6 key levers for successful organizational transformation (2023)

Disruption used to be an exceptional event that befell a few unlucky companies—think Kodak, Polaroid, and Blackberry. But in today's complex and uncertain world, where we face challenges ranging from climate change to digitization, geopolitics to DEI, organizations must treat transformation as a core capability to be mastered, as opposed to a one-off event.

At the same time, leaders must understand that transformation is fraught with risks. In 1995, John Kotter discovered this70% of organizational transformations fail, and almost three decades later, not much has changed. Our own research, where we spoke to more than 900 C-suite executives and more than 1,100 employees who had gone through business transformation, showed similar results: 67% of leaders told us they had experienced at least one bad transformation in the past five years.

Given that organizations will spend billions on transformation initiatives over the next year, a 70% failure rate equates to significant value erosion. So what can leaders do to turn the odds of success in their favor? To find out, we interviewed 30 leaders of transformation and surveyed more than 2,000 senior managers and employees in 23 countries and 16 sectors. Half of our respondents were involved in a successful transformation, while the other half experienced an unsuccessful transformation.

So what tactics have successful transformational leaders used to manage the emotional journey? To find out, we built a model to predict the likelihood of an organization achieving its transformation KPIs based on the extent to which it demonstrated 50 behaviors in 11 transformation areas. This model found that behavior in six of these areas consistently improves the odds of transformational success. Organizations that are above average in these areas have a 73% chance of meeting or exceeding their transformation KPIs, compared to only a 28% chance for organizations that are below average. Our research suggests that any organization that can effectively apply these six levers will increase its chances of success.

Our research has also shown that the key difference in successful transformations is thatleaders have embraced the emotional journey of their employees. 52 percent of respondents involved in successful transformations said their organization provided the emotional support they needed during the transformation process "to a significant extent" (compared to 27% of respondents involved in unsuccessful transformations).

Transformations are extremely difficult on a personal level for everyone involved. In the successes we studied, leaders not only ensured their teams had the processes, resources, and technology they needed—they also built the right emotional conditions. These leaders offered a compelling rationale that drove the transformation and gave employees the emotional support they needed to perform. This meant that when the going got inevitably tough, employees felt suitably challenged and ultimately energized by the stress.

In contrast, leaders of failed transformations did not make the same emotional investments. As their team faced inevitable challenges, negative emotions soared and the team entered a downward spiral. Managers lost faith and tried to distance themselves from the project, prompting employees to do the same.

Six key levers for transformation

So what tactics have successful transformational leaders used to manage the emotional journey? The six levers that, according to our research, increase the chances of success are:

1.Management's own willingness to change

Many people think that a leader's job is to look outward and provide direction to others, but our research suggests that to help their workforce transform, leaders must first look inward and examine their own relationship to change. "If you are not ready to change yourself, forget about changing your team and organization," said Dr. Patrick Liew, Executive Chairman of GEX Ventures us.

In our interviews, the leaders talked about working on their own development, including managing their emotions more and getting used to the discomfort that comes with personal growth. Leaders needed to “look in the mirror,” as one told us, and realize they were part of the problem before moving on a positive path. They had to overcome their own fears before they could help their employees navigate this change.

"As someone who has been tasked with leading this [transformation], to be honest with you, it was quite nerve-wracking at first because I think most of us naturally want to know which way we go," an automotive industry. The COO told us. And a senior vice president in the global business services industry described the need to become more vulnerable and honest in their journey of self-discovery: "I think I've become even more aware of myself, who I am."

2. Shared vision of success

Creating a unified vision of future success is another very important fundamental point of transformation. In our study, 50% of respondents involved in successful transformations said the vision greatly motivated and inspired them to go the extra mile (compared to 29% of respondents in low-performing transformations).

Employees must understand the urgent need to disrupt the status quo. A compelling "why" can help them navigate the inevitable challenges that will arise during the transformation program. Many employees who participated in our survey said they “wanted” and “needed” the vision to be clearly communicated. When leaders share a clear vision, workforce buy-in is more likely. But if people don't understand the vision or the need for transformation, success is hard to achieve.

