Apply Kotter’s Change Framework to a business situation with which you are familiar.

Change Framework Analysis to Business Situation
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Apply Kotter’s Change Framework to a business situation with which you are familiar. Describe the business situation, introduce and describe Kotter’s methodology, then apply Kotter’s change framework to the business situation in detail with the appropriate steps and expected outcomes to resolve the business situation. Do not forget to justify why Kotter’s framework is the best tool of choice for the situation.An example business situation could be a software company’s product extremely behind in technology architecture and features; prompting a corporate mandate to scrap the existing product and develop anew from starting point zero. Implications to undertaking this goal, overhaul needed in the company’s mindset, working culture, motivation, incentive, and overall strategic steps needed to accomplish the goal within an aggressive timeline of 1year. Apply Kotter’s change framework to this situation.
Leading ChangeWhy Transformation Efforts Failpage 1The Idea in Brief The Idea in PracticeCOPYRIGHT © 2006 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED.Most major change initiatives—whether intendedto boost quality, improve culture, orreverse a corporate death spiral—generateonly lukewarm results. Many fail miserably.Why? Kotter maintains that too manymanagers don’t realize transformation is aprocess,not an event. It advances throughstages that build on each other. And ittakes years. Pressured to accelerate theprocess, managers skip stages. But shortcutsnever work.Equally troubling, even highly capablemanagers make critical mistakes—such asdeclaring victory too soon. Result? Loss ofmomentum, reversal of hard-won gains,and devastation of the entire transformationeffort.By understanding the stages of change—and the pitfalls unique to each stage—youboost your chances of a successful transformation.The payoff? Your organization flexeswith tectonic shifts in competitors, markets,and technologies—leaving rivals far behind.To give your transformation effort the best chance of succeeding, take the right actions at eachstage—and avoid common pitfalls.Stage Actions Needed PitfallsEstablish asense ofurgency• Examine market and competitive realitiesfor potential crises and untappedopportunities.• Convince at least 75% of your managersthat the status quo is more dangerousthan the unknown.• Underestimating the difficulty of drivingpeople from their comfort zones• Becoming paralyzed by risksForm a powerfulguidingcoalition• Assemble a group with shared commitmentand enough power to lead thechange effort.• Encourage them to work as a teamoutside the normal hierarchy.• No prior experience in teamwork at thetop• Relegating team leadership to an HR,quality, or strategic-planning executiverather than a senior line managerCreate avision• Create a vision to direct the change effort.• Develop strategies for realizing that vision.• Presenting a vision that’s too complicatedor vague to be communicated in fiveminutesCommunicatethe vision• Use every vehicle possible to communicatethe new vision and strategies forachieving it.• Teach new behaviors by the example ofthe guiding coalition.• Undercommunicating the vision• Behaving in ways antithetical to thevisionEmpowerothers to acton the vision• Remove or alter systems or structuresundermining the vision.• Encourage risk taking and nontraditionalideas, activities, and actions.• Failing to remove powerful individualswho resist the change effortPlan for andcreate shorttermwins• Define and engineer visible performanceimprovements.• Recognize and reward employees contributingto those improvements.• Leaving short-term successes up tochance• Failing to score successes early enough(12-24 months into the change effort)Consolidateimprovementsandproducemore change• Use increased credibility from earlywins to change systems, structures, andpolicies undermining the vision.• Hire, promote, and develop employeeswho can implement the vision.• Reinvigorate the change process withnew projects and change agents.• Declaring victory too soon—with thefirst performance improvement• Allowing resistors to convince “troops”that the war has been wonInstitutionalizenewapproaches• Articulate connections between newbehaviors and corporate success.• Create leadership development andsuccession plans consistent with thenew approach.