The Constant Need for Change
Many organizations often unknowingly exhibit complacency and only incorporate significant change when a crisis or imminent threat emerges. This is especially true in organizations that have had success in the past.
In this excerpt of the Change in a Successful Organization whitepaper from Michael Winslow, Tamara Ledbetter, Adam Zimman, John Esser, Tim Judge, and Carmen DeArdo, we’ll explore how to answer the following questions without a crisis:
- How do you create awareness and bias-to-action to overcome organizational inertia to initiate change?
- How do you transfer awareness and action across all levels of the organization, from the C-suite to the frozen middle and down to the everyday practitioner?
- How do you transform the organizational mindset and culture to one that ultimately rejects complacency itself?
The Axis of Change
For any individual or group there are two dimensions for change: motivation and ability. These two dimensions can be used to categorize all teams, organizations, and companies. Both dimensions are a spectrum; neither is binary.
- Motivation for change is all about people and their understanding and acknowledgement that change is needed. Biologically as a species, we have been successful thanks to the appropriate level of motivation for change as our external conditions have evolved and altered. In the context of a company, this motivation is often driven by external conditions. However, the companies that can be successful across decades, or even centuries, often view change as the only predictable constant in external conditions.
- The ability for change is all about process and technology. Do you have the tools and the defined steps to make changes? And more importantly, do you have the skill to make the changes that are needed to move in the correct direction?
Figure 1: The Axis of Change
When we combine these two dimensions, we can begin to visualize four distinct categorizations for change in organizations (see Figure 1).
There are successful organizations in all four quadrants, yet there are distinct benefits and limitations in three of the four. The most successful organizations, those that sustain their success, build a culture where change is a proactive activity instead of a reactive one.
The key? Unlocking the ability to combine high motivation and practiced ability for change.
The Quadrants of Change
Looking at these four types of successful organizations, we can begin to build definitions based on the axes we have used to build the quadrants.
The Hopefully Triumphant Organization
Leaders who display a motivation to change, yet lack the tools and/or process for imparting change, are often eventually successful, though often at a cost of culture and employee engagement. Their success is typically difficult for them to repeat when urgent changes must occur. Those in this quadrant once had the drive and motivation to do what was needed to create a new market or do things better than companies they displaced. However, they often struggle to understand or articulate how change occurs. Perhaps it’s organic and quiet or trial by fire and painful—regardless, they make it to a successful state. This is often a temporary quadrant; companies either figure out how to increase their ability for change or a fast follower will usurp their success with better process and execution.
The Continually Successful Organization
Companies that display a powerful combination of high motivation and high ability for change are typically continually successful. These are the organizations seen as either proactive or very fast followers in the bold changes they pursue. It’s important to note that they may not always be first in their market or industry to act or make a change. Whether they are leading or quickly joining, there is a well-crafted culture and practice of improvement, reflection, and iteration across all levels of the organization. Risk is calculated, action is intentional, and all understand the value of change.
The Blissfully Stagnant Organization
Organizations that are successful, even though they lack the motivation and ability to make changes when required, are likely externally dependent. External conditions shift to grow profits, yet the organization has had the ability to remain predominantly stagnant with low impact. For some industries, this has historically been an intentional strategy, for example in commodities markets. As the saying goes, eventually the tax comes due. As we move deeper into the last decade of the Digital Age and into the Fourth Industrial Revolution, more disruption has come to these companies then they saw in the preceding century. When disruption comes knocking by way of the external conditions they rely on, more often than not they transition from blissfully stagnant to nonexistent, found only in history books.
The Successfully Complacent Organization
Some successful companies—perhaps the oddest of organizations—lack the motivation for change yet do have reasonable tools, processes, and skills in place for making changes when required. These organizations are typically viewed as positively reactive to impactful requirements for change; however, they do not work proactively or innovatively. While these organizations may often remain successful through a number of external changes, they are seldom the leaders in an industry, are rarely seen as market vertical, and will likely face significant threats from more innovative disruptors in the future.
