Profiling the darker side of change management

New Year’s greetings from everyone at GCS; we hope this year will be prosperous for the profession as we continue our mission to revitalise the South African business sector.

Change management is a topic that GCS is very passionate about. It sits at the heart of the business rescue and turnaround process as a financially distressed company needs to fundamentally change almost every aspect of its business to return to profitability.

There are two sides to change management. The easy part of change management involves making softer operational decisions to improve the company. I recently read an article on the Harvard Business Review (HBR) website which profiles the more challenging part of change management, the part BRPs help their clients navigate daily.

Factors of success

The HBR article points out that these factors bear three distinct characteristics.

First, companies are able to measure them in direct or indirect ways. Second, companies can easily communicate their importance, both within and outside organisations. Third, and perhaps most important, businesses are capable of influencing those elements quickly.

The HBR article adds that some of the hard factors that affect a transformation initiative are the time necessary to complete it, the number of people required to execute it, and the financial results that intended actions are expected to achieve. Our research shows that change projects fail to get off the ground when companies neglect the hard factors. That doesn’t mean that executives can ignore the soft elements; that would be a grave mistake. However, if companies don’t pay attention to the hard issues first, transformation programs will break down before the soft elements come into play.

Studies done by the authors of the HBR article found a consistent correlation between the outcomes (success or failure) of change programs and four hard factors:

• project duration, particularly the time between project reviews;
• performance integrity, or the capabilities of project teams;
• the commitment of both senior executives and the staff whom the change will affect the most; and
• the additional effort that employees must make to cope with the change.

We will look at the first two in this editorial and the other two in an editorial I will publish in February.

Duration

The HBR article points out that companies make the mistake of worrying mostly about the time it will take to implement change programs. They assume that the longer an initiative carries on, the more likely it is to fail—the early impetus will peter out, windows of opportunity will close, objectives will be forgotten, key supporters will leave or lose their enthusiasm, and problems will accumulate. However, contrary to popular perception, our studies show that a long project that is reviewed frequently is more likely to succeed than a short project that isn’t reviewed frequently. Thus, the time between reviews is more critical for success than a project’s life span.

Companies should formally review transformation projects at least bimonthly because, in our experience, the probability that change initiatives will run into trouble rises exponentially when the time between reviews exceeds eight weeks. Whether reviews should be scheduled even more frequently depends on how long executives feel the project can carry on without going off track. Complex projects should be reviewed fortnightly; more familiar or straightforward initiatives can be assessed every six to eight weeks.

Scheduling milestones and assessing their impact are the best ways by which executives can review the execution of projects, identify gaps, and spot new risks. The most effective milestones are those that describe major actions or achievements rather than day-to-day activities. They must enable senior executives and project sponsors to confirm that the project has made progress since the last review took place. Good milestones encompass a number of tasks that teams must complete. For example, describing a particular milestone as “Consultations with Stakeholders Completed” is more effective than “Consult Stakeholders” because it represents an achievement and shows that the project has made headway. Moreover, it suggests that several activities were completed—identifying stakeholders, assessing their needs, and talking to them about the project. When a milestone looks as though it won’t be reached on time, the project team must try to understand why, take corrective actions, and learn from the experience to prevent problems from recurring.

The HBR article adds that a review of such a milestone—what we refer to as a “learning milestone”—isn’t an impromptu assessment of the Monday morning kind. It should be a formal occasion during which senior management sponsors and the project team evaluate the latter’s performance on all the dimensions that have a bearing on success and failure. The team must provide a concise report of its progress, and members and sponsors must check if the team is on track to complete or has finished all the tasks to deliver the milestone. They should also determine whether achieving the milestone has had the desired effect on the company, discuss the problems the team faced in reaching the milestone, and determine how that accomplishment will affect the next phase of the project. Sponsors and team members must have the power to address weaknesses. When necessary, they should alter processes, agree to push for more or different resources or suggest a new direction. At these meetings, senior executives must pay special attention to the dynamics within teams, changes in the organisation’s perceptions about the initiative, and communications from the top.

Integrity

The HBR article points out that performance integrity means the extent to which companies can rely on teams of managers, supervisors, and staff to execute change projects successfully. In a perfect world, every team would be flawless, but no business has enough great people to ensure that. Besides, senior executives are often reluctant to allow star performers to join change efforts because regular work can suffer. However, since the success of change programs depends on the quality of teams, companies must free up the best staff while making sure that day-to-day operations don’t falter. In companies that have succeeded in implementing change programs, we find that employees go the extra mile to ensure their day-to-day work gets done.

Because project teams handle a wide range of activities, resources, pressures, external stimuli, and unforeseen obstacles, they must be cohesive and well-led. It’s not enough for senior executives to ask people at the water cooler if a project team is doing well; they must clarify members’ roles, commitments, and accountability. They must choose the team leader and, most importantly, work out the team’s composition.

The HBR article adds that smart executive sponsors are very inclusive when picking teams. They identify talent by soliciting names from key colleagues, including human resource managers, by circulating criteria they have drawn up, and by looking for top performers in all functions. While they accept volunteers, they take care not to choose only supporters of the change initiative. Senior executives personally interview people so that they can construct the right portfolio of skills, knowledge, and social networks. They also decide if potential team members should commit all their time to the project; if not, they must ask them to allocate specific days or times of the day to the initiative. Top management makes public the parameters on which it will judge the team’s performance and how that evaluation fits into the company’s regular appraisal process. Once the project gets underway, sponsors must measure the cohesion of teams by administering confidential surveys to solicit members’ opinions.

Executives often make the mistake of assuming that because someone is a good, well-liked manager, he or she will also make a decent team leader. That sounds reasonable, but effective managers of the status quo aren’t necessarily good at changing organisations. Usually, good team leaders have problem-solving skills, are results-oriented, are methodical in their approach but tolerate ambiguity, are organizationally savvy, are willing to accept responsibility for decisions, and, while being highly motivated, don’t crave the limelight. A CEO who successfully led two major transformation projects in the past 10 years used these six criteria to quiz senior executives about the calibre of nominees for project teams. The top management team rejected one in three candidates, on average, before finalising the teams.

The journey of 1,000 miles begins with the first step

A Chinese proverb says that the journey of 1,000 miles begins with the first step. This proverb has long been used as a motivator for companies approaching a challenge (such as change management) with trepidation.

While change can be disruptive, it is a necessary component of the required revitalisation for companies to return to profitability. BRPs will play an essential role in this as they are experts at managing this process and can approach a problem with an unemotional attachment. This is key to finding a workable solution.