Is part or all of your business in the need of a transformation — A truly radical change?
My smart friend Daniel Neukomm riffed on Harvard Professor John Kotter’s theories on mistakes commonly made in corporate transformations (hint: if you AVOID these mistakes, you can indeed transform your business) — enjoy!
While a professor at Harvard Business School, John Kotter had the opportunity to gain valuable insight into an array of companies ranging in both size and scope.
In doing so, he identified eight key stages of transformational development in which companies failed to manage the change process. He theorized that those companies that had been successful did so only by effectively negotiating all eight steps.
He further noted that those firms who skipped any of those steps, or failed to recognize the importance of them were sacrificing quality and effect for speed of change, giving the illusion of being quick but in realty building a platform for failure.
In addition to illustrating a series of opportunities to fail, Kotter also provides some insight as to how to overcome these commonly experienced errors.
The lack of a sense of urgency of transformation is the leading cause of why, and the primary stage of where business fail at effectively managing change.
Many companies struggle simply to be able to identify the need to change when circumstances arise that warrant doing so. Firms are constantly exposed to the need for change, from the emergence of new foreign markets to the presence of new, more powerful competition in the marketplace.
Kotter notes that more then 50% of companies fail at this initial stage for numerous reasons. Most notable of those significant reasons of failure at this early stage is the gross overestimation of current and prior efforts of urgency by corporate executives.
Many senior managers feel that they have already recognized and leveraged the existing need for urgent transformation and as such lack the necessary motivation to shift the rate of change into high gear.
Another important factor is the imbalance between those who dictate change and those who simply implement change. Firms with too many managers and not enough leaders often experience this dynamic and it adversely affects the ability to change efficiently.
Kotter offers the relatively simple solution of implementing mechanisms that establish a sense of urgency among employees. He further states that the need to aggressively achieve cooperation is essential as this impacts a firms ability to identify and discuss potential threats and pending crisis. The need to be able to clearly identify the market, and its competitive realities is also mentioned as a key solution to lack of urgency.
Creating a powerful coalition is essential to guiding practical and effective transformation within a firm. The lack of importance placed on the need to achieve collective support is the second stage of error as cited by Kotter.
He states that in both large and small firms alike there is an increasing need to build support across a wide range of people involved in both the decision making and implementation process. Many firms believe that just having the senior management team on board with new ideas for change is enough.
In fact, there are many moving variable in the dynamic for change and as such many different roles, and the people who fill them, are required to achieve efficient transformational change.
For example, large firms undergoing aggressive transformation into a new market require the support of investors, board members and product development staff, but perhaps key customers as well.
Furthermore, due to the broad scope of support often needed to implement dramatic and effective change standard hierarchical structures are not enough to ensure success. (Kotter, 1995)
Solutions to this stage of error range from instilling more power in those who already hold leadership roles, to the simplicity behind creating a more team oriented environment. (Kotter, 1995)
Lacking a vision can be an obstacle in almost any process, and most certainly in a corporate environment. Without a clear and defined vision it is not hard to imagine the difficulty experienced in trying to convey instructions and instill motivation in others to perform.
Furthermore, the lack of a clear and concise vision can be equally de‐habilitating, as broad sweeping goals can be difficult to break down into measurable achievements.
This lack of clarity can also trickle down into incompatible projects stemming from misdirected resources and undefined goals. (Kotter, 1995)
Kotter offers some relatively straightforward and simple solutions to the absence of a clear and concise vision. Ensuring the existence of a vision is obviously at the top of the list as this is the source of the problem.
Many companies have visions that are bland and generic, often open to interpretation which in turn leads to misunderstanding.
Kotter suggests that having a vision that can be communicated clearly, to anyone, in less than five minutes is essential to having that vision realized.
The absence of an easily understandable vision can cause confusion in the workplace and hinder fluid change in any organization.
Even with a clear and concise vision, the ability to communicate it effectively to everyone in the company can is vital to facilitate its purpose.
Kotter points out three patterns in which companies fail to effectively communicate the vision.
The most obvious solution to this issue is to implement a system whereby directors not only communicate the vision but also lead by example and execute the stated vision consistently.