Recognize the Forces of Change
Customer Needs Are Changing Rapidly
A successful organization is obsessed with its customers’ needs. This means it is always aware when those needs change. It will not happen organically. You must incorporate practices that actively seek to understand the customers’ future objectives. At Amazon, Jeff Bezos refers to this as always having a “Day 1” culture. Since customers always want something better, giving it to them can help protect your company from irrelevance and death.
Changing Technical Landscape
It is clear that the technical landscape will change often. Investing in changes that keep your organization ahead of the curve is one way to be continually successful. Companies like Netflix and Microsoft have proven that it’s vital to be able to manage radical changes in the industry.
Response to Crisis
Winston Churchill once famously said, “Never let a good crisis go to waste.” While it is absolutely true that crises can speed an otherwise lengthy change in an organization, these are often the riskiest times for change.
Outpacing the Competition
Even when successful, you must constantly keep an eye out for existing competitors and new entrants in your space. Stay paranoid. Assume that the disruptors are right on your heels and that your company must take measures to remain on top.
Once organizations have a solid product, they will eventually reach a point where they need to reduce the cost of maintaining and delivering that product. In some industries where the cost of goods increases in one part of the business, companies may rely on their engineering organization to offset the increase in cost by reducing the cost of delivery. Smart companies can approach this in several ways: migrate to cloud environments, standardize reusable components (economy of scale), and leverage open-source solutions.
Be Persistent, Expect Some Resistance
Changing an organization is often essential for a company to remain competitive. Failure to change may influence the ability of a company to survive. Yet employees do not always welcome changes in methods, nor do managers or leaders. This is not because they have a desire for the company to fail; rather, they have a desire to be confident in what they do every day and find comfort in the success experienced (and rewarded) in the past.
In a 2018 interview, Compuware CEO Chris O’Malley pointed out that studies show that approximately 17% of large organizations are “actively disengaged.” This means they look to thwart the idea of change in order to keep the status quo. O’Malley cautions that we need to be aware that these types of headwinds exist and that they should be taken into consideration.
Figure 2*: Obstacles and Challenges During Major Organizational Changes
*Note: Excludes HR professionals who indicated that their organizations had not experienced nay obstacles or challenges during major organizational changes. Percentages do not total 100% due to multiple response options. Source: SHRM 2007 Change Management Survey Report
Going back to a 2007 survey conducted by the Society for Human Resource Management (SHRM), results showed that employee resistance to change is one of the top reasons change efforts fail.3 In fact, reactions to organizational change may range from resistance to compliance to enthusiastic support for the change, with the latter being the exception rather than the norm.
One of the key drivers of shifting this left? Clear sponsorship from the top. That is, leaders being able to clearly articulate the “why” of change from the employees perspective.
The Evidence that Change is Needed
As we noted in the previous section, successful companies can spend years in the continually successful quadrant; however, at some point many companies transition to other quadrants due to an inability or a lack of motivation to change.
The leadership at many successful companies does not simply refuse to change, they believe that the risk of change outweighs the benefits. In many ways, successful companies are demotivated to change because it places their core business at risk or it challenges the value that current leadership can bring to the future of the company.
This is particularly true for firms that have held a strong market position for many years, where leadership has been conditioned to believe that the current business model continues to be the way forward. Complacent companies are at risk because they do not have a crisis to force change and often do not recognize the need for investment to build new capabilities in order to prepare for eventual change.
Several firms do a good job evaluating the strategic change efforts of large corporations and can help us identify shining examples of continually successful organizations.
One firm, Innosight, releases an annual Transformation 20 report in which they use three factors for their rankings: New Growth, Repositioning the Core, and Financials. The aim is to pinpoint best practices across industries and public companies to identify leadership excellence.
Often companies are willing to respond to threats, but they use the same tools that they have always used, doubling down on their past practices. Donald N. Sull, in his book Revival of the Fittest, notes that successful companies tend “to respond to even the most disruptive shifts in the environment by accelerating actions that worked in the past.”
This means that complacency takes the form of a lack of motivation to change, including in response to crises.
To read several case studies of successful firms that were able to overcome the complacency inertia and drive successful change, as well as those that were not able to get the company to change in time, download the full whitepaper here.