understand that change is about getting a critical mass of individuals to embrace change so that the entire organisation would then follow. In most of the cases we tend to think more of the things that we need to do and less about the people we need to do it with and this will ultimately lead to failure.
For this reason, although we talk about how to implement change from the organisation point of view we are also going to spend time during this session talking about how to specifically work with the people that are involved in the process.
So what do organisations need to do in order to embrace change?
1) First important step is to become aware and stay alert regarding the environment changes that take place and could impact their business. Some of the most important ones are:
a. Changes in competition. Maybe some new players appear on the market and now customers have a lot more options to chooses from. Or maybe competitors come with some new products, concepts or they change the pricing strategy and so on.
b. Customer behaviour could also change. Clients might be less willing to wait in order to receive their product or prefer online shopping versus driving to the supermarket.
c. Politics could majorly impact the way you do business with other countries if diplomatic relationships are suddenly changing.
d. Regulations can change your entire strategy regarding how you handle customer data or how your products are delivered to market.
e. Technology progress has impacted all existing businesses in the last 50 years.
2) Once changes in the environment are understood the next step is to renew your strategy. This can consist in the development and release of new products, or extending business towards new markets and in some extreme cases change the entire business model and sell mobile phones instead of rubber boots.
3) The immediate impact is that your organisational model needs to change in order to cope with the strategy change that you are implementing. This can be as simple as implementing new, or adjusting your current processes. Or it can go deep and require a culture change within the organisation. Meaning that you will be impacting values, behavioural patterns, rituals and traditions that are already existing. And if you move from rubber boots to mobile phones you can expect that the Structure of your organisation needs to look in a different way too so that it can run the new business model you are adopting.
One thing we know for sure: implementing change is not easy! And the statistics also show this.
In 1996 Dr John Kotter shows in his book “leading change” that only 30% of the transformation programs are actually successful. Twelve years later, in 2008, McKinsey consulting company runs a survey and asks more than 3000 Executives how many transformations are actually successful. The answer: one out of three.
Even more interesting is the evolution of Fortune 500 firms. We are talking here about the most successful companies in the world and we see that between 1955 and 2016 only 12% managed to keep their position. If we brake the information down even further. We see that between 1955 and 1944 (39 years) we have a 30.6% survival rate while if we look at the next 21 years the survival rate is almost the same: 37.6%.
This actually tells us that the environment is changing a lot faster today and it’s becoming extremely difficult for companies to deal with such dynamics.
To put it all in a nut shell: if you are part of a change program there is a 70% chance that you will fail unless you do it the right way… which, will ultimately increase you chances for success.
So, is there a secret formula for managing change? In this direction, Dr Kotter is proposing the following 8 step process:
1. Create a Sense of Urgency
He is stressing how important is for the entire organisation to feel that continuing the same way it’s not possible anymore and there is an urgent need for change in order to deal with the shifting environment. And remember, this isn’t simply a matter of showing people poor sales statistics or talking about increased competition. During this step one must ideally link the need for change with the survival of company and show how not changing will anyhow lead to other types of change (less positive ones).
What you can concretely do during this step is:
a) Identify potential threats, and develop scenarios showing what could happen in the future.
b) Examine opportunities that should be, or could be, exploited.
c) Start honest discussions and give convincing reasons to get people talking and thinking about change.
d) Request support from customers, outside stakeholders and industry people to strengthen your argument.
Note: Kotter suggests that for change to be successful, 75 percent of a company's management needs to "buy into" the change. In other words, you have to work really hard on step one and spend significant time and energy building urgency before moving to the next steps.
2. Form a powerful coalition
Change takes strong leadership and visible support from key people within your organisation. Managing change isn't enough. You have to lead it. One can find effective change leaders throughout your organisation and they don't necessarily follow the traditional company hierarchy. To lead change, you need to bring together a coalition, or team, of influential people whose power comes from a variety of sources, including job title, status, expertise and political importance.
What you can concretely do during this step is:
a) Identify leaders in your organisation, as well as key stakeholders, and make sure they are supporting the change.
b) Once your change team is formed work together towards the final goal and organise team building events so that you keep the coalition strong.
c) Check your team for weak areas, and ensure that you have a good mix of people with different knowledge and different levels within your company.
3. Create a vision for change
When you first start thinking about change, there will probably be many great ideas and solutions floating around. Link these concepts to an overall vision that people can grasp easily and remember. A clear vision can help everyone understand why you're asking them to do something. When people see for themselves what you're trying to achieve, then the directives they need to follow tend to make more sense. Also once the vision is clear many will find their own way without being guided each and every step.
What you can concretely do during this step is:
a) Determine the values that are central to the change.
b) Develop a short summary (one or two sentences) that captures what you "see" as the future of your organisation.
c) Create a strategy to execute that vision and
d) Ensure that your change coalition can describe the vision in five minutes or less.
4. Communicate the vision
Communicate your vision and execution plan frequently and embed it within everything that you do. Talk about it with every chance you get. Use the vision daily - to make decisions and solve problems. When you keep it fresh on everyone's minds, they'll remember it and respond to it. It's also important to "walk the talk." What you do is far more important – and believable – than what you say. Demonstrate the kind of behaviour that you want from others.