• Not creating new social norms andshared values consistent with changes• Promoting people into leadership positionswho don’t personify the newapproachBESTOFHBRLeading ChangeWhy Transformation Efforts Failby John P. Kotterharvard business review • hbr.org • the tests of a leader • january 2007 page 2COPYRIGHT © 2006 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED.Leaders who successfully transform businesses do eight things right(and they do them in the right order).Editor’s Note:Guiding change may be the ultimatetest of a leader—no business survives overthe long term if it can’t reinvent itself. But,human nature being what it is, fundamentalchange is often resisted mightily by the people itmost affects: those in the trenches of the business.Thus, leading change is both absolutely essentialand incredibly difficult.Perhaps nobody understands the anatomyof organizational change better than retiredHarvard Business School professor John P.Kotter. This article, originally published in thespring of 1995, previewed Kotter’s 1996 bookLeading Change. It outlines eight critical successfactors—from establishing a sense of extraordinaryurgency, to creating short-termwins, to changing the culture (“the way we dothings around here”). It will feel familiar whenyou read it, in part because Kotter’s vocabularyhas entered the lexicon and in part because itcontains the kind of home truths that we recognize,immediately, as if we’d always knownthem. A decade later, his work on leadingchange remains definitive.Over the past decade, I have watched morethan 100 companies try to remake themselvesinto significantly better competitors. Theyhave included large organizations (Ford) andsmall ones (Landmark Communications),companies based in the United States (GeneralMotors) and elsewhere (British Airways),corporations that were on their knees (EasternAirlines), and companies that were earninggood money (Bristol-Myers Squibb). These effortshave gone under many banners: totalquality management, reengineering, rightsizing,restructuring, cultural change, and turnaround.But, in almost every case, the basicgoal has been the same: to make fundamentalchanges in how business is conducted in orderto help cope with a new, more challengingmarket environment.A few of these corporate change efforts havebeen very successful. A few have been utterfailures. Most fall somewhere in between, witha distinct tilt toward the lower end of the scale.The lessons that can be drawn are interestingand will probably be relevant to even more orLeadingChange•••BESTOFHBRharvard business review • hbr.org • the tests of a leader • january 2007 page 3ganizations in the increasingly competitivebusiness environment of the coming decade.The most general lesson to be learned fromthe more successful cases is that the changeprocess goes through a series of phases that, intotal, usually require a considerable length oftime. Skipping steps creates only the illusion ofspeed and never produces a satisfying result. Asecond very general lesson is that critical mistakesin any of the phases can have a devastatingimpact, slowing momentum and negatinghard-won gains. Perhaps because we have relativelylittle experience in renewing organizations,even very capable people often make atleast one big error.Error 1: Not Establishing a GreatEnough Sense of UrgencyMost successful change efforts begin whensome individuals or some groups start to lookhard at a company’s competitive situation,market position, technological trends, and financialperformance. They focus on the potentialrevenue drop when an importantpatent expires, the five-year trend in decliningmargins in a core business, or an emergingmarket that everyone seems to be ignoring.They then find ways to communicate this informationbroadly and dramatically, especiallywith respect to crises, potential crises, or greatopportunities that are very timely. This firststep is essential because just getting a transformationprogram started requires the aggressivecooperation of many individuals. Withoutmotivation, people won’t help, and the effortgoes nowhere.Compared with other steps in the changeprocess, phase one can sound easy. It is not.Well over 50% of the companies I havewatched fail in this first phase. What are thereasons for that failure? Sometimes executivesunderestimate how hard it can be to drive peopleout of their comfort zones. Sometimes theygrossly overestimate how successful they havealready been in increasing urgency. Sometimesthey lack patience: “Enough with the preliminaries;let’s get on with it.” In many cases, executivesbecome paralyzed by the downside possibilities.They worry that employees withseniority will become defensive, that moralewill drop, that events will spin out of control,that short-term business results will be jeopardized,that the stock will sink, and that theywill be blamed for creating a crisis.A paralyzed senior management often comesfrom having too many managers and notenough leaders. Management’s mandate is tominimize risk and to keep the current systemoperating. Change, by