Managing Change Blog
Would it surprise you to learn that engagement trumps strategy in business transformations? That is the clear conclusion of our recent study of more than 400 companies. In it, the most successful executive teams, those that achieved their transformation ambition, overwhelmingly rated their ability to effectively engage their organizations as the No. 1 factor in their success.
The group chose engagement by a wide margin, ranking it more than 50% higher than any other factor, including clarity of strategic direction.
Change management has been around for decades, but more than 70% of change efforts fail. Bain’s Results Delivery® insights help companies to predict, measure and manage risk, starting on day one.
How can this be? Isn’t the strategy still important?
Of course it is. If you head in the wrong strategic direction, you are not going to meet your objectives. This has always been true, and it still is. What has changed, and the interesting insight this data offers, is that while smart strategy avoids outright failure, it is not the differentiator for outperformance.
The tried-and-true playbooks of the past—smart competitive strategy, a relentless focus on cost, customer-centricity, smart M&A—all remain relevant. But in our current environment of ever-shorter cycle times and increasing change, they have become the new table stakes: necessary but not sufficient. How the strategy is executed can be more important than the answer itself.
Increased volatility driven by macroeconomic and technology-related forces means organizations must become more agile. They need to be able to adapt to market changes, face new competitive threats and bring in new skills and capabilities, all at a faster pace than before. Many feel as if they are constantly on their back foot, desperately struggling to get out ahead, or like a hamster on a wheel that never stops, but just keeps getting faster.
The need for agility puts a premium on successfully managing the “inside game” of a business transformation. This starts with winning employee hearts and minds—unleashing the discretionary energy of your workforce—in the face of an external environment of change that, left unmanaged, tends to feed anxiety and ultimately lead to a feeling of loss of control.
A transformation is twice as likely to achieve its goal, and to sustain that change, when engagement in the effort is effective and started early. And yet, too many of the transformation plans we see, and boardroom conversations we hear, massively underweight the people component. Either it’s missing altogether, or it’s conveniently thrown over the fence to HR to figure out. As a result, companies miss the opportunity to leverage employee support. Fewer than one in four respondents to our survey report feeling well informed about, connected to or listened to about a change underway at their company.
We have observed that executives fall into two traps in this regard, despite their best intentions. The first is to frame engagement as a communications issue, which invariably leads down a path of one-way communication, but no true dialogue or engagement. Often an external agency is retained to run a nifty communications campaign, including nice-looking posters up on the wall, but this ultimately feels hollow and does not change employee behaviors.
The second trap is to approach this sequentially, to start engaging only once everything is clear and aligned at the top. After all, how can we engage when we aren’t even clear on the answer yet? While the desire for ultimate clarity is understandable, the reality is that engagement, in the right form, is important from Day 1.
Let us explain through the lens of an executive who is in the middle of his own massive global transformation.
Within the supply chain function, which this executive leads, there are more than 15,000 people around the world. Roughly a quarter of the company’s factories need to close, and most will need significant retooling. An estimated one-third of the employee base will likely need to turn over in the next three years. New capabilities must be acquired. The global supply chain needs to be set up in a completely different way. In other words, a true, and difficult, transformation.
After deep reflection with his leadership team on this latest transformation data, he determined to put the traditional playbook aside, and correctly balance effort and priorities. This meant putting organizational engagement prominently on the leadership agenda, even in the initial months when he and his team were still designing the transformation roadmap itself.
They spent quality time defining their “beach,” or articulation of the future: both why they needed to change, and what that would mean for everyone. They spent time learning how communication and leadership during times of high stress and anxiety can be quite different, and invested in becoming better sponsors of change themselves. They mapped out the different populations within the business—who might be affected most, and how critical they might be to ultimate business success. They began engaging with these populations early on, in both one-on-one and small-group meetings, sharing what they could, and when the answer was not yet fully clear, sharing at least the process and rough timeline. They carefully mapped out an engagement plan that choreographed all the moving pieces and aligned with the timeline of the business initiatives themselves.
This transformation is ongoing, so the results are a work in progress, but already the feedback from the organization is phenomenally positive. The thoughtful construction of the process gives the operating leadership team confidence that the changes and corresponding business results will in fact deliver at an accelerated pace. The organization feels listened to, involved and respected. On the whole, people are behind the change and have their head in the game, helping the company protect their core business today while preparing for big readjustments for the future.
By no means is strategy dead. Rather, the topic of engagement has come alive. The data tells us so, and the trends suggest it will only become more important. For executive teams looking to transform their businesses for a more agile and flexible future, they best heed this rebalance.
David Michels is a partner in Bain & Company’s Zurich office and leader of the firm’s Results Delivery® practice in Europe, the Middle East and Africa. Kevin Murphy is a Bain partner based in Washington, DC.
Authentic engagement should be a company's highest priority when undergoing a major transformation.