From Change Management to Change Agility

Traditionally change management had been seen as a rational, almost linear, top-down driven way of moving the organization from a clearly undesired stage to a desired stage. The idea was to create a comprehensive project plan with clear milestones and KPIs that measure progress along the way. Top managers sought to maintain control of the change process by limiting dialogue and involvement of their employees to the extent possible.

Employees and their behavior were often viewed as a disturbing factor within a well-oiled machine. Often times external consultants were hired to push the plan and desired change onto the employees. As a result, more than 2 out of 3 organizational change initiatives failed. Those change initiatives were doomed to fail as they reproduce exactly the same kind of resistance which they set out to prevent. 

In the late 1990s organizations learned and incorporated emotional components (clear sense of urgency and compelling vision) and focused on bottom-up initiatives using change agents from the shopfloor to facilitate change. In many cases that was taken to the extreme and line managers felt sidelined as the top management communicated and aligned directly with change agents without middle-management involvement. The main resistance did not anymore come from the shopfloor, but from middle-managers who felt left behind. As a consequence, success rates only marginally improved.

In the last decade many organizations incorporated both the idea of a top-down and bottom-up approach enabling and empowering both middle-managers and change agents at the shopfloor to facilitate and enable lasting change.

In today’s fast paced environment in which change is omnipresent and not anymore a one-off exceptional event within a rather stable environment, traditional change management practices are not sufficient anymore to ensure that organizations thrive and even survive.

What we actually see more often than ever are erratic and unforeseen external forces that throw organizations completely off its track. Change is not anymore the exception, it is all around us and constant. “When the rate of change outside is more than what is inside, be sure that the end is near.” (Azim Premji)

Even in response to dramatic environmental shifts most organizations simply react by doing what they have always done while expecting different results. Those organizations are set up to withstand external change in the ecosystem and not to embrace change as an opportunity. In most of the situation the problem is not that the organizations do not (re)act (paralysis) - rather they do not (re)act appropriately (active inertia).

Do you know companies such as Nokia, Hewlett Packard, Schering Plough, Hoechst and Sandoz? What do all of those organizations have in common?

For many years they were very successful, some of them were even market leader and then within a few years they disappeared from the market. Nokia used to be not only market leaders but had half of the global market share in 2007.

Becoming irrelevant is a slow, but steady process. It is almost like the famous boiled frog. If you slowly increase the temperature you do not see change happening and stay complacent until the moment of no return.

In fact, more than 90% of the Fortune 500 companies in the US from 1955 have either gone bankrupt, merged, or still exist but have fallen from the top Fortune 500 companies. In the last years this trend accelerated significantly. The wind of change has already wiped out over half of the Fortune 500 since the year 2000. Previously very successful companies such as Motorola, Blockbuster, Nokia, BlackBerry, Xerox, Kodak or Polaroid became victims of their own success and disappeared from the market. What seemed to be caused by strategic mistakes often times goes deeper and is actually rooted in an unhealthy, sometimes even toxic organization.

As those companies grew larger and richer, over-confidence and complacency kicked in. Executives started to believe that they had found the success formula and projected this formula into the future. Peers were less likely to hold each other accountable and to pay attention to overarching objectives. Actually in many of those companies I mentioned above departments became its own kingdom, each executive a little emperor, their managers were more concerned about their status, the next promotion and their relationship to their boss than developing their own people and cooperating constructively with other departments to invent, produce and market innovative products.

This phenomenon is also known as silo thinking or politics, and spreads naturally and quickly like bad weeds in the garden. Success breeds silos, politics and active inertia, and turf wars and active inertia breeds failure.

In managing their teams those overly confident leaders became ignorant to the views of others and did not encourage their (client-facing) people to speak up and share with their management the first glimpses of change in the environment. The whole in those organizations became less than the sum of the parts.