definition, requires creatinga new system, which in turn always demandsleadership. Phase one in a renewalprocess typically goes nowhere until enoughreal leaders are promoted or hired into seniorleveljobs.Transformations often begin, and beginwell, when an organization has a new headwho is a good leader and who sees the need fora major change. If the renewal target is the entirecompany, the CEO is key. If change isneeded in a division, the division general manageris key. When these individuals are not newleaders, great leaders, or change champions,phase one can be a huge challenge.Bad business results are both a blessing anda curse in the first phase. On the positive side,losing money does catch people’s attention.But it also gives less maneuvering room. Withgood business results, the opposite is true: Convincingpeople of the need for change is muchharder, but you have more resources to helpmake changes.But whether the starting point is good performanceor bad, in the more successful cases Ihave witnessed, an individual or a group alwaysfacilitates a frank discussion of potentiallyunpleasant facts about new competition,shrinking margins, decreasing market share,flat earnings, a lack of revenue growth, orother relevant indices of a declining competitiveposition. Because there seems to be an almostuniversal human tendency to shoot thebearer of bad news, especially if the head ofthe organization is not a change champion, executivesin these companies often rely on outsidersto bring unwanted information. WallStreet analysts, customers, and consultants canall be helpful in this regard. The purpose of allthis activity, in the words of one former CEO ofa large European company, is “to make the statusquo seem more dangerous than launchinginto the unknown.”In a few of the most successful cases, a grouphas manufactured a crisis. One CEO deliberatelyengineered the largest accounting loss inthe company’s history, creating huge pressuresfrom Wall Street in the process. One divisionpresident commissioned first-ever customersatisfaction surveys, knowing full well that theNow retired,John P. Kotterwas theKonosuke Matsushita Professor ofLeadership at Harvard Business Schoolin Boston.Leading Change•••BESTOFHBRharvard business review • hbr.org • the tests of a leader • january 2007 page 4results would be terrible. He then made thesefindings public. On the surface, such moves canlook unduly risky. But there is also risk in playingit too safe: When the urgency rate is notpumped up enough, the transformation processcannot succeed, and the long-term futureof the organization is put in jeopardy.When is the urgency rate high enough?From what I have seen, the answer is whenabout 75% of a company’s management is honestlyconvinced that business as usual is totallyunacceptable. Anything less can produce veryserious problems later on in the process.Error 2: Not Creating a PowerfulEnough Guiding CoalitionMajor renewal programs often start with justone or two people. In cases of successful transformationefforts, the leadership coalitiongrows and grows over time. But wheneversome minimum mass is not achieved early inthe effort, nothing much worthwhile happens.It is often said that major change is impossibleunless the head of the organization is anactive supporter. What I am talking aboutgoes far beyond that. In successful transformations,the chairman or president or divisiongeneral manager, plus another five or15 or 50 people, come together and developa shared commitment to excellent performancethrough renewal. In my experience,this group never includes all of the company’smost senior executives because some peoplejust won’t buy in, at least not at first. But inthe most successful cases, the coalition isalways pretty powerful—in terms of titles,EIGHT STEPS TO TRANSFORMINGYOUR ORGANIZATIONEstablishing a Sense of Urgency• Examining market and competitive realities• Identifying and discussing crises, potential crises, or major opportunitiesForming a Powerful Guiding Coalition• Assembling a group with enough power to lead the change effort• Encouraging the group to work together as a teamCreating a Vision• Creating a vision to help direct the change effort• Developing strategies for achieving that visionCommunicating the Vision• Using every vehicle possible to communicate the new vision and strategies• Teaching new behaviors by the example of the guiding coalitionEmpowering Others to Act on the Vision• Getting rid of obstacles to change• Changing systems or structures that seriously undermine the vision• Encouraging risk taking and nontraditional ideas, activities, and actionsPlanning for and Creating Short-Term Wins• Planning for visible performance improvements• Creating those improvements• Recognizing and rewarding employees