There used to be a popular series of jokes about ‘the great business lies’. Statements such as: ‘you have my full support’, ‘the cheque’s in the post’ and ‘I’m from head office and I’m here to help.’ Yet arguably one of the commonest business deceptions (however unintended) seems to go unrecognised, namely ‘people don’t like change’.
Whether you look at fashion, new technology or the nation’s eating habits, it is perfectly plain that people can be extraordinarily quick to change when they want to.
But how else can we explain research that consistently shows that between 60% and 80% of all major business-change projects fail to achieve their commercial objectives? This seems to hold true whether in relation to the value creation intended from acquisitions, the implementation of major systems or attempts to improve responsiveness to customers.
The MD of a FTSE100 company wrote recently that his company entered into deals that did not really make commercial sense – ‘not when you know how few deals increase shareholder value’. Even management guru Peter Senge wrote in 1999: ‘Failure to sustain significant change recurs time and again despite substantial resources committed to the change.’
We have discussed this with about 70 business leaders in the last year, and not one has refuted it. Failures are not the exception; they are the rule, whether you operate in the public or private sector, in big organisations and small. At this very moment, UK plc is wasting many millions of pounds on doomed projects and the chances are that your organisation is contributing to this total.
So what is the cause? Sometimes it’s the inevitable consequence of a misconceived project. When Webvan raised over $2bn to build a home-delivery network for online purchases, its chairman and CEO George Shaheen said: ‘The creation of 26 distribution centres – each one bigger than 18 conventional supermarkets ? will take costs out of the equation.’ Two years later, Webvan went bust without ever making a profit.
But misjudgements are not the main reason why major change projects fail. Organisations are complex social systems. The largest single cause of failure is the failure to align the behaviours of people within the organisation with the new strategy.
Most change programmes focus on the textbook dimensions of organisational change – systems, processes, structure and people – and tackle them by appointing change leaders, and creating a programme of workstreams and detailed project plans for each stream.
The only ‘slight problem’, as Blackadder might say, is overwhelming evidence that this approach, based on a cherished management belief that if you pull the right levers the organisation will respond as you want it to, doesn’t work.
I’ve worked with a number of clients that set out to ‘re-engineer’ their finance function by systematising or outsourcing the transaction processing to free-up highly competent and highly paid finance professionals from routine, non-value adding activities to work instead as business ‘consultants’ within the organisation.
This is an elegant and completely logical concept. But in every case I saw, it failed, for a host of different reasons, all understandable with hindsight but not thought out when the original board decision is taken.
For a start, consultancy and control require fundamentally different skills. Simply providing accountants with training in consulting tools and methods is not enough. When individuals lose their power base they feel threatened by the move. Most business units resist the offer of ‘help’ from people they intrinsically associate with ‘control’ and ‘back office’. Their suspicion is usually justified because as soon as things get tough the so-called consultants are recalled to control transaction management duties. And so on.
It’s no wonder that companies fail to align people’s behaviour with the new strategy. It’s not that people intrinsically dislike change. But they do dislike being changed. And in particular they dislike attempts to change them by a leadership that is not committed to, and often doesn’t understand, the full implications of the changes they promote. They dislike leadership teams who almost inevitably got to where they are by being successful within the old structure and the old strategy.
If you are a business leader, a finance director or a business adviser, what should you do when confronted with a major change proposal? The simple answer is to ask: ‘Why do we think this project will be one of the 25% that succeeds?’ Another sensible step would be to double the cost, double the implementation time and then see if it still clears the investment hurdle.
There are also a few practical steps that can be taken to maximise the likelihood of success, like recognising that change is ‘complex’ and that, unless people’s behaviours are aligned with the strategy, the project will probably fail.
This may seem obvious but most boards approve projects if they are on strategy, meet the investment requirements and have a good-looking project plan. They rarely, if ever, wrestle with the likelihood of success ? particularly if the chief executive supports it.
In the 1980s, many audit firms tried to hold back the tide of ever-lower audit profitability by getting staff to provide more and more ‘added-value services’.
Unfortunately most of these were costly to provide and not greatly valued by clients. A better strategy might have been to focus on taking cost out of the audit process without lowering quality and explore other business opportunities to tap into their highly valuable skills and experience.
Start by working on the belief and commitment of the leadership team. That will mean getting all the key players together, probably for at least a couple of days and probably with an experienced facilitator, to get right under the skin of the proposed project.
A very insightful study of change projects published recently concluded brutally with the following words: ‘centrally planned changes based on assumptions of linearity fail to achieve their aims’. Adopting an inclusive approach to the required change will help gain clarity about why the change is imperative to the business and get employees’ views on how to do it.
Alternatively you can do what most staff do most of the time, which is to personally resist the proposed change, go along with proposals that affect others and go to the pub to have a good whinge about another daft project. You may want to exercise your share options first.
Matthew de Lange is a partner in MetaforePartners LLP
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