At the same time those companies started to put less focus on shifting (prospective) customers expectations and market trends. Instead of putting customers first those companies started to primarily focus on maximizing short-term shareholder value. Instead of investing the majority of their energy, time and resources into innovation, differentiation and sustainability they started to primarily focus on investing and divesting parts of their business in order to please opportunistic investors and maximizing short-term profits. M&A, efficiency and portfolio management became more important than collaboration, innovation, differentiation and customer needs. In other words, those organizations became fragile – the opposite of agile. Think about a vase. When we exert force on it, it will get weaker and even break. The same is true of unhealthy or toxic organizations.

An agile organization, on the other hand, bounces back, if you exert force on it. In many cases it even gets stronger, it bounces higher than before when competition gets fierce and regulatory affairs hurdles increase. Think about a trained muscle. When you do not stretch yourself and train your muscles, you suffer from atrophy.

What does an organization need to do to do to become agile and stay ahead of the curve of competition? An agile organization can only grow long-term on the foundation of a healthy organization.

For most of us it is difficult to explain what a healthy organization is, yet when you walk into an organization, you know it because you feel it. Agile and healthy organizations show high levels of trust inside and outside and high customer and employee loyalty. They place curiosity, innovation and experimentation at the heart of their operation, not only in R&D. There is a clear long-term perspective. In agile companies making money (achieving high margins) is the result, not the objective. The focus remains on customer needs, its organizational mission and the vision. Those companies work hard on uncovering the spoken and unspoken desire and needs of customers.

Internally they focus primarily on culture and leadership. There is little confusion and politics. Those agile leaders do not request lengthy reports and analysis. Agile leaders do not strive to maintain the current status, to control and to micromanage. Agile leaders do not rely on authority, control and command telling people what to do. They are not bosses. 

Agile leaders are enablers who are curious about their people and their customers. They embrace the customer as much as their employee. They are inspiring, releasing and empowering their people. Those agile leaders see their primary task to set customers but also their teams and direct reports for success:

• Instead of focusing on their own supervisor and their next career move they focus on customers and their own people. (from "me first" to "customers/others first")
• Instead of sitting ,most of their time in their back offices strategizing they are close to their people and enable them to succeed. (from "above them" to "with them")
• Instead of focusing primarily on performance (getting things done) they also focus equally on learning (slowing down and reflecting on how to do it better)
• Instead of spotting and focusing on weaknesses they help their people to identify their talents and tap into their full potential. (from weaknesses to strengths)
• Instead of focusing on what is wrong or less than perfect they catch people when they do right or improve. (from spotting the insufficient to spotting glimpses of excellence)
• Instead of identifying the scapegoat and blaming they ensure to fix the issue and learn from it - avoiding that the same issue happens again. (from blaming to learning)
• Instead of focusing on mental energy (numbers, data and facts) they care holistically about mental, emotional, relational, physical dimensions. (from rational to holistic)
• Instead of asking for regular reports they provide resources, empower, support and coach their people along the way and remove obstacles that get in the way. (from using them to shine to making them shine)
• Instead of telling (what to do) those leaders ask and listen. (from subject-matter expert to coach)
• Instead of critically viewing, judging and labelling their people they trust their employees, encourage them to experiment something new, reflect, quickly adapt and share their learnings with others. (from critical to curious).

In doing so agile leaders serve as energy hubs for their teams. Transparency, alignment, clarity and trust turn individual talents, skills and behavioral efforts into exceptional performance which is reflected in the P&L and employee and customer attraction and loyalty. Agile organizations are never designed top-down nor bottom-up - they are set up outside-in. As a result agile organizations effectively identify and capture the right opportunities. Agile and healthy organizations beat competition that waste time, money and energy fighting amongst themselves, which ultimately results in loss of customers and employees.

The agile organizations do not transform structure, systems and processes from one static state to another. They are aware that once you complete that reorganization in a VUCA world, it is already obsolete. Rather those agile organizations constantly prepare for the unexpected and cultivate an agile leadership culture that operates in a perpetual state of readiness of the unexpected, and knows what leadership, talent, process and technology levers to pull at the right time to synchronize with an increasingly unpredictable environment. In a constantly changing business environment they demonstrate the dynamic capacity to align, adjust and renew themselves faster and more effectively to customer needs than their competitors. They sometimes even create disruption and change in the external surroundings themselves.