involved in the improvementsConsolidating Improvements and Producing Still More Change• Using increased credibility to change systems, structures, and policies thatdon’t fit the vision• Hiring, promoting, and developing employees who can implement the vision• Reinvigorating the process with new projects, themes, and change agentsInstitutionalizing New Approaches• Articulating the connections between the new behaviors and corporatesuccess• Developing the means to ensure leadership development and succession12345678Leading Change•••BESTOFHBRharvard business review • hbr.org • the tests of a leader • january 2007 page 5information and expertise, reputations, andrelationships.In both small and large organizations, a successfulguiding team may consist of only threeto five people during the first year of a renewaleffort. But in big companies, the coalitionneeds to grow to the 20 to 50 range beforemuch progress can be made in phase three andbeyond. Senior managers always form thecore of the group. But sometimes you findboard members, a representative from a keycustomer, or even a powerful union leader.Because the guiding coalition includes memberswho are not part of senior management,it tends to operate outside of the normal hierarchyby definition. This can be awkward, butit is clearly necessary. If the existing hierarchywere working well, there would be no need fora major transformation. But since the currentsystem is not working, reform generally demandsactivity outside of formal boundaries,expectations, and protocol.A high sense of urgency within the managerialranks helps enormously in putting a guidingcoalition together. But more is usually required.Someone needs to get these peopletogether, help them develop a shared assessmentof their company’s problems and opportunities,and create a minimum level of trustand communication. Off-site retreats, for twoor three days, are one popular vehicle for accomplishingthis task. I have seen many groupsof five to 35 executives attend a series of theseretreats over a period of months.Companies that fail in phase two usually underestimatethe difficulties of producing changeand thus the importance of a powerful guidingcoalition. Sometimes they have no history ofteamwork at the top and therefore undervaluethe importance of this type of coalition. Sometimesthey expect the team to be led by a staffexecutive from human resources, quality, orstrategic planning instead of a key line manager.No matter how capable or dedicated thestaff head, groups without strong line leadershipnever achieve the power that is required.Efforts that don’t have a powerful enoughguiding coalition can make apparent progressfor a while. But, sooner or later, the oppositiongathers itself together and stops the change.Error 3: Lacking a VisionIn every successful transformation effort that Ihave seen, the guiding coalition develops apicture of the future that is relatively easy tocommunicate and appeals to customers, stockholders,and employees. A vision always goesbeyond the numbers that are typically foundin five-year plans. A vision says something thathelps clarify the direction in which an organizationneeds to move. Sometimes the firstdraft comes mostly from a single individual. Itis usually a bit blurry, at least initially. Butafter the coalition works at it for three or fiveor even 12 months, something much betteremerges through their tough analytical thinkingand a little dreaming. Eventually, a strategyfor achieving that vision is also developed.In one midsize European company, the firstpass at a vision contained two-thirds of thebasic ideas that were in the final product. Theconcept of global reach was in the initial versionfrom the beginning. So was the idea of becomingpreeminent in certain businesses. Butone central idea in the final version—gettingout of low value-added activities—came onlyafter a series of discussions over a period ofseveral months.Without a sensible vision, a transformationeffort can easily dissolve into a list of confusingand incompatible projects that can takethe organization in the wrong direction ornowhere at all. Without a sound vision, thereengineering project in the accounting department,the new 360-degree performanceappraisal from the human resources department,the plant’s quality program, the culturalchange project in the sales force will notadd up in a meaningful way.In failed transformations, you often findplenty of plans, directives, and programs butno vision. In one case, a company gave outfour-inch-thick notebooks describing its changeeffort. In mind-numbing detail, the booksspelled out procedures, goals, methods, anddeadlines. But nowhere was there a clear andcompelling statement of where all this wasleading. Not surprisingly, most of the employeeswith