Major change is always risky, and those risks are not managed nearly as effectively as they could be. As a result, the failure rates of business-transformation efforts remain stubbornly high despite decades of conversation, coaching, consulting, and training. This is no small problem: the ability to change—to rethink strategy midcourse and respond quickly to new threats or opportunities—is a key differentiator in today’s fiercely competitive global economy. Although innovation has driven significant progress in virtually all other aspects of business, it’s done little to advance the art and science of change management. A fresh approach is needed.
Martha Craumer, senior writer at The Boston Consulting Group, spoke with Perry Keenan, a senior partner and managing director in the firm’s Chicago office, about the obstacles to effective change, why traditional approaches fall short, and what it takes to succeed.
Why does change management need to change?
Over the past few decades, we’ve seen real progress on every front, in every industry. Data storage capacity and transaction speeds have grown exponentially. Childhood mortality rates around the world have plummeted. The cost of mobile technology is now so low that even impoverished consumers in rural India are online. But progress is elusive on the change-management front. Since the 1970s, the failure rate of transformation efforts has stayed constant at a rather staggering 70 percent. Only 30 percent typically succeed. It’s no wonder that business executives are reluctant to take the plunge.
The reason for this absence of progress is a lack of innovation in the discipline of change management. As a result, companies keep making the same mistakes.
What mistakes do you typically see?
The first is an absence of vision, a lack of clarity as to why change is necessary and what lies at the end of the road. Clarity must come from the top and be communicated to all levels of the organization. Another key problem is a lack of alignment among senior executives on the goals of the change effort and how to achieve them. Frequently, because of a misguided desire for secrecy, members of the extended leadership team are brought into the loop only hours before their own people are notified. But even when alignment and enrollment are in place, leaders typically lack an effective early-warning system to flag missed targets so that teams can course-correct before the effort goes off the rails. Complex change efforts involve multiple initiatives, many of which are interdependent. Without rigorous, systematic planning and absolute transparency concerning progress toward milestones, many programs lose momentum. Finally, many change programs fail to involve all employees and to make everyone feel a sense of ownership. Most companies make more than one of these mistakes.
How is BCG’s approach to change management different?
BCG knows these pitfalls well, and our approach is designed to systematically overcome them. We’ve studied hundreds of major change programs at companies around the world, with a goal of developing a more effective approach—one that would reduce the risks and focus on delivering measurable value. Based on our findings, we created an approach that delivers four key elements: certainty of execution, enabled leaders, an engaged organization, and effective governance. Change efforts typically fail because they don’t recognize the importance of—and adequately address—all four elements. When all are in place, you build people’s confidence in the leadership’s commitment, the feasibility of the changes, and the momentum behind the effort.
We also recognize that mission-critical change efforts require a governance structure oriented toward value delivery. In many cases, a project-management office serves as the glue that helps bind together the data, conversations, and decision-making process among senior executives and change leaders. This is particularly important for complex, cross-business transformation efforts. Top management must make the time for regular reviews and be willing to resolve key issues outside of scheduled meetings. At the same time, we don’t want to overburden business leaders, so we focus on providing them with the smallest amount of critical data needed—the minimum sufficient—to drive impact and accountability. The goal is to have senior management expend the minimum effort for maximum results.
Kennedy Information, a leading research firm that studies the global consulting market, recently ranked BCG highest among all consulting firms in breadth of consulting capabilities. We were especially proud that our firm was specifically recognized for its leading-edge tools and client-centric approach to change management.
How do you define success at the end of a change effort?
A company has successfully managed its change program when it achieves its operating and financial targets while building the capabilities of the organization and helping people become more competent, engaged, and able to exercise the “change muscle” again and again. Too often, change programs deplete a company’s energy, leaving employees broken, cynical, and disengaged. The toll of “change fatigue” is very real. But change can be energizing if people are taught the right tools and skills, and if rewards and incentives are designed to drive positive outcomes.
What does the future hold for change management?
It’s become a cliché, but change is the new normal—and it’s continuous and accelerating. Companies must find ways to embed the needed change-management tools and capabilities within their organizations through ongoing and explicit training, development, and coaching of their people and line managers. Further, prioritization is critical. Management teams are lucky if they can do 20 percent of what most traditional change gurus suggest. To succeed, companies must rigorously focus on only the most important stakeholders and operational issues—and allocate the necessary tools, talent, and leadership time accordingly.
The bottom line is that today’s companies can’t afford to sit on “pause.” Advances in technology, growing market volatility, new competitors, shrinking product life cycles—all contribute to a rapid rate of change that business leaders must be prepared to address on an ongoing basis.