Chartered Institute of Personnel Development

What's so hard about corporate change?

May 20, 2013: 11:43 AM ET

The most important ingredients of business change are hard to understand, difficult to put into effect, and often underestimated.

By Peter Cheese

(TheMIX) -- I don't think any of us in the business world need to be persuaded of the importance of becoming more agile and adaptive. Fast-pace change, uncertainty, and volatility are the lexicon of our work lives.

What most will acknowledge, though, is that change is hard. "We're good at the smaller change, but we're not good at the big strategic change," or "we start change programs, but we never seem to finish them properly," or even "we've got too many change initiatives but are still missing the point."

The evidence backs these perceptions. A 2008 study by IBM of more than 1,500 executives across 15 countries found that almost 60% failed on at least one major objective or failed entirely. More recent research by the University of Oxford reported that IT projects typically take longer than planned and cost more, with only 16% of projects hitting their targets.

As a driver of business change, M&A has also struggled to deliver value for shareholders. Most research since the 1980s suggests that as much as 70% of deals have destroyed rather than created value. A Cass Business School study, reported in CFO Magazine in June 2012, examined more than 3,000 UK acquisitions by UK companies between 1997 and 2010, and found that successful deals create more value than unsuccessful deals destroy, but still acknowledged that the failure rate was around 60%.

If managing successful change is at the heart of being adaptive, why are the failure rates apparently so high? And what are some of the barriers to creating truly flexible organizations -- organizations where change is not only welcomed but seen as energizing and engaging?

The typical culprits tend to fall in one of four categories: A lack of vision, middle management permafrost, a lack of understanding about change, and a lack of good methods to measure and implement change.

To encourage innovation, companies have to be able to collaborate, work across boundaries within and between organizations, to bring together disparate experiences and perspectives, and to properly empower people to come up with ideas and make change happen. In other words, we have to build different corporate cultures and ways of working.

These elements are the "softer" side of adaptability. But they are also the most critical enablers of change, and they are harder to understand and to put into effect, which is why they are so often underestimated.

Change Track Research in Australia has the biggest base of data I have seen on how change really works. They have tracked hundreds of change programs of all types over a wide range of companies for 10 years. This has provided great insights into what really are the major influencers of change.

Change Track's findings reinforce the point that things like a lack of management commitment, passion, and involvement are the greatest barriers to change.

So, how do we create the kind of environments and organizations that build trust through consistent commitment and passion?

First, we have to identify the real cultural norms of an enterprise. Are people really empowered or are they constrained by limited authority, freedom, or just plain untrusted? Has the organization built processes that can manage complexity but are actually disempowering?

Companies must build management commitment from the top, and that means building trust from top down. Managers need to communicate the following message: "I trust you to do the right thing, to react to the situation, or develop the new idea, but I will also support you if mistakes happen." All within reason, of course.

Managers must also reinforce these commitments and behaviors through the right processes and systems. These are, for the most part, done with the help of HR -- performance management, learning, leadership development, and so on.

Another approach to encourage change is to start with experiments and projects outside the mainstream of the business, where rules are set aside in the interest of encouraging more radical thinking and innovation.

If, as some like to suggest, HR is the custodian of corporate culture, then HR should be helping to articulate and understand these "softer" enablers of change and bring them to life.

What do you think sets adaptable organizations apart from the rest? Please share your thoughts and help us hack HR by joining the "Building an Adaptability Advantage" hackathon, a joint production of the Chartered Institute of Personnel and Development (CIPD) in the UK and the MIX.

Peter Cheese joined the CIPD as CEO in July 2012. He spent 30 years working at Accenture, culminating in a 7 year spell as global managing director, leading the firm's talent and organization performance consulting practice.

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