Organizational Transformation: Five Keys to Success

By: Adam Kling

As the business climate continues to rapidly evolve, numerous organizations are undergoing significant transformations to remain competitive. Over the last several years, I have worked with CEOs and senior teams as they searched to create greater shareholder value by transforming their organization. Whether it is an acquisition to gain market share, altering the operating model to right size the organization and become more nimble, moving into new markets, and/or developing new products, companies often face similar issues without knowing the keys to success. Both operational and psychological elements need to be addressed during a transformation, and few companies can successfully address both.

Here are the top five elements I have found to increase the chances of a successful transformation, as well as some advice for managing the process.

1. Ensure the CEO sets the right tone. A CEO’s leadership style influences the tone on the senior team and the organization’s culture. This leadership “shadow” is a result of the CEO’s experience, beliefs, and behaviors. However, not every CEO understands the impact this shadow has on the organization’s ability to transform and how best to leverage it. For example, if the CEO believes and demonstrates that discussing, debating, and challenging ideas are critical for success (which research has demonstrated they are), then initiatives will be discussed and debated. If the CEO believes a directive approach is best, then she will provide direction. While both approaches have their upsides and downsides, each creates a different shadow and influences the environment. Knowing when to be inclusive and when to be directive is critical.

For CEOs, this means learning to balance a participative and directive approach and staying aware of their shadow by continually seeking feedback. If the feedback is watered down, they’ll need to find the kernel in each message and pressure-test this with someone who will give the unvarnished truth. If feedback is not forthcoming, this may mean that people are afraid to share what they really think.

If the CEO isn’t getting the message, then you muster up the courage to approach him. Using questions can provide an entry into the discussion—e.g., How are you thinking about your role in leading this transformation? Are you having the impact you want/must have? Why/why not?

2. Engage the senior team. During a transformation, the CEO must quickly build momentum by engaging the senior team to help lead the effort. As was written about in a previous post, involving the team to define the vision, prioritize initiatives and allocate resources will elevate their role and increase their sense of responsibility for the transformations success.

3. Develop a transformation road map. Transformations, particularly cultural transformations, can feel nebulous and abstract (e.g., “we need to become a nimbler organization so we can quickly adapt to industry changes,” “we must be more customer centric,” etc.). Achieving conceptual alignment (aligning around the idea) is important but operational alignment (aligning around the plan) is critical. Without both factors, the effort will flounder and progress will be slow. Typically, the chief transformation officer or CHRO is responsible for developing the road map. However, in some cases it isn’t clear who has ownership of the process, particularly if the CEO communicates that transformation is the executive team’s responsibilities. It’s important to establish a clear owner for developing a transformation road map and then build out the people and culture elements with as much discipline and focus as the sales, operations, and other components. People-oriented challenges are consistently found to be the biggest barriers to success.

4. Leverage human resources. Sustained transformations require leaders and employees to think, lead, and act differently. HR systems (compensation, performance management, recruiting, leadership competencies, etc.) are levers that drive behavioral change and need to be adjusted so they reward the new behavior. Waiting to make these changes until new processes have been fully implemented will delay achieving the transformation’s goals.

To avoid any lag, once a road map is in place, immediately review your HR programs to ensure they are incentivizing and driving the desired behaviors. The executive team should be involved in designing the go-forward strategy since they will be implementing it.

5. Manage the psychological transition and tension. This last point is often overlooked and the least-understood element that has the greatest impact on a transformation’s success. Transformations are messy and complex because multiple parts of the organization must be altered to adapt to a new environment. Therefore, CEOs leading transformations must stay focused on helping others embrace a new reality in instances where it is unclear exactly what it takes to be successful. Surfacing and productively managing through difficult topics (e.g., not believing the transformation will be successful, not feeling confident peers have the capability to deliver, etc.) is the best way to build commitment to the new reality.

To cultivate transparency, you should create a forum to have open and candid discussions. Determine which topics need to be addressed as a senior team and which ones should be handled one-on-one. If the difficult questions are not being raised, identify the five most challenging questions or topics and raise them.  

Conclusion
Transforming a company is hard work, and few organizations achieve the results originally articulated. By examining the operational and psychological elements and making sure everyone understands the goals—from the CEO to the senior team, HR and all team members—companies can increase the chances of successfully changing their trajectory.

 

Determining which direction to take your company in is one thing; knowing how to get there is another. To learn how RHR can help your senior teams establish a clear direction and align behavior around it while enhancing your team’s ability to work together to achieve their organizational goals and create impact on the bottom line, contact Orla Leonard, Practice Leader, Senior Team Effectiveness.

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