Harvard Business Review www. Kotter maintains that too many emananed nse ies for potentiates and untapped peogle rom thelr comfort zones managers dort realize transformation isa te pportunties reso caniwes yoke process, not an event.
It advances through Convince a last of your mane nF » stages that build on each other And it agers tha the status quo mote dan takes years.
Pressured to accelerate the serous than the unknown process, managers skip stages. A decade later his work on leading change remains definitive Over the past decade, I have watched more than companies try to remake themselves into significantly better competitors. They have included large organizations Ford and small ones Landmark Communications , companies based in the United states Gen- eral Motors and elsewhere British Airways , corporations that were on their knees Eastern, Airlines , and companies that were earning good money Bristol-Myers Squibb.
But, in almost every case, the basic goal has been the same: to make fundamental changes in how business is conducted in order to help cope with a nev, more challenging market environment. A few have been utter failures, Most fall somewhere in between, wit a distinct tit toward the lower end of the scale. Skipping steps creates only the ilusion of speed and never produces a satisfying result. A second very general lesson is that critical mis takes in any of the phases can have a devastat ing impact, slowing momentum and negating hard-won gains.
Ths first step is essential because just getting a transfor ration program started requires the aggres sive cooperation of many individuals. Without motivation, people won't help, and the effort goes nowhere Compared with other steps in the change process, phase one can sound easy. Phase one in a renewal process typically goes nowhere until enough.
Ifthe renewal target is the er- tire company, the CEO is key. If change is needed in a division, the division general mar- ager is key. When these individuals are not new leaders, great leaders, or change champions, phase one can be a huge challenge.
They have included large organizations Ford and small ones Landmark Communications , companies based in the United States General Motors and elsewhere British Airways , corporations that were on their knees Eastern Airlines , and companies that were earning good money Bristol-Myers Squibb.
These efforts have gone under many banners: total quality management, reengineering, right sizing, restructuring, cultural change, and turnaround. But, in almost every case, the basic goal has been the same: to make fundamental changes in how business is conducted in order to help cope with a new, more challenging market environment.
A few of these corporate change efforts have been very successful. A few have been utter failures. Most fall somewhere in between, with a distinct tilt toward the lower end of the scale. The lessons that can be drawn are interesting and will probably be relevant to even more organizations in the increasingly competitive business environment of the coming decade. The most general lesson to be learned from the more successful cases is that the change process goes through a series of phases that, in total, usually require a considerable length of time.
Skipping steps creates only the illusion of speed and never produces a satisfying result. A second very general lesson is that critical mistakes in any of the phases can have a devastating impact, slowing momentum and negating hard-won gains.
Perhaps because we have relatively little experience in renewing organizations, even very capable people often make at least one big error. They focus on the potential revenue drop when an important patent expires, the five-year trend in declining margins in a core business, or an emerging market that everyone seems to be ignoring.
They then find ways to communicate this information broadly and dramatically, especially with respect to crises, potential crises, or great opportunities that are very timely. This first step is essential because just getting a transformation program started requires the aggressive cooperation of many individuals.
Compared with other steps in the change process, phase one can sound easy. It is not. What are the reasons for that failure? Sometimes executives underestimate how hard it can be to drive people out of their comfort zones. Sometimes they grossly overestimate how successful they have already been in increasing urgency. They worry that employees with seniority will become defensive, that morale will drop, that events will spin out of control, that short-term business results will be jeopardized, that the stock will sink, and that they will be blamed for creating a crisis.
A paralyzed senior management often comes from having too many managers and not enough leaders. Change, by definition, requires creating a new system, which in turn always demands leadership.
Phase one in a renewal process typically goes nowhere until enough real leaders are promoted or hired into senior-level jobs. Transformations often begin, and begin well, when an organization has a new head who is a good leader and who sees the need for a major change. If the renewal target is the entire company, the CEO is key.