whom I talked were either confusedor alienated. The big, thick books did not rallythem together or inspire change. In fact, theyprobably had just the opposite effect.In a few of the less successful cases that Ihave seen, management had a sense of direction,but it was too complicated or blurry tobe useful. Recently, I asked an executive in amidsize company to describe his vision and receivedin return a barely comprehensible 30-If you can’t communicatethe vision to someone infive minutes or less andget a reaction thatsignifies bothunderstanding andinterest, you are notdone.Leading Change•••BESTOFHBRharvard business review • hbr.org • the tests of a leader • january 2007 page 6minute lecture. Buried in his answer were thebasic elements of a sound vision. But they wereburied—deeply.A useful rule of thumb: If you can’t communicatethe vision to someone in five minutes orless and get a reaction that signifies both understandingand interest, you are not yet donewith this phase of the transformation process.Error 4: Undercommunicating theVision by a Factor of TenI’ve seen three patterns with respect to communication,all very common. In the first, agroup actually does develop a pretty goodtransformation vision and then proceeds tocommunicate it by holding a single meeting orsending out a single communication. Havingused about 0.0001% of the yearly intracompanycommunication, the group is startledwhen few people seem to understand the newapproach. In the second pattern, the head ofthe organization spends a considerable amountof time making speeches to employee groups,but most people still don’t get it (not surprising,since vision captures only 0.0005% of thetotal yearly communication). In the third pattern,much more effort goes into newslettersand speeches, but some very visible senior executivesstill behave in ways that are antitheticalto the vision. The net result is that cynicismamong the troops goes up, while belief in thecommunication goes down.Transformation is impossible unless hundredsor thousands of people are willing tohelp, often to the point of making short-termsacrifices. Employees will not make sacrifices,even if they are unhappy with the status quo,unless they believe that useful change is possible.Without credible communication, and alot of it, the hearts and minds of the troops arenever captured.This fourth phase is particularly challengingif the short-term sacrifices include job losses.Gaining understanding and support is toughwhen downsizing is a part of the vision. Forthis reason, successful visions usually includenew growth possibilities and the commitmentto treat fairly anyone who is laid off.Executives who communicate well incorporatemessages into their hour-by-hour activities.In a routine discussion about a businessproblem, they talk about how proposed solutionsfit (or don’t fit) into the bigger picture. Ina regular performance appraisal, they talkabout how the employee’s behavior helps orundermines the vision. In a review of a division’squarterly performance, they talk notonly about the numbers but also about howthe division’s executives are contributing to thetransformation. In a routine Q&A with employeesat a company facility, they tie their answersback to renewal goals.In more successful transformation efforts,executives use all existing communicationchannels to broadcast the vision. They turnboring, unread company newsletters into livelyarticles about the vision. They take ritualistic,tedious quarterly management meetings andturn them into exciting discussions of thetransformation. They throw out much of thecompany’s generic management educationand replace it with courses that focus on businessproblems and the new vision. The guidingprinciple is simple: Use every possible channel,especially those that are being wasted on nonessentialinformation.Perhaps even more important, most of theexecutives I have known in successful cases ofmajor change learn to “walk the talk.” Theyconsciously attempt to become a living symbolof the new corporate culture. This is often noteasy. A 60-year-old plant manager who hasspent precious little time over 40 years thinkingabout customers will not suddenly behavein a customer-oriented way. But I have witnessedjust such a person change, and change agreat deal. In that case, a high level of urgencyhelped. The fact that the man was a part of theguiding coalition and the vision-creation teamalso helped. So did all the communication,which kept reminding him of the desired behavior,and all the feedback from his peers andsubordinates, which helped him see when hewas not engaging in that behavior.Communication comes in both words anddeeds, and the latter are often the most powerfulform. Nothing undermines change morethan behavior by important individuals that