How to transform an organisation

Our experience shows that a transformation can only be achieved when at least 40% of the organisation actively supports the change

With disruptions fast becoming the new normal, a “business as usual” approach is no longer sufficient for 21st century organisations to compete and thrive. This has prompted many to embrace what has become one of the most commonly used terms in business: Transformation. 

We believe true transformation is a fundamental, enterprise-wide shift in the way an organisation operates, with equal focus on both performance and organisational health. Such transformations are difficult to achieve and harder to sustain. 

Surveys have shown that 70 per cent of executives say their companies’ transformations failed to deliver and sustain impact. With over 100 successful case examples in the past decade, we have identified typical failure modes, as well as strategic choices that improve the odds of success. Let us start by looking at the major pitfalls.

Lack of a burning platform

Transformations require a compelling case for change, to shift underlying mindsets and behaviours. The purpose needs to be clear in the minds of the leadership, to help create a buy-in across the organisation. Without this purpose and urgency, organisations are unable to move to a new way of working. 

Good-to-great transformation journeys need to go a step further and require leaders to articulate the “why” to energise the organisation. If not done properly, momentum could fizzle out, intensity is lost, initiatives are not monitored, people move on, and challenges continue to mount.

One such case study is of a global logistics organisation where employees faced a new transformation agenda each year. The leadership failed to create an impetus for change — one that would force the organisation to pause and rethink its way of operating. Only after creating a compelling change story could the organisation start to make meaningful progress on its transformation initiatives.

Not involving a critical mass of people

Several transformations launch with a small task force, and the rest of the organisation gets involved only to help execute changes in their areas of expertise. Studies in neuroscience suggest that people are more likely to accept something if they are involved in decision-making rather than if it is forced upon them. People need to have a sense of agency, to change. 

Ignoring culture, mindsets, and capabilities

While building employee capabilities, it is critical to understand the culture and mindsets that need to shift to enable them to perform at peak potential. Our research shows that 70 per cent of transformations fail because of insufficient focus on culture and capabilities. Rather than treating it holistically, capability-building is often an afterthought during a transformation, or is limited to training people on new systems and processes introduced as part of the transformation. 

Key elements during transformations 

Set the direction at the start: Our research shows that a clear and compelling aspiration from the outset of the transformation journey increases the chances of success threefold. When deeply rooted in the case for change, this aspiration also inspires conviction across the organisation.

Clearly communicating the aspiration as part of the change story is just as important as defining the aspiration. Chief executive officers (CEOs) who drive successful transformations do not merely communicate plans to employees, they share a story that engages the entire organisation. According to data from Quantified Communications, a platform for communication skills, messages that include well-crafted stories are 21 per cent more memorable and 35 per cent more persuasive. 

Energise the organisation: Our experience has shown that a transformation can only be achieved when at least 40 per cent of the organisation actively supports the change. A CEO must ensure the entire leadership is not only supporting the transformation agenda, but also role modeling the expected behavioural change. This requires deep discussions with each leader to align personal aspirations with those of the organisation. 

The next stage is to develop a critical mass of change agents and focus on building their capabilities. In one of our transformations for a major power sector player, the CEO mandated the setting up of a capability building academy with a dean and trainers to ensure all best practices were codified and adopted across the organisation as part of a training calendar.

Link “talent to value” in staffing: This is done by identifying the roles that drive significant value creation, staffing them with the best talent, and then upgrading their capabilities. These roles can rest anywhere in the organisation and are not necessarily at the highest levels. There needs to be greater focus on the development of people in these roles, to ensure they are put through a structured leadership development journey. The performance metrics of these roles need to be tightly tied to the transformation outcomes and their incentives linked to the success.

CEOs shifting focus to these critical elements, along with monitoring outcome metrics, can see change scaling and cascading to day-to-day working — which is the true test of success of a transformation.

Chaddha is a partner at McKinsey & Company, and leader of the transformation practice in India. Kasibhatla is an expert in McKinsey’s organisation & leadership practice