How can you develop an agile and healthy organization?

It requires to pursue the following intertwined imperatives:

1. Fill key leadership positions with leaders who demonstrate integrity (who are willing to sacrifice their own ego for the greater good of the company) and act as enabler for employees;
2. Form a cohesive and behaviorally aligned leadership team at the top who think and act company first (not their function nor themselves);
3. Create organizational clarity along the following main questions:

           What do our (potential) customers really want - not what they say they
           want?

           Where are we going to?

            Why do we exist?

           What are we doing?

           How do we interact and get things done around here?

           What do we stand for?

           What capabilities do we need to develop to get us to our strategic 
           objectives?

           What do we have to keep in order to be successful in the future?

           What do we need to change in order to be successful in the future?

           What will happen, if we do not become agile as an organization? (burning
           platform)

           What are our strategic priorities and our key priorities this year? For me,
           my interfaces, my direct reports and their direct reports?

4. Place top talents who are hungry (strive to constantly improve and learn and 
    perform best to their potential),  humble (sacrifice own ego for the greater
    good) and honest (high integrity) in positions in which they can play out their '
    strengths and stretch them. In doing so promote diversity (professional
    background, nationality, culture, gender, age, styles, external vs internal hire)
    on a basis of clearly defined common values and norms and build
    complimentary teams;

5. Maximize versatility, flexibility and responsiveness by creating "generalized
    specialists" that go beyond representing own functional area in broader
    discussions;

6. Create a fun, informal and open environment with little separations and lots
    of choices and invitations to connect, communicate and engage;

7. Instill trust, confidence, positivity and continuous improvement - catch people 
   when they do right or improve;

8. Empower people to make their own decisions, challenge the status quo and
    liberate out-of the box thinking - let ideas flourish a bit before you evaluate 
    together. Encourage people then to hold themselves accountable as much as
    other to assess issues themselves, fix them along the way and learn from
    mistakes;

9. Encourage people to see failure as an important opportunity to learn and 
    grow and to embrace the possibility of failure rather than reinforcing the
    natural fear to fail and get rejected (failing forward);

10. Encourage everyone to get close to customers and to anticipate trends 
     (outside-in view) - learn from best practice (but do not copy and paste),
     rather create next practice - gain direct feedback from customers on ideas in
     R&D, M&D and other areas - yet do more what customers really want, not
     necessarily what they say they want;

11. Encourage people to think big, start small, and learn fast (through reflection
      and feedback);

12. Align structure, processes and systems (e.g. performance management,
      talent management, knowledge management) to reinforce agility while 
      keeping a stable basis in terms of structure, processes and
      people. It requires to move away from organizing the work by bureaucratic
      linear plans, rules and reports towards experiments, iterative work
      cycles and direct feedback (from customers).

I am often asked about the most important ingredient in creating a truly agile company. No doubt it is leadership that builds and sustains organizational health starting at the very top and reinforced all the way down. Rather than a methodology agile is a mindset and the mindset is first and foremost shaped by the leaders of the organization. If you do not have leaders in place who encourage and empower people to get ideas from customers and other organizations, to challenge the status quo, to go new routes, to admit, reflect and learn from mistakes, you are set for failure with any initiative to enhance organizational agility and effectiveness. You need to create organizational health first.

Think about innovative and sustainable high-performing organizations such as Tesla, Zara, Gilead, Spotify, Google, Apple and Circue du Soleil. Tesla, Google, Apple and Circue du Soleil have expanded the boundaries of an existing industry with the backbone of a healthy organization. They had the courage to make necessary changes when they were still on an upswing. 

Those organizations constantly reinvent themselves, experiment, learn from the past, produce in the present and prepare for the future.

Organizational agility goes well beyond Change Management. It is neither top-down, nor bottom-up, it is outside-in. Agility in its essence is about constantly preparing yourself, your teams and the organization for the unexpected in order to stay ahead of the curve. Organizational agility that is created in a holistic and integrated way will become the key competitive advantage in a constantly changing world.