The world is speeding up and growing increasingly complex: within the past few years, leaders have been forced to respond to pandemics, wars, recessions, supply chain issues, increased labor competition, and more. At the same time, power within companies is more dispersed (that is, less top-down), so leaders can’t simply give an order and expect it to ripple through the organization. That’s why an organization’s ability to navigate continual transformation—and enlist all employees in doing so—isn’t just a requirement for survival, but an enduring competitive advantage.
What Is Organizational Transformation?
Organizational transformation is the process of aligning its organizational culture (how employees work together) with its strategy (the trade-offs the company is willing to make to achieve its goals).
Of course, while this may seem straightforward enough, the process itself is far more complex because it involves people. Organizational transformation is ultimately about making individual behavior changes at scale: it requires overcoming employees’ initial resistance to new ideas and methods; creating an environment where those employees can actually try those new methods, fail, and learn; and successfully reinforcing and spreading those new practices to the rest of the company.
Unfortunately, this is complicated by several factors: first, while the statistic that “70% of change initiatives fail” is bandied about, the truth is that initiatives often do find partial success—but research shows that even “partial success” is often thought of as “total failure” by employees. Even worse, when people do change, they forget they ever did things any other way, making it challenging to convince them that change is possible.
It’s not surprising, then, that employees are skeptical of organizational transformations—and the communication campaigns supporting most initiatives don’t help. Everyone’s had past experiences in which management excitedly announces a new vision or cultural change to great fanfare—but when these changes start to flounder, failures are hidden and efforts abandoned, leaving people frustrated and burned out. Remember Kanter’s Law: “In the middle, everything looks like a failure.” The reality is that the transformation process is hard, and it does take time, and new approaches may not be an immediate success.
Finally, change—even when it’s the right thing to do, even when it’s for the best—entails some kind of loss, such as a loss of time (training to learn new capabilities) or control (when change happens to you, rather than being shaped by you). Loss aversion is one of our strongest cognitive biases, and if not addressed, leads to increase resistance to change.
When Is Organizational Transformation Necessary?
In the face of these challenges, organizational transformation can seem like a daunting prospect—yet it may also be unavoidable. If changes in the conditions of the market are significant enough to change your strategy, you’ll need to make corresponding changes to your organization’s culture. That’s because culture is how strategy is enacted: it’s how divisions are structured, and how decisions are made within those divisions; it’s how information is shared and ideas debated; it’s the processes followed to deliver your products or services. Without transforming how your work, your company will struggle to meet the demands of the evolving market, and your most valuable employees will leave for other opportunities.
The question then becomes, “how do I lead a successful cultural transformation?” Unfortunