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Change Management: A CEO Guide to Avoiding Failure

Whether it’s when they first take the role or at some point during their tenure, just about every CEO must deal with change management. So why do they so often fail?

A McKinsey study just four years found that “just 26 percent of respondents say the transformations they’re most familiar with have been very or completely successful at both improving performance and equipping the organization to sustain improvements over time. In our 2012 survey, 20 percent of executives said the same.” In other words, nearly three-quarters of initiatives intended to drive change in the workplace fail.

Based on their survey results — direct feedback from CEOs and senior leaders — McKinsey suggests a critical approach: Be bold.

“At organizations that took a rigorous, action-oriented approach and completed their transformations (that is, all of their initiatives have been fully implemented), executives report a 79 percent success rate—three times the average for all transformations,” the report states. “According to the results, no single action explains the difference; in fact, the more actions an organization takes, the more likely its transformation is to succeed.”

Which practices “correlate much more closely than others with success” when it comes to change management?

  • “Communicating effectively”
  • “Leading actively”
  • “Empowering employees”
  • “Creating an environment of continuous improvement so organizations can keep their performance from stagnating (or even regressing) once a transformation’s goals are met.”

Change Management: 4 Crucial Steps

Meanwhile, a recent Harvard Business Review pinpointed four crucial steps in facilitating successful change.

1. Start small rather than articulating from the top

Many change initiatives start from the top, as upper management articulates the need for change and perhaps outlines the steps toward it. However, HBR points out that top-down leadership on change can simply give resistance a head start before real change has a chance to get established on the ground.

Rather than a kick-off from the top, start with a small, core group tasked with initiating change. Ideally, the group will comprise employees who want and embrace the change. They can implement and test required changes and their effects. If successful, this experimental group can be a persuasive force in making the needed change go wide.

The piece offers a mini-case study of Wyeth Pharmaceuticals’ adoption of lean manufacturing practices as an example. The firm started with a few groups and then broadened the changes needed. Ultimately, the transformation saved 25% on costs.

2. Focus on a “keystone change”

The HBR also recommends starting small with goals for change. Focus on a “keystone” change which has specific goals and utilizes several stakeholders. The keystone should focus on a particular problematic issue, such as paring costs, enhancing employee engagement, or attracting more customers.

Whether it's when they first take the role or at some point during their tenure, just about every CEO must deal with change management. So why do they so often fail?

Focus on a specific goal at first.

3. Build a change network

From the initial core groups, target building a network as the first step. Once a consensus forms in the core, take it wider as part of your business strategy. If you are focusing on getting more customers, for example, take the successful methods to other company offices or divisions. Inculcate the methods into new employees. Develop metrics that measure the efficacy of the new techniques and use them to drive change adoption.

4. Keep going on the broader picture

Successful initial efforts can actually be the downfall of transformative change movements. A company that wants to establish lean manufacturing methods like Wyeth did, for example, can’t simply embrace a 25% cost reduction joyously and call it quits. That’s because the 25% cost reduction then becomes the only result, not the broader goal of lean manufacturing.

It’s highly important to keep focusing on the process of, and necessity for, change overall in business leadership efforts.

As McKinsey states: “By implementing continuous-improvement activities that enable the organization to look regularly for new and better ways to work, respondents’ organizations double their chance of successfully sustaining improvements after the transformation.”