(First of two parts)
Transformation has always been integral to the long-term success of a business. But for many years, the process by which businesses overhauled their operations to boost productivity and promote sustainable growth was sporadic. In many instances, changes in stakeholder expectations or market sentiment would prompt leaders to rethink their organizations from the ground up or make small changes to adapt.
However, both the nature and rate of transformation have changed in the past few years. In the EY 2021 Global Board Risk survey, as much as 82% of board members and CEOs stated that market disruptions have increased in frequency and severity. Companies have started to transform more regularly to keep up — amplifying the need to successfully transform and do so consistently.
A research collaboration established in 2021 between EY and the Saïd Business School of the University of Oxford determined the need for a more effective and contemporary means to sustain organizational change. Specifically, it has to employ a strategy that takes into account the sentiments of both leaders and workers to focus on human factors, which are frequently cited as one of the main reasons why transformations fail. Moreover, the research posited that apart from the transformation failure rate being too high, organizations can no longer afford the human cost associated with it.
HUMAN EMOTIONS AT THE HEART OF TRANSFORMATION SUCCESSLeaders usually invest early to create the circumstances for a successful transformation on both an emotional and a rational level. The research observed that, along the way, confidence in the process may ebb as tensions arise, but also noted that the support usually increases to match the pressure. Workers will feel positive by the end of the transformation with proper and timely support. The study has found that positive worker sentiment increased by 50% after successful transformations.
The emotional state of both leaders and employees at the start of a successful transition is comparable, but there will be a point in the transformation when things start to go awry. This is where supportive intervention is needed as up to 66% of employees feel stressed with an underperforming transformation. The impact of a failed transformation can be severe, with up to 75% of the workforce experiencing negative feelings and an extreme of 31% feeling angry, depressed or sad.
This is particularly noteworthy in situations where a series of transformations is planned. While negative emotions in the workforce can rise by 25% during successful transformations, it rises dramatically to 130% during unsuccessful ones. Going into the next transformation with this negativity can be devastating for any new transformation efforts. This makes it even more important for organizations to revisit their transformation plans and keep humans at the center in order to better turn transformation failure into success.
Research findings from the study identified six key drivers that can help increase the likelihood of transformation success. In the first part of this article, we discuss the first three: adapting and nurturing the necessary leadership skills, creating a vision that everyone can believe in, and building a culture that encourages and embraces all opinions.
LEAD: ADAPT AND NURTURE THE NECESSARY LEADERSHIP SKILLSRegardless of whether a transformation was successful or not, employees in the study ranked leadership as the most important factor. Interestingly, while leaders considered leadership as the primary factor in successful transformations, they also saw it as irrelevant when the transformation failed. Given the importance of personal emotional development, leaders must be aware of their own mental and physical limitations. Moreover, they must be absolutely open and honest about their worries, fears, and self-doubt regarding the transformation journey, as well as admit what they don’t know and still need to learn.
Leaders need to have the courage to admit they may not have all the solutions and be willing to demonstrate the humility to search both inside and outside the company for such solutions. For instance, compared to respondents in low-performing transformations, respondents in high-performing transformations were more likely to say that leaders embraced ideas from more junior staff.
To demonstrate that the entire team is participating in the transformation together, leaders must take responsibility for both the good and the bad. By promoting collaboration, achieving consensus, and establishing consistent two-way communication with those driving the execution, leaders can highlight that everyone contributes. Successful transformation executives have reportedly spoken with employees directly to ascertain their concerns. Others made investments in technological platforms that enabled two-way communication and united diverse viewpoints.
Key driver: Leaders must invest in their own transformation and place a strong emphasis on teamwork and communication.
INSPIRE: CREATE A VISION EVERYONE CAN BELIEVE INVision establishes the transformation tone and foundational framework. In order to find a compelling vision, leaders must look outside of themselves, their company, and their sector. They should cast a wide net to find inspiration and employ future-back planning to locate exciting new opportunities, creating a compelling vision that can inspire everyone. Compared to 26% of respondents in a low-performing transformation, 47% of those in a high-performing transformation thought the vision was compelling and clear.
As much as 71% of employees think that this can increase the success of a transformation, making it imperative for leaders to effectively convey why change is necessary rather than merely state what they must do if they want the vision to become a reality. Instead of just encouraging their people to understand the vision, leaders must nurture genuine belief in it.
Compared to 25% of respondents in low-performing transformations, 50% of respondents in high-performing transformations said that leadership made it obvious why the organization needed to change.
Key driver: Leaders must manifest a vision that everyone can support, motivating employees to go above and beyond.
CARE: BUILD A CULTURE THAT ENCOURAGES AND EMBRACES ALL OPINIONSEmotions are the key to a successful transition, but if the business is unprepared, it can doom the transformation to failure. In the study, 50% of the employees who went through a successful transformation felt that transformation was merely another word for layoffs. Workers involved in poorly executed transformations reported feeling ignored, unsupported, and stressed both during and after the transition. Leaders admitted in follow-up meetings that they were shocked by these results and were not aware of the severe toll that a poorly executed change had taken on their workforce.
In addition to giving enough emotional support to minimize anxiety and burnout, leaders must be able to manage emotions to keep employees motivated and engaged. According to the prediction model used in the study, extending emotional support increased the average likelihood of transformation success by 17%.
Understanding the emotional condition of the workforce during the transformation process will help leaders spot early warning signs and make the necessary modifications to set the transformation back on track.
Key driver: Leaders will have to pay close attention to what their people are saying, identify the cause of their anxiety, and try to solve problems in a way that is both productive and emotionally supportive.
In the second part of this article, we will discuss the next three key drivers: setting clear responsibilities and preparing for change, using technology to quickly drive visible action, and finding the best ways to connect and collaborate.
This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co.
Rossana A. Fajardo is the EY ASEAN business consulting leader and the consulting service line leader of SGV & Co.