5. Remove obstacles
Is anyone resisting the change? Are there processes or structures that are getting in the way? Put in place the structure for change and continuously check for barriers to it. Removing obstacles will empower the people to execute your vision, and it can help the change to move forward.
What you can concretely do during this step is:
a) Identify, or hire, change leaders whose main role is to deliver the change.
b) Recognise and reward people for making change happen.
c) Identify people who are resisting the change, and help them see what's needed and Don’t be afraid to take more radical decisions if they are needed.
d) Take action to quickly remove any kind of barriers (human or otherwise).
6. Create short term wins
Even the small victories must be recognised, collected and communicated – early and often. Nothing motivates more than success. Give your company a taste of victory early in the change process. Within a short time frame (this could be a month or a year, depending on the type of change), you'll want to have some "quick wins" that your staff can see. Without this, critics and negative thinkers might hurt your progress.
What you can concretely do during this step is:
a) Create short-term targets – not just one long-term goal. You want each smaller target to be achievable, with little room for failure.
b) Look for quick and simple to implement projects that you can do without help from any strong critics of the change.
c) Don't choose early targets that are expensive. You want to be able to justify the investment in each project.
7. Build on the change (sustain acceleration)
Kotter argues that many change projects fail because victory is declared too early. Real change runs deep. Quick wins are only the beginning of what needs to be done to achieve long-term change. Each success provides an opportunity to build on what went right and identify what you can improve. From my personal experience I can say that the biggest mistake that change agents do: is to think that you can shift people’s mind-set and habits as fast as you shift processes and the systems that support them.
What you can concretely do during this step is:
a) After every win, analyse what went right and what needs improving.
b) Set goals to continue building on the momentum you've achieved.
c) Ensure that your change team has the proper people skills so that they can influence others through coaching, feedback and by adjusting the objective and incentive systems in such a way that it now supports the vision
8. Anchor the change (institute change)
Articulate the connections between the new behaviours and organisational success and continue until they become strong enough to replace the old habits. Finally, to make any change stick, it should become part of the core of your organisation. It's also important that your company's leaders continue to support the change. This includes existing staff and new leaders who are brought in. If you lose the support of these people, you might end up back where you started.
What you can concretely do during this step is:
a) Include the change ideals and values into the hiring and training process.
b) Publicly recognise key members of your change coalition, and make sure the rest of the staff (new and old) remembers their contribution.
c) Create plans to replace key leaders of change as they move on. This will help ensure that their legacy is not lost or forgotten.
d) Change procedures, objectives, incentives, work layout and any other relevant topic in order to support the change
And remember. Change is mainly about people. So if move from the organisation point of view and move closer to where change is actually happening, Dr Kotter is giving us an interesting thought to think about.
What would happen if, in every change transformation, leaders would always ask themselves before implementing something: is this action winning the hearts and minds of the people? Would the transformations look any different? The vast majority of the change programs are focused on execution of different tasks and not on winning the buy-in of every individual involved or impacted by the change. Even more, when trying to get the buy-in of the people, we are in 80% of the cases focused on the rational part of the individuals and not on the emotional part although it’s scientifically proven that the emotional part of our brain exists before our rational part was properly developed and it’s therefore tighter connected to our decision making triggers … so focusing on the heart is more likely to lead to results than focusing on the mind – meaning providing logical reasons for why to change
A simple example that proves this is smoking: we have all the logical reasons in the world to quit smoking. But in most of the cases it takes an even with a deeper emotional impact in order to determine us to actually do it. According to Kotter the most successful change programs focus 60% of the time to win the heart of the people involved and 40% on sending rational messages of why change is important. So from the position of a change leader, what should one do in order to win the hearts and minds of the people involved in the change?
First of all, before trying to change somebody, you need to understand what is his driving force through life. In his book “Creating lasting change”, Anthony Robbins talks about the 6 driving needs that govern our lives. And he assigned them into two categories:
1) Needs of the personality
a) The need for certainty. This needs says that one needs to feel secure and to know what is going to happen at all times. People driven by this need will usually plan everything in advance and will feel uncomfortable when something unexpected happens.
b) Funny enough the next need is the one for uncertainty or diversity. If you know everything about what is going to happen in your life you will ultimately feel bored. Diversity brings spice and exciting emotions. People driven by this need usually behave like there is no tomorrow and there is little need to worry about how to do something or get somewhere. They’ll find a way, no need to think about it now.
c) The need for significance or importance refers to how people desire to feel in the eyes of those around them. People driven by this need will value being at all times in the centre of attention. This could be achieved by having an important position or, for example, by following a career with public exposer.
d) The need for connection and love refers to the fact that some people need to have strong feelings or connection for and from other people that are important to them. People driven by this need put family or harmony with those around them above money or career.
2) Needs of the spirit
e) The need for growth refers to how individuals desire to evolve over time. People driven by this need are in a continuous pursuit for a higher level of knowledge, meditation, mastery for specific skill or craft or, whatever is important for them.
f) The need for contribution refers to how individuals desire to give back to the world something of value. People driven by this need have a strong desire to help others in some way. It’s either by giving money or spending their own time and knowledge with those around. There are many ways in which one can contribute.
