Managing Change Blog
What if your CFO told investors on the next quarterly call that the company had a 1-in-8 chance of hitting its target objectives for the change initiative it urgently needs? No senior executive in his or her right mind would accept those odds, right?
But that’s the reality: Our research shows that only 12% of change programs succeed—and many business leaders have the scars to prove it. Some 38% of companies that launched major change programs (even when using change management practices) failed to deliver, producing less than half of their expected results, and the remaining 50% settled for mediocre underperformance that diluted the value of their businesses (not to mention management’s credibility).
Those dire numbers point to a pressing need for companies to build capabilities and organizational capacity to deliver better results in change programs. This means looking at new approaches. Some companies are moving beyond the fundamentals of tracking progress and reporting results of change programs to forge new ways that emphasize coaching and building organizational capability and capacity for change. The key to this approach is engaging managers in the organization every step of the way to help them lead the change—from co-creation of initiatives to coaching during implementation.
The leaders of these effective change programs have learned to build teams that focus on value, process and people and place them in a Results Delivery® Office, or RDO. An RDO is similar to a program management office (PMO) but differs in its emphasis on coaching and building organizational capability and capacity for change. The value team manages the most important drivers and measures of results, tracking customer, process and cultural metrics as well as financial ones. The process team works on bringing about change quickly, while managing risk, and the people team builds the capabilities needed for employees to adopt new behaviors and execute. The teams use agile techniques, such as the short cycles known as sprints, and have streamlined decision-making processes. The RDO team also provides information to leaders so they can adjust the transformation program as necessary—calling for a mid-course correction or even recommending that initiatives be postponed or dropped.
The most successful change programs often have five principles in common:
They establish a “red is good” mindset. Many change programs fail to deliver because of the way they are governed. Typically, a senior leader is given oversight and keeps on top of activities through periodic performance reviews. In these reviews, team members report on what is happening in their “work streams.” The natural tendency is to show the boss a performance dashboard with all green indicators, rather than sharing any concerns that would appear as red lights. However, the leader can change this behavior by making clear that nobody would be punished for a red light—and, in fact, leadership is eager to learn about any signs of trouble. Then meetings can become forward-looking, highly productive team problem-solving sessions. A healthcare company that was merging two major groups to speed up product introductions reaped huge rewards from the red-is-good approach. It had enlisted respected members of both groups as “change agents,” and dispatched them to talk to colleagues about the change program. They came back with flashing red lights—they were hearing things like “I have no idea what this is about” and “This doesn’t make sense to me.” Leadership quickly scheduled site visits to listen to concerns, and soon more employees understood and supported the change. An insurance company had a similar experience. The change team’s pulse survey found positive responses—except in IT, where employee comments included terms such as “rushed” and “illogical.” The CEO, CIO and local leaders met with IT staff in various locations and in two weeks turned these attitudes around.
They focus on the 20% of activity that will create 80% of value. Often, change programs treat all initiatives as equally important. In reality, some elements are critically important and have to be done well, while other items are important, but not essential. In our experience, the 80/20 rule applies: About 20 percent of the activities deliver 80 percent of the impact. An RDO is staffed by employees who have the strategic knowledge and authority to determine what falls into the 20%. They establish and adjust priorities to maximize results and avoid wasting energy and resources on work that consumes more time and attention with limited value. Transformation teams should also look out for potential overload—when they see that too many initiatives are affecting one part of the company, they can postpone or cancel some. At the healthcare company, the change program team started with a list of 100 ideas and, working with top leaders, whittled it down to 20, which made the effort much more effective. In fact, because leaders felt that the remaining initiatives were so important, they stepped up their commitments and brought extra energy to the change program. The list has since been adjusted every six months.
They increase the metabolic rate. Change programs should move quickly, using methods to execute and streamline decision making. The RDO approach decentralizes 90% of decisions and keeps things moving by clarifying decision rights. Team members act as liaisons for each initiative, responsible for bringing decisions back to the central group. The few big decisions that require top management input are taken up at regular meetings that are scheduled to establish a rapid “results rhythm.” The transformation also moves faster because teams use short sprints, which generate quick results and keep energy levels high. As they carry out their work across the company, these teams can help boost the metabolic rate of the entire organization.
They inspire adoption of new ways of working. One of the greatest challenges in change programs is providing the motivation and the energy for the front line to adopt new ways of working. The chances of success rise dramatically when the change teams work as thought partners and coaches with line managers. Together they define the change and identify obstacles and ways around them. Another RDO best practice: training managers in critical change management skills at the start so they can successfully sponsor change with employees who report to them—rather than the company trying to force change from outside the team through top-down communications. And, because business leaders—not project managers—are accountable for delivery, they are more likely to get everyone on board and achieve the desired results. At the healthcare company, for example, the combined business group was launched ahead of schedule and products are starting to exit the pipeline at a faster rate.
They build change capability. Change programs often falter after handoff from a central body, like a PMO, to the organization. This is when companies discover that for all their well-laid plans, they don’t have the talent in place to make the change a reality. With its “people” focus, the RDO is thinking about capabilities from the start—coaching leaders to engage teams, sponsor change and shift behaviors. And because the RDO works with line leaders across the organization, they are building capacity for change management all the time. In addition to learning skills such as risk assessment, line leaders signing up to work with the change program gain valuable experience and build the resilience needed to deal with and lead the next change. To build a cadre of homegrown change managers, the healthcare company trained more than 60 employees from three levels of the organization in RDO change methods. The company now staffs its strategic initiatives with these change experts.
The Results Delivery Office concept is designed from the ground up for each organization, based on existing capabilities and the nature of the change it is attempting. The approach combines aggressive risk management—red is good—with strategies that accelerate results and improve the chances of achieving buy-in. And, by building capabilities to manage change, an RDO sets organizations up to meet the larger, more frequent, complex waves of change that buffet businesses today.
Richard Fleming is a partner with Bain & Company in the New York office and leads Bain’s Americas Results Delivery practice. Neysa Colizzi is a practice area manager in Bain’s Results Delivery practice, based in Chicago.
Results Delivery® is a registered trademark of Bain & Company, Inc.