Insider Business Club: delivering corporate change

Why do so many corporate change programmes fail?

Simon Street, strategy and change consulting partner, IBM

Going back a few years now we carried out a survey of 500 companies and,
looking at a survey done more recently, neither the success rate nor the success
factors have changed in comparison to our initial survey.

If you are not clear about what you are getting into these things for – in
terms of the cost synergies and the growth synergies – and then very clearly are
assigning the areas of benefit to different leadership groups and then cascading
those down the organisation, – it is little wonder that you haven’t really got
the benefits locked into the organisation performance systems.

There are new capabilities on the block that many of these restructurings –
and certainly M&A situations – require. In my experience no more than 50% of
the leadership team will have the right skills to do it.

Often the critical path and getting the change in place is about securing the
leadership skills that you need.

Don’t forget, some of the people you need could be on long recruitment time
lines to get them into the organisation, so you have to think in terms of
phasing the change around some of the critical appointments that you have to

I think new sorts of skills that we see more demand for in business lines
around finance functions, for example, are often around building strategic
business cases. An M&A problem I hear a lot from business lines is: ‘If only
I had finance people that can stand shoulder to shoulder with me and work on a
quite complex set of cost reductions and growth synergies and help me actually
get that through the board.’ The demand is increasingly on strategic skills
rather than transactional ones.

Are there magic bullets that can help ensure successful change?

Rob Bratby, partner, Mayer, Brown, Rowe & Maw

Where organisations are clear about what they want to achieve and how they
want to achieve it, the chances of the deal being successful are much greater.

I would probably highlight one area that can help the change go smoothly,
that’s pre-deal due diligence. In terms of actually achieving successful
organisational change, organisations that approach the due diligence – not
merely to go through the motions, but to identify how in practice they will
implement the objectives and synergies that they want to achieve – stand a much
greater chance of success.

If you look in the outsourcing space there are a tremendous number of deals
where either the suppliers or the customers are looking to re-negotiate before
the end of the term and in many cases it is because the expectations on both
sides have not been delivered in practice.

There is a degree of unreality around some of the business cases that people
start with. Then they get into the project and find that it is not really
working for either side. As lawyers, one of the things that we see is people
coming to us mid-way through a multi-year contract and asking, ‘what do we do
now? How do we position ourselves to re-negotiate this into something that
works?’ The mis-match between the initial business case and the benefits that
are delivered on the ground is very often the route cause of that.

One thing that lawyers perceive is actually the number of external change
initiatives – whether it’s M&A or whether it’s outsourcing – that fail. You
see a lot of press about how XYZ deal is successful. But Ii it doesn’t succeed
you don’t really hear much more about it.

How important are the people issues?

Professor Rob Lambert, Cranfield School of Management

Part of the problem is people don’t bite the bullet early enough and get
people involved. Once you start to predict what the changes are, you can take
mitigating actions.

Some of the research we are working on, particularly in the context of merg
ers and acquisitions, is around harmonising the strategic leadership team, i.e.
the victors whoever those victors are following a merger and acquisition.

The objectives involve: getting that strategic leadership team to agree what
the new organisation is going to look like; how it is going to operate and
putting in place a set of co-ordinated change initiatives that they will all buy
into because if they don’t buy into it then turf war and politics take over and
confuse the change initiatives that people have set off to deliver those

It is all about the follow through. We did some research two or three years
ago on the quality of business cases behind change initiatives. The clarity of
them, the ‘accuracy’ of costs, resources and benefits and definitions of those
things were all very, very weak. People were very economic with the truth quite
often in businesses cases.

When it comes to reviewing an initiative, can people fix it part way through?
There is also a lot of defensiveness at times when people just stick to
contracts and deliverables. There is also often not enough honesty part way
through a review to say, ‘what are we really trying to achieve and can we fix

Often people get into a hole and just carry on digging. It takes quite a
brave leadership team to ask, are we on the right track and can we correct it,
rather than delving away down in the tunnels.

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