As humans we have all the 6 needs. But only two of them will be the dominating ones which will in the end guide us in our decision making process. And having one or another need as a primary one will not tell if we are good or bad. For example, a fireman is willing to sacrifice his life in the desire to feel important, while a terrorist is willing to do the same from the exact same desire. Also, what people do is not necessarily reflecting the need behind their action. For example, a person could give money to charity in order to obtain the publicity derived from his gesture and therefor fulfil his need for importance.
But beyond any doubt is that in order to make people desire to change we have to make sure that what we offer is fulfilling their primary needs. In any other scenario there is a high chance that they will resist it.
Another food for thought is that in most of the cases, specially for higher level of management, the current situation is already one that feeds their primary needs. And if a scenario or an activity is fulfilling two or more needs of an individual it is becoming an addiction.
So imagine proposing change to a board member that values most security and importance. He’s probably deeply addicted to his current role and the security given by the fact that he knows everything there is to know within the organisation. Is change scary? Knowing what are his needs, gives you maybe already a hint regarding what are his main fears and how he should be approached? Right?
So having in mind that change is about people and about their needs I will finish this article by giving you a few tips regarding how a Change Leader can approach a Transformation program.
1) Understand and appreciate the world of the people involved in the change
A change leader should start by understanding the particular needs of the individuals. For example:
a) Security. They will have a job tomorrow? In case not, how will the company ensure my transition and support them? If I am manager now will I keep my position in the new structure?
b) Diversity. Are there exciting new activities to perform?
c) Importance. Is there a way to shine for everybody to see?
d) Connection. Will the team I will work with is a fun one? Will I be able to communicate with top management more often?
e) Growth. What will I learn? Or, what skills will I develop?
f) Contribution. Is this change making a difference for my colleagues or for the community?
The leader must understand in what way the current setup is fulfilling this needs and how the change can do the same, or, hopefully even better.
2) Create leverage and offer empowering alternatives
Once the current environment and the needs are fully understood the leader can create leverage by offering alternatives that fulfil those needs in better and more empowering ways.
And it’s relatively easy to create leverage when the future towards which you are heading looks brighter for everybody involved. But what do you when this not the case? What do you do when some of the people that need to work for the change will ultimately loose their jobs in the end, for example?
One of the biggest projects I was involved in was a relocation project from one city to another that impacted in the end around 600 employees. We decided to move a big part of our company’s operations in order to save a significant saving for our operating costs. Due to this move More than 95% of the staff in scope would remain without a job unless they are willing to relocate and accept the lower pay rate agreed in the new location.
So how to deal with such a change transformation? How to ensure business continuity and not have a massive turnover rate once the project is starting?
Here is how we decided to create leverage and the alternatives we offered:
a) We paid all staff couple of salaries on top of their standard severance package if they stay with the company until the transition is fully over.
b) We offered key people of each department 6 months extra paid period within the company after the project is completed and also first option for job opportunities that appear in departments that did not relocate.
c) We also offered significant remuneration to key people for making the project a success based on clearly agreed performance indicators, plus the same benefits that all the other employees got.
d) We offered managing position to those talents that are willing to relocate and also an exciting role during the transition.
e) And we kept staff conditions interest rate for all employees that had currently had a credit for the next 2 years.
Overall we tried to make an offer that nobody could refuse and also retain all our talents within the company and show to those people that they are important and that we value their contribution.
3) Communicate often and be transparent
Hide nothing and keep everybody in the loop every single day. Make small wins visible and capitalise on that.
In the relocation project I just mentioned there were voices suggesting we should keep everybody in the dark and inform those who leave only couple of weeks before the transition of their department is actually starting. I believe that if we would have done it like that we would end up with massive turnover starting with the most talented people from all departments. Since everybody would fear that they would loose their job one day.
Instead we communicated all the plan right from the beginning and we made sure that our key resources understand what is the special offer we have for them. Buy doing so we eliminated gossip, invented scenarios and panic. All employees were aware what will happen and we had no problem with turn over or with employees behaving in a rebellious way.
4) Problem solve and role model
Be the first to jump on the hardest issues and teach your team how to do the same. Role model with every single occasion. I can’t stress how important this is. People will understand if you explain but they will act if they see you and the other leaders doing it first
5) Prevent regressive behaviour
Make sure there is no possibility to turn back to the old ways. The most efficient way to achieve this, from my perspective, is by implementing a no return system. Meaning, the company is committed to change and you can be either in or out. There are no half way measures for this transformation. If those reluctant to change see that they can stop everything by sabotaging your efforts, there is a great chance that they will put a great deal of energy into this. Hire only people that have the profile that supports the change and train them so that they live and breathe the new organisational culture
6) Create a supportive environment
Meaning that you should change everything so that it is in line with the vision you have: procedures, processes, organisational structure, objectives, work layout, employees profile, everything that can have an impact.
I hope you found this article useful. For any questions or suggestions don't hesitate to drop a line in the comments area.
Good luck!
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