If change is needed in a division, the division general manager is key. When these individuals are not new leaders, great leaders, or change champions, phase one can be a huge challenge. Bad business results are both a blessing and a curse in the first phase. But it also gives less maneuvering room. With good business results, the opposite is true: convincing people of the need for change is much harder, but you have more resources to help make changes.
But whether the starting point is good performance or bad, in the more successful cases I have witnessed, an individual or a group always facilitates a frank discussion of potentially unpleasant facts: about new competition, shrinking margins, decreasing market share, flat earnings, a lack of revenue growth, or other relevant indices of a declining competitive position. Because there seems to be an almost universal human tendency to shoot the bearer of bad news, especially if the head of the organization is not a change champion, executives in these companies often rely on outsiders to bring unwanted information.
Wall Street analysts, customers, and consultants can all be helpful in this regard. In a few of the most successful cases, a group has manufactured a crisis. One division president commissioned first-ever customer-satisfaction surveys, knowing full well that the results would be terrible. He then made these findings public. On the surface, such moves can look unduly risky. But there is also risk in playing it too safe: when the urgency rate is not pumped up enough, the transformation process cannot succeed and the long-term future of the organization is put in jeopardy.
One chief executive officer deliberately engineered the largest accounting loss in the history of the company. Anything less can produce very serious problems later on in the process. Major renewal programs often start with just one or two people. In cases of successful transformation efforts, the leadership coalition grows and grows over time. But whenever some minimum mass is not achieved early in the effort, nothing much worthwhile happens.
It is often said that major change is impossible unless the head of the organization is an active supporter. What I am talking about goes far beyond that. In successful transformations, the chairman or president or division general manager, plus another 5 or 15 or 50 people, come together and develop a shared commitment to excellent performance through renewal. But in the most successful cases, the coalition is always pretty powerful—in terms of titles, information and expertise, reputations and relationships.
In both small and large organizations, a successful guiding team may consist of only three to five people during the first year of a renewal effort. But in big companies, the coalition needs to grow to the 20 to 50 range before much progress can be made in phase three and beyond.
Senior managers always form the core of the group. But sometimes you find board members, a representative from a key customer, or even a powerful union leader.
Because the guiding coalition includes members who are not part of senior management, it tends to operate outside of the normal hierarchy by definition. This can be awkward, but it is clearly necessary. If the existing hierarchy were working well, there would be no need for a major transformation. But since the current system is not working, reform generally demands activity outside of formal boundaries, expectations, and protocol. A high sense of urgency within the managerial ranks helps enormously in putting a guiding coalition together.
But more is usually required. Off-site retreats, for two or three days, are one popular vehicle for accomplishing this task. I have seen many groups of 5 to 35 executives attend a series of these retreats over a period of months.
Companies that fail in phase two usually underestimate the difficulties of producing change and thus the importance of a powerful guiding coalition. Sometimes they have no history of teamwork at the top and therefore undervalue the importance of this type of coalition. Sometimes they expect the team to be led by a staff executive from human resources, quality, or strategic planning instead of a key line manager.
No matter how capable or dedicated the staff head, groups without strong line leadership never achieve the power that is required. But, sooner or later, the opposition gathers itself together and stops the change. In every successful transformation effort that I have seen, the guiding coalition develops a picture of the future that is relatively easy to communicate and appeals to customers, stockholders, and employees. A vision always goes beyond the numbers that are typically found in five-year plans.
A vision says something that helps clarify the direction in which an organization needs to move. Sometimes the first draft comes mostly from a single individual. It is usually a bit blurry, at least initially.
But after the coalition works at it for 3 or 5 or even 12 months, something much better emerges through their tough analytical thinking and a little dreaming. Eventually, a strategy for achieving that vision is also developed. In one midsize European company, the first pass at a vision contained two-thirds of the basic ideas that were in the final product. The concept of global reach was in the initial version from the beginning.
So was the idea of becoming preeminent in certain businesses. But one central idea in the final version—getting out of low value-added activities—came only after a series of discussions over a period of several months. Without a sensible vision, a transformation effort can easily dissolve into a list of confusing and incompatible projects that can take the organization in the wrong direction or nowhere at all.
