Reducing the risk of transformation failure.

Imagine investing £5m to £50m or more in a business with a 70% failure rate. According to McKinsey, Boston, and Bain, that’s what many organisations do when they embark on transformation initiatives.

A recent Forbes article says 31% of CEO change is for not managing change well enough. A Gartner study reports that 73% of employees affected by the change suffer from moderate to high stress levels!

Despite the high odds of failure along with high levels of cost and personal risk, organisations continue to invest in transformation and restructuring, hoping for a different outcome. But what are the root causes of transformation failure, and how can leaders avoid them?

1. Scope creep

Transformation initiatives often start with a clear scope, but as the project progresses, it’s easy for scope creep to occur. This can happen for various reasons, such as changing business priorities, new stakeholder requirements, or unforeseen challenges. Scope creep can lead to delays, budget overruns, and a significant loss in overall initiative benefit. 

2. Lack of leadership

Another common cause of transformation failure is a lack of leadership engagement. The CEO and executive sponsor must be committed to the transformation, actively involved, and visibly engaged. When the CEO and executive sponsor are not fully engaged, it sends a negative message that increases change resistance.

3. Over-reliance on technology

Many believe that technology is the key to a successful transformation. However, technology is just one piece of the puzzle and frequently only the enabling part. This misplaced belief can lead to losing sight of the underlying business process, customer journey and even the underlying reason for deploying the technology and its intended function.

4. Poor people management

People are the most critical and often the most challenging asset in any organisation, especially with change and disruption being our new norm. It’s essential to have a clear communication plan to keep employees informed but with clear opportunities for an active dialogue with the transformation leadership. 

5. Lack of change management

Even the best communication and change management strategy will fail if you do not build functional and locational advocacy for the change. Without an effective change agent network that creates local and functional advocates and an understanding through trusted local leaders, your change initiative can encounter resistance and experience delay during a critical event. 

6. Lack of outside perspective

It’s easy to get caught up in your day-to-day as an executive sponsor or distracted by the day-to-day details of the transformation. For the executive sponsor, being an active participant can be impossible, with all the other asks on their time. A fractional Chief Transformation Officer or Transformation Executive can be an essential additional set of eyes and ears for the executive sponsor, who can spend 4 or 5 days per month as a mentor to the Transformation team, helping to guide a successful outcome. 

7. Lack of metrics

All too frequently, we see a standard transformation report provide passive data on past performance with very little directional information on overall performance. What we see infrequently are high-quality metrics that align with the declared initiative outcomes. Structural KPIs need to be defined, measured and reported against to give a clear performance picture. 

8. Lack of a performance culture

We accept that motivating employees to embrace change and contribute to the transformation’s success can be difficult. However, we fail to recognise the linkage between reward and performance when it comes to transformation. Creating a performance culture in a transformation is a critical success factor. You can quickly build an effective and high-performing team through a mix of performance bonus arrangements for permanent staff and outcome-based fee arrangements for external hires. 

Conclusion

Transformation failure is a problem with a consequence for those sponsoring and leading it, but the associated risks can reduced. Experience allows you to understand the root causes of failure and to take mitigating actions to address the risk and increase your chances of success.

If you are leading a transformation that is facing challenges or you are about to embark on your next critical change point, and you want to increase your chances of transformation success, let’s schedule a conversation.

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