isinconsistent with their words.Error 5: Not Removing Obstacles tothe New VisionSuccessful transformations begin to involvelarge numbers of people as the processprogresses. Employees are emboldened to trynew approaches, to develop new ideas, and toprovide leadership. The only constraint is thatthe actions fit within the broad parameters ofLeading Change•••BESTOFHBRharvard business review • hbr.org • the tests of a leader • january 2007 page 7the overall vision. The more people involved,the better the outcome.To some degree, a guiding coalition empowersothers to take action simply by successfullycommunicating the new direction. But communicationis never sufficient by itself. Renewalalso requires the removal of obstacles.Too often, an employee understands the newvision and wants to help make it happen, butan elephant appears to be blocking the path.In some cases, the elephant is in the person’shead, and the challenge is to convince the individualthat no external obstacle exists. But inmost cases, the blockers are very real.Sometimes the obstacle is the organizationalstructure: Narrow job categories can seriouslyundermine efforts to increase productivityor make it very difficult even to thinkabout customers. Sometimes compensationor performance-appraisal systems make peoplechoose between the new vision and theirown self-interest. Perhaps worst of all are bosseswho refuse to change and who make demandsthat are inconsistent with the overall effort.One company began its transformation processwith much publicity and actually madegood progress through the fourth phase. Thenthe change effort ground to a halt because theofficer in charge of the company’s largest divisionwas allowed to undermine most of thenew initiatives. He paid lip service to the processbut did not change his behavior or encouragehis managers to change. He did not rewardthe unconventional ideas called for in the vision.He allowed human resource systems toremain intact even when they were clearly inconsistentwith the new ideals. I think the officer’smotives were complex. To some degree,he did not believe the company needed majorchange. To some degree, he felt personally threatenedby all the change. To some degree, he wasafraid that he could not produce both changeand the expected operating profit. But despitethe fact that they backed the renewal effort,the other officers did virtually nothing to stopthe one blocker. Again, the reasons were complex.The company had no history of confrontingproblems like this. Some people were afraidof the officer. The CEO was concerned that hemight lose a talented executive. The net resultwas disastrous. Lower-level managers concludedthat senior management had lied to themabout their commitment to renewal, cynicismgrew, and the whole effort collapsed.In the first half of a transformation, no organizationhas the momentum, power, or time toget rid of all obstacles. But the big ones mustbe confronted and removed. If the blocker is aperson, it is important that he or she betreated fairly and in a way that is consistentwith the new vision. Action is essential, bothto empower others and to maintain the credibilityof the change effort as a whole.Error 6: Not Systematically Planningfor, and Creating, Short-Term WinsReal transformation takes time, and a renewaleffort risks losing momentum if there are noshort-term goals to meet and celebrate. Mostpeople won’t go on the long march unless theysee compelling evidence in 12 to 24 monthsthat the journey is producing expected results.Without short-term wins, too many peoplegive up or actively join the ranks of those peoplewho have been resisting change.One to two years into a successful transformationeffort, you find quality beginning to goup on certain indices or the decline in net incomestopping. You find some successful newproduct introductions or an upward shift inmarket share. You find an impressive productivityimprovement or a statistically higher customersatisfaction rating. But whatever thecase, the win is unambiguous. The result is notjust a judgment call that can be discounted bythose opposing change.Creating short-term wins is different fromhoping for short-term wins. The latter is passive,the former active. In a successful transformation,managers actively look for ways to obtainclear performance improvements, establishgoals in the yearly planning system, achievethe objectives, and reward the people involvedwith recognition, promotions, and even money.For example, the guiding coalition at a U.S.manufacturing company produced a highlyvisible and successful new product introductionabout 20 months after the start of its renewaleffort. The new product was selectedabout six months into the effort because it metmultiple criteria: It could be designed andlaunched in