"It's not about me telling people, 'This is going to happen,'" one medical device industry executive told us. "It's about me creating that shared sense of ownership ... and then [teaching] my team what to achieve. We very consciously want our teams to really believe in how we, as a collective, want to work."

3.A culture characterized by trust and psychological security

Leaders' trust and care can make a difficult transformation more emotionally bearable. At the most basic human level, we all know what it feels like to be seen, heard and heard by another person. It can validate our efforts, motivate us to work harder, and help alleviate feelings of doubt, fear, anger, and sadness. Employees in our survey said they wanted leaders who were patient and who also had, in the words of one employee, "a calm and teachable spirit."

In a workplace with a high degreepsychological safety, employees feel confident that they can share their honest opinions and concerns without fear of retaliation. When trust and psychological safety are lacking, it is difficult to convince your workforce to make the necessary changes. For example, one senior manager told us that employees in their company were very afraid of transformation and did not feel they could talk about the problems they saw. Not surprisingly, the transformation did not go well.

4. A process that balances execution and research

Transformations obviously require disciplined project management to move the program forward. But our research showed that leaders of successful transformations created processes that balanced the need to execute with giving employees the freedom to explore, express creativity and allow new ideas to emerge. This allows the workforce to identify solutions or options that better meet long-term transformation goals.

“Innovation requires the right people and processes,” said one respondent in our anonymous survey. "Both are key to fostering collaboration and experimentation."

We've also found that allowing room for small failures can ultimately lead to great success, while fear of failure can lead to missed opportunities. Forty-eight percent of our respondents involved in successful transformations said the process was designed so that a failed experiment would not materially negatively impact their career or compensation. In contrast, only 29% of respondents in failed transformations said the same.

5. To recognize that technology carries its own emotional journey

Leaders in our survey ranked technology as the biggest challenge they faced in their transformation efforts. There are many emotions to deal with when introducing new systems or technologies, from stressing over how they will work to fearing whether they will cause job losses or slow down the system.

In the ineffective transformations we studied, we saw the narrative shift away from the vision and focus on the technology itself. While in successful transformations, leaders have ensured that technology is seen as a means to achieve the strategic vision. Furthermore, they prioritized rapid implementations of new technology - with a focus on a minimum viable product rather than a perfect implementation. Finally, they have invested resources in developing skills to ensure that the workforce is ready to create value using the new technology.

"The first sessions were held with our senior executives to get them on board early in the process," explained the company's vice president of media/advertising. "These sessions were meant to show them that what was being built was something they helped design, not something presented to them as a fait accompli... This reduced the number of active opponents."

6. Shared sense of ownership of the result

In the successful transformations we studied, leaders and employees worked together to create an environment where everyone felt a shared sense of ownership of the vision and outcome of the transformation.

The best example of this is the rapid transition of many companies to virtual and remote work during the pandemic. Because of the speed and urgency of change, managers have had to work closely with the workforce to create new ways of working and be much more sensitive to their views on what is and isn't going well. This massive co-creation helped build a sense of pride and shared ownership among management and the workforce.

"In transformation, things keep popping up," said Christiane Wijsen, head of corporate strategy at Boehringer Ingelheim. “When you have movement around you, the fans will tone it down and adjust every time. When you don't have this movement, you're alone."

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Finally, it is worth repeating that all transformations are difficult. Even during successful programs, there will come a time when people begin to feel stressed. The skills in this difficult phase are being able to energize your workforce and turn the increased pressure into something productive, as opposed to letting the transformation devolve into pessimism and failure.

What we've seen in our research is that managers who really work with their employees are much more successful. They acknowledge feelings and deal with them, instead of pushing them aside or ignoring them. The best leaders create a vision for the entire organization and a safe environment to work together and listen to each other.

"You have to be very, very respectful of people at the work level," said Thomas Sebastian, managing director of the London Market Joint Venture at DXC Technology. "You have to understand the emotional side and consider a whole different perspective, like how this transformation will make their lives easier."

Success breeds success. Once the workforce has undergone a successful transformation, they will be ready to hit the ground running again. And given the rapid change in the world, organizations must be ready to start again.