Implementing transformations—like open-heart surgery?

Enterprises are often compared to living organisms, transformation processes to open-heart surgery. This analogy automatically suggests the horror scenario with the headline "Surgery successful, patient dead". The key question, then, is how to change a business model without disrupting day-to-day business?

How deep can the incisions be? Do we start with the processes or the structure? Does shock therapy, a "big bang", lead to life-saving measures with a forward-looking strategy and a new business model, or does it require a more gentle process, a longer succession of small, more delicate transformation steps? 

That this analogy suggests a misguided degree of caution is something we know from multiple real-world projects—a world in which too many people still believe in the validity of this analogy. Transformations threaten to fail not as a result of some form of corporate cardiac arrest, but rather due to the fact that the incisions made in day-to-day business are imperceptible and the desired effects do not materialize. In addition to the question as to how we ensure operations keep running smoothly during implementation, we, and our clients, have to ask ourselves the following question: "How can we make sure that the organization will actually change?" After all, we know very well that, generally speaking, businesses do not suddenly succumb to the depth of incisions made, from excessive surgeries, but rather waste away very slowly as a result of not having allowed change to take place and not giving themselves the chance to reorganize. 

Full-time employees wanted 

First and foremost, there is the question of project personnel, which is all too often dismissed as a side issue. In most cases, the transformation activities are put in the hands of staff who can dedicate only part of their time to the job because they are also involved in day-to-day business at the same time. On the operational levels this is understandable, but if the bottom tier of management also doesn't want to devote much time to the transformation—something we still come across from time to time—then something is fundamentally wrong at the top. The primary task of top management is to shape the future with strategic foresight and not to keep day-to-day operations running. The levels below are manned by the employees who are closest to the business end, those who know the company and who are in close contact with customers, suppliers and production sites. They are essential to daily operations and yet they are the most important shapers, drivers and movers of a transformation. Decisions as to how they are deployed must be made on an individual basis: Is their time better invested in working on change for the future or in day-to-day operations? Special projects are also an excellent opportunity to develop and challenge young talent—in which they are given more responsibility in day-to-day business in view of the shortage of capacity or they are heavily integrated into the program for change. Transformation programs are attractive for young talent because nowhere else can you build a career faster than in a company that is short on resources for high-level positions. A fundamental prerequisite is that the program is sold internally as an endorsement for ambitious talent. If management has trouble finding good people for the program, the lack of such an incentive is often precisely the reason why.

A question of history

We have seen cases in which it was vital to energize the organization for a short time and to implement drastic measures very swiftly. In restructuring cases, for example, it would be fatal to take one's foot off the gas for the sake of ensuring a smooth process, because the chances of survival decrease with each day. 

In another example, we were called to a financially successful but in the meantime weary enterprise in order to significantly boost its energy levels and agility while securing its long-term profitability despite rapidly increasing competitive pressure. We asked employees at various levels and in various units what level of savings could be expected of the team and the answer was surprisingly unanimous: "Nothing below 30 percent". Their reasoning was that if we didn't set the goal high enough, nobody would consider making seriously radical changes. Rather, everyone would look just for incremental improvements that would fizzle out over time. The motto was: The higher we set the goal, the more we would change the thinking and habits of the team. For example, for companies that have failed to implement any change for a long time and have settled into a kind of cozy stasis, it's helpful to strive for what may be a frighteningly ambitious goal and rapid implementation—with the objective of shaking up the organization, get it moving and giving it a momentum from which to seek change itself. 

But we've also experienced the opposite. An international client told us at the beginning of one assignment about the previous transformation programs they had undergone. Extremely ambitious goals and implementation methods that sailed very close to the wind, together with a reduction in personnel, resulted in a deeply frustrated company. The workforce could scarcely motivate themselves for this new program, because to them its goal seemed utterly unattainable. For this client, a gentler approach comprising smaller steps and more manageable goals was advisable.

Whether we decide to go with a "big bang" or "slow development" depends on the transformation history of the company, its culture and its management style. And, of course, it's a good idea to choose methods that are differentiated according to regions, areas and functions and take into account the critical effects of the measures on current business. In every transformation process, each unit should be examined individually to determine how potentials can be exploited quickly and sustainably. And the view of top management must always be compared with that of the employees on the ground—because the gulf is surprisingly wide. 

Minor change, big drama

We have also often seen measures that appeared to be modest in the overall picture of the transformation, but were perceived as dramatic changes on the ground. The relocation of their workplace—even just a few miles away—may present employees with greater challenges (such as taking their children to kindergarten) than switching to a new production principle does. Changes in management positions can also trigger enormous unrest and uncertainty, even if on the face of it they appear to be no more than a minor modification to the organigram. In one company we have seen how the simple renaming of units threw a wrench in the works of a machine that had been running perfectly up to then. How come? Well, the employees were identified so closely with their particular organizational unit that some of them addressed each other by the acronym or abbreviation of their department and job title instead of their actual name. What appears at top management level to be a major upheaval, such as the introduction of new processes, new IT, new products, may well be perceived at employee level as a normal course adjustment that's just part of the job—or that doesn't affect individual people at all. It's often all a question of perspective. 

But the moment nothing changes for the employees, one has to ask oneself: Are we still dealing with a real transformation? What we justifiably call transformation must impact the employees—not merely as a theoretical organigram in which a few boxes have been moved around without them noticing, nor as a dramatic intrusion on their lives. Corporate transformations are carried by employees throughout the entire organization who work to develop and improve themselves, break with routine and rethink things. 

Process follows structure and vice versa

The question as to whether the processes or the structure must be addressed first, which element is the most crucial to the transformation, is a matter for the experts. One argument in favor of the processes is that the transformation is conceived of with its goals in mind. With this approach, the practical embodiment of the new business model is made the starting point. Beyond issues relating to the organigram and responsibilities, we define what needs to be done differently in the future. According to this argument, the processes that enable the company to achieve its goals determine the structure. One argument against this approach is that the processes are clarified at a time when responsibilities and the new balance of power have not yet been established. And especially in the case of highly disruptive changes, it's to some degree not even possible to predict which processes will result from them. As a result, endless rounds of discussions and design meetings can arise that are difficult to control. Another weakness of this approach is that the processes are developed at a level that lacks the necessary vision and overall view. There is also the danger of a situation arising in which nobody really has any interest in or feels responsible for installing the full scope of the processes from start to finish. 

We have learned from work on scores of projects that it is wrong to dogmatically give priority to either the processes or the structure, since both are so closely interwoven that the one cannot be changed without the other. To a certain extent, we therefore recommend a parallel approach in which the most important business processes are derived from the new strategy and, at the same time, the new organization is set up to such an extent that the new managers can help shape the process. For then the analogy between an organization and an organism is valid: A company is a living, organic whole that can only be transformed holistically.

Authors: Hagen G?tz Hastenteufel and Christine Sachseneder

Special thanks to Delphine Bourilly, Alyson Potenza, Martin Rajes and Shirley Santoso for their valuable contributions.