a relatively short period, it couldbe handled by a small team of people whowere devoted to the new vision, it had upsidepotential, and the new product-developmentteam could operate outside the established departmentalstructure without practical problems.Little was left to chance, and the winLeading Change•••BESTOFHBRharvard business review • hbr.org • the tests of a leader • january 2007 page 8boosted the credibility of the renewal process.Managers often complain about being forcedto produce short-term wins, but I’ve found thatpressure can be a useful element in a changeeffort. When it becomes clear to people thatmajor change will take a long time, urgencylevels can drop. Commitments to produceshort-term wins help keep the urgency level upand force detailed analytical thinking that canclarify or revise visions.Error 7: Declaring Victory Too SoonAfter a few years of hard work, managers maybe tempted to declare victory with the firstclear performance improvement. While celebratinga win is fine, declaring the war woncan be catastrophic. Until changes sink deeplyinto a company’s culture, a process that cantake five to ten years, new approaches are fragileand subject to regression.In the recent past, I have watched a dozenchange efforts operate under the reengineeringtheme. In all but two cases, victory was declaredand the expensive consultants were paidand thanked when the first major project wascompleted after two to three years. Within twomore years, the useful changes that had beenintroduced slowly disappeared. In two of theten cases, it’s hard to find any trace of the reengineeringwork today.Over the past 20 years, I’ve seen the samesort of thing happen to huge quality projects,organizational development efforts, and more.Typically, the problems start early in the process:The urgency level is not intense enough,the guiding coalition is not powerful enough,and the vision is not clear enough. But it is thepremature victory celebration that kills momentum.And then the powerful forces associatedwith tradition take over.Ironically, it is often a combination of changeinitiators and change resistors that creates thepremature victory celebration. In their enthusiasmover a clear sign of progress, the initiatorsgo overboard. They are then joined by resistors,who are quick to spot any opportunityto stop change. After the celebration is over,the resistors point to the victory as a sign thatthe war has been won and the troops shouldbe sent home. Weary troops allow themselvesto be convinced that they won. Once home,the foot soldiers are reluctant to climb back onthe ships. Soon thereafter, change comes to ahalt, and tradition creeps back in.Instead of declaring victory, leaders of successfulefforts use the credibility afforded byshort-term wins to tackle even bigger problems.They go after systems and structures thatare not consistent with the transformation visionand have not been confronted before.They pay great attention to who is promoted,who is hired, and how people are developed.They include new reengineering projects thatare even bigger in scope than the initial ones.They understand that renewal efforts take notmonths but years. In fact, in one of the mostsuccessful transformations that I have everseen, we quantified the amount of change thatoccurred each year over a seven-year period.On a scale of one (low) to ten (high), year onereceived a two, year two a four, year three athree, year four a seven, year five an eight, yearsix a four, and year seven a two. The peak camein year five, fully 36 months after the first setof visible wins.Error 8: Not Anchoring Changes inthe Corporation’s CultureIn the final analysis, change sticks when it becomes“the way we do things around here,”when it seeps into the bloodstream of the corporatebody. Until new behaviors are rooted insocial norms and shared values, they are subjectto degradation as soon as the pressure forchange is removed.Two factors are particularly important in institutionalizingchange in corporate culture.The first is a conscious attempt to show peoplehow the new approaches, behaviors, and attitudeshave helped improve performance.When people are left on their own to makethe connections, they sometimes create veryinaccurate links. For example, because resultsimproved while charismatic Harry was boss,the troops link his mostly idiosyncratic stylewith those results instead of seeing how theirown improved customer service and productivitywere instrumental. Helping people see theright connections requires communication. Indeed,one company was relentless, and it paidoff enormously. Time was spent at every majormanagement meeting to discuss why performancewas increasing. The company newspaperran article after article showing howchanges had boosted earnings.The