In failed transformations, you often find plenty of plans and directives and programs, but no vision. In one case, a company gave out four-inch-thick notebooks describing its change effort. In mind-numbing detail, the books spelled out procedures, goals, methods, and deadlines. But nowhere was there a clear and compelling statement of where all this was leading.
Not surprisingly, most of the employees with whom I talked were either confused or alienated. The big, thick books did not rally them together or inspire change. In fact, they probably had just the opposite effect. But, sooner or later, the opposition gathers itself together and stops the change p.
In order to counteract this error, the membership, role, and development of the steering committee structure require major attention as part of the effort. Error 3: Lacking a Vision Kotter's bottom line: In every successful transformation effort that I have seen, the guiding coalition develops a picture of the future that is relatively easy to communicate and appeals to customers, stockholders, and employees p.
According to Kotter, a vision always goes beyond the numbers in the plan and "helps clarify the direction in which an organization needs to move. His recommendation in terms of a vision? In the first, a company develops a good vision statement, communicates it in a single venture, and then wonders why nobody understands it.
In the second, a top executive makes a series of speeches about the vision, but "most people still don't get it.
According to Kotter, communication is the key to getting people to make the sacrifices that are necessary to achieve the vision. If the communication is done poorly or if the top leadership undermines it with their actions, everything is wasted. His recommendation? Use every possible channel, especially those that are being wasted on information that really doesn't matter.
Equally important is the ability of leadership to "walk the talk," to get out and live the vision with the people. In Kotter's words, "Nothing undermines change more than behavior by important individuals that is inconsistent with their words. But communication itself will not overcome the obstacles that stand in the way of change. Kotter says that sometimes the obstacle is in people's heads; more often, however, they are in the form of other people bosses who don't walk the talk or the organization rigid or dysfunctional structures, inappropriate or ineffective appraisal and reward systems.
Kotter's perspective on this error is to be assertive: In the first half of a transformation, no organization has the momentum, power, or time to get rid of all obstacles. But the big ones must be confronted and removed. If the blocker is a person, it is important that he or she be treated fairly and in a way that is consistent with the new vision. But action is essential, both to empower others and to maintain the credibility of the change effort as a whole.
We risk losing the early momentum of an effort if there are not short-term goals to meet and celebrate. According to Kotter, creating short-term wins is different than hoping for short-term wins. Managers have to identify opportunities, set goals, develop strategies, and recognize people when the goals are met.
Kotter says that once people realize that the larger transformation effort will take a long time, leadership must create opportunities to produce short-term wins as a way to keep the momentum high.
Error 7: Declaring Victory Too Soon "After a few years of hard work, managers may be tempted to declare victory with the first clear performance improvement," says Kotter. He adds that celebrating a win is okay, but that is different than "declaring the war won. Of all the problems that can hinder an effort not enough urgency, an ineffective guiding coalition, a vision that does not get communicated , Kotter says the premature victory celebration kills the momentum and allows the forces of tradition to take over.
The successful strategy, according to Kotter, involves the following: Instead of declaring victory, leaders of successful efforts use the credibility afforded by shortterm wins to tackle even bigger problems. They go after systems and structures that are not consistent with the transformation vision and have not been confronted before.
They pay real attention to who is promoted, who is hired, and how people are developed. Error 8: Not Anchoring Changes in the Corporation's Culture Kotter opens this section thus: In the final analysis, change sticks when it becomes "the way we do things around here," when it seeps into the bloodstream of the corporate body. Until new behaviors are rooted in social norms and shared values, they are subject to degradation as soon as the pressure for change is removed. Two strategies help institutionalize change in the corporate culture: 1 Showing people how new approaches, attitudes, and behaviors contributed to improvements in performance.
According to Kotter, when left to their own devices to make the connection, people often overlook their contributions to the changes. This is primarily a communication change strategy.
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