Furthermore, all available vehicles should be utilized to deliver the vision to all stakeholders of the organization.
The solution to this potential issue seems rather elementary yet still is not widely practiced. (Kotter, 1995)
Communication itself is not enough on its own to instill the goals laid out by the visions of the company to encourage and facilitate change. Numerous obstacles exist for corporate officers in their quest to see their visions brought to fruition through the actions of employees.
Major contradiction of interests seems to present the greatest barrier for progress, most notably incentive based performance pay structures. Many of these incentive programs reward individual performance over the performance of the company, presenting a difficult position for managers. (Kotter, 1995)
Solutions for this problem lay in the design and structure of the system as it pertains to the vision of the company. No longer can a corporation have an aggressive vision and an incentive based pay structure that does not reflect the long‐term goals of that vision.
Designers of corporate incentives must take into account how the system may derail the likelihood of integrating the vision. (Kotter, 1995)
For example, if the vision of a health company is to provide medical treatment, incentive programs cannot be structured to reward saving the company money and reducing the bottom line by paying more to those employees who refuse to provide medical services.
Unfortunately, this is largely the practice of US medical insurance firms.
Many companies experience turbulence in the transformation process by not creating short‐term goals. More firms have trouble in keeping employees motivated to achieve long‐term goals due to the lack of immediate return on efforts being made in the short‐term.
Kotter mentions that most people will not commit to the entirety of the project if there are not results in some measurable returns within the first 12 to 24 months.
If results are not seen within this immediate period, employees will often loose the drive necessary to achieve the long‐term goal. Managers who dissect such big picture goals into smaller more manageable tasks will often see greater results from their employees efforts implying that this may be an effective solution to the problems arising form lacking short‐term structure in the change process. (Kotter, 1995)
Kotter offers some simple yet valuable insight yet again in this stage of transformational change by suggesting that managers break up longer‐term, more complex goals into short‐term, more manageable targets.
The creation of the short‐ term wins in this context so long enables a more momentum driven process, typically allowing for more accurate achievement of the longer‐term goal.
Establishing visible and more measurable performance improvements and then rewarding employees for achieving those milestones will enhance the corporation’s ability to implement change and realize transformational fluidity.
While establishing short‐term wins is key to the success of managing change there are also some disadvantages which can arise form this strategy as well. Kotter points out while short‐term wins are encouraged there is some danger in give incentives to employees to reach a larger volume of small scale project achievements.
This danger arises from employees and managers alike striving for accomplishments that have emotional and financial bonuses attached because there will be a need to declare victory sooner than what is best for the organization.
There is an ironic relationship between those who resist change and those who support stated in Kotter’s theory. He mentions that while change initiators are quick to declare themselves victorious in their ability to effectively manage change is often the change resistors who step in an solidify a failure.
This is due to the fact that such resistors are looking for any opportunity to stop the change process and declaring victory provides that opportunity.
In an effort to solve the issues surrounded by premature victory celebrations Kotter points out that managers should focus instead on their increased credibility to implement change into systems, structures and policies.
Moreover, managers should promote those employees who recognize and implement the vision of the organization, establishing a momentum driven transformation process and achieving long terms goals rather then racking up points on a project score board.
He further states that the transformational process needs to be constantly reinvigorated with new projects, themes and new agents to implement them in order to capitalize on momentum.
Perhaps the most interesting error mentioned by Kotter is the inability of a corporation to solidify whichever new process of change deemed effective.
Many firms fail to ensure that years of efforts not be flushed away by a lack of recognition by all employees, including top managers of reasons why change has been
On many occasions companies failed to ensure that new behaviors were integrated and relied on in the future.
Two important factors are noted for this lack of integration.
Solutions to this problem are readily available to managers.
In the former, simple efforts to communicate the reasons for successful transformation should be made to ensure a clear, broad, company wide understanding of the reasons for success.
An example of this would be the use of company newsletters outlining the relevant information necessary to understand achievements and why they were possible so that al employees can identify opportunities for future success.
In the latter, ensuring that the board of directors understands the reasons behind why a company leader was able to enhance performance through successful change is imperative to ensure that effective processes of change continue under new management. (Kotter, 1995)