second factor is taking sufficient timeto make sure that the next generation of topmanagement really does personify the newAfter a few years of hardwork, managers may betempted to declarevictory with the firstclear performanceimprovement. Whilecelebrating a win is fine,declaring the war woncan be catastrophic.Leading Change•••BESTOFHBRharvard business review • hbr.org • the tests of a leader • january 2007 page 9approach. If the requirements for promotiondon’t change, renewal rarely lasts. One badsuccession decision at the top of an organizationcan undermine a decade of hard work.Poor succession decisions are possible whenboards of directors are not an integral part ofthe renewal effort. In at least three instances Ihave seen, the champion for change was theretiring executive, and although his successorwas not a resistor, he was not a change champion.Because the boards did not understandthe transformations in any detail, they couldnot see that their choices were not good fits.The retiring executive in one case tried unsuccessfullyto talk his board into a less seasonedcandidate who better personified the transformation.In the other two cases, the CEOs didnot resist the boards’ choices, because theyfelt the transformation could not be undoneby their successors. They were wrong. Withintwo years, signs of renewal began to disappearat both companies.• • •There are still more mistakes that peoplemake, but these eight are the big ones. I realizethat in a short article everything is made tosound a bit too simplistic. In reality, evensuccessful change efforts are messy and fullof surprises. But just as a relatively simple visionis needed to guide people through amajor change, so a vision of the change processcan reduce the error rate. And fewer errorscan spell the difference between successand failure.Reprint R0701JHarvard Business ReviewOnPoint 1710To order, see the next pageor call 800-988-0886 or 617-783-7500or go to www.hbr.orgBE S TO FHBRLeading ChangeWhy Transformation Efforts FailTo OrderFor reprints,Harvard Business ReviewOnPoint orders, and subscriptionstoHarvard Business Review:Call 800-988-0886 or 617-783-7500.Go to www.hbr.orgFor customized and quantity ordersof reprints andHarvard BusinessReviewOnPoint products:Call Rich Gravelin at617-783-7626,or e-mail him atrgravelin@hbsp.harvard.edupage 10Further ReadingA R T I C L E SBuilding Your Company’s Visionby James C. Collins and Jerry I. PorrasHarvard Business ReviewSeptember–October 1996Product no. 410XCollins and Porras describe the glue thatholds a change effort together. Great companieshave a clear sense of why they exist—their core ideology—and where they wantto go—their envisioned future. The mechanismfor getting there is a BHAG (Big, Hairy,Audacious Goal), which typically takes 10 to30 years to accomplish. The company’s business,strategies, and even its culture maychange, but its core ideology remains unchanged.At every step in this long process,the leader’s key task is to create alignmentwith the vision of the company’s future, sothat regardless of the twists and turns in thejourney, the organizational commitment tothe goal remains strong.Successful Change Programs Begin withResultsby Robert H. Schaffer and Harvey A. ThomsonHarvard Business ReviewJanuary–February 1992Product no. 92108Although a change initiative is a process, thatdoesn’t mean process issues should be theprimary concern. Most corporate changeprograms have a negligible impact on operationaland financial performance becausemanagement focuses on the activities, notthe results. By contrast, results-driven improvementprograms seek to achieve specific,measurable improvements within afew months.B O O K SThe Heart of Change: Real-Life Stories ofHow People Change Their Organizationsby John P. Kotter and Dan S. CohenHarvard Business School Press2002Product no. 2549This book is organized around Kotter’s eightstagechange process, and reveals the resultsof his research in over 100 organizations inthe midst of large-scale change. Althoughmost organizations believe that change happensby making people think differently, theauthors say that the key lies more in makingthem feel differently. They introduce a newdynamic—“see-feel-change”—that sparksand fuels action by showing people potentreasons for change that charge their emotions.The book offers tips and tools to youapply to your own organization.Leading Changeby John P. KotterHarvard Business School Press1996Product no. 7471This book expands upon the article about whytransformation efforts fail. Kotter addresseseach of eight major stages of a change initiativein sequence, highlighting the key activitiesin each, and providing object lessons aboutwhere companies often go astray.

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