by Lars Fæste and Jim Hemerling
In the face of disruptive technologies, globalization, and a volatile marketplace, leading companies are committing to a new kind of transformation.
Instead of pursuing it as a onetime, crisis-driven initiative and instead of focusing primarily on cutting costs, they are committing to “always on” transformation — profoundly changing their strategy, business model, operating model, people, and organization on an ongoing basis in order to stay ahead.
The new approach demands a new kind of leadership — leadership that is not just directive but also inclusive and that has an appetite for risk, says a new e-book published by The Boston Consulting Group (BCG). Transformation: Delivering and Sustaining Breakthrough Performance draws on the firm’s work in more than 400 transformations that generated a median annual impact exceeding $340 million through cost cuts, revenue increases, the application of capital efficiency levers, and improvements in organizational performance.
“CEOs, boards, and leadership teams need to incorporate transformation as a way of working,” says Jim Hemerling, a senior partner at BCG and one of the editors of the e-book. “That means shifting from treating people as a means to an end — or, worse, as collateral damage — and instead putting people first. The behaviors that leaders need include listening, empathizing, inspiring, empowering teams, and building long-term capabilities to sustain change over time.”
Transformation Missteps That Smart Leaders Avoid
Constant change translates into relentless pressure for CEOs and boards. Those that commit to undertaking a transformation risk several potential missteps, ones that the most effective leaders avoid. Among them:
- Trying to Compel Employees. Leaders frequently use a “forced conscription” approach to staffing transformation teams and then seek to motivate people with carrots and sticks. But when change is constant, this approach fails to trigger the intrinsic motivation that is needed to deliver and sustain performance. Instead, leaders need to invest in and create an organizational context that allows people to thrive, including cultivating a deep sense of purpose, allowing a degree of autonomy, embedding opportunities for personal growth, and orchestrating personal affiliation among the members of project teams.
- Failing to Build Capabilities. In many cases, companies focus too much on specific “finish line” goals and not enough on the capabilities they must build and strengthen in order to transform sustainably, such as skills, knowledge, systems, and analytics and resources. Leaders who effectively drive transformation instead define the capabilities that the company will need in order to sustain the transformation, and they ensure that these capabilities are developed.
- Failing to Be Bold Enough. A joint BCG/Spencer Stuart study of 400 new S&P 500 CEOs over the past ten years shows that many CEOs struggle during their first few years. Perhaps the most important finding was that thriving CEOs were quicker than ousted CEOs to have made bold moves during their first year. They were also more inclined to “go for it” — to launch ambitious and innovative initiatives.
Inclusive Leadership Makes the Difference at Several Key Steps
In a transformation, leaders need to define a vision and a roadmap with clear milestones and to hold employees accountable for results. In other words, they need to be directive. But given the demands of always-on transformation, leaders also need to be inclusive. They must reach out early and often to listen to employees, actively engage and inspire them, and provide opportunities to contribute their creativity and energy to the transformation. Inclusive leaders:
- Define the ambition at the outset, take charge, and set long-term goals. The most effective transformational CEOs engage and seek input from employees and outside stakeholders about the state of the company, in order to set the right ambition from the outset.
- Energize people throughout the organization. Starting with a deep commitment to the organization’s purpose and a clear vision, they build a compelling case for change, ensure that the leadership team speaks with one voice, and inspire employees to come along on the journey. Tone matters — authenticity and urgency are critical, and messages must be rooted in a deep sense of purpose.
- Engage HR as a strategic transformation partner. Transformations have an enormous impact on all the areas where HR plays a critical role, including organization design, leadership and talent development, engagement, and culture and performance management. To make sure the transformation lasts over the long term, the most effective CEOs bring HR on board early as a strategic transformation partner, making sure the organization has the right people — and people processes — to support ongoing change.
Many of the skills required during a transformation are well within most CEOs’ capabilities, but leaders often do struggle with being inclusive. Emotional intelligence and the ability to tap into intrinsic motivation are critical. “The imperative to change is usually a given — but how CEOs respond is not,” says Lars Fæste, senior partner at BCG and an editor of the e-book. “CEOs who are inclusive, leading with emotion and empathy, are more likely to succeed in creating lasting change.”
Lars Fæste is a senior partner in the Copenhagen office of The Boston Consulting Group and the global leader of the Transformation practice.
Jim Hemerling is a senior partner in the firm’s San Francisco office. He is a leader of the People & Organization and Transformation practices and a BCG Fellow.
Source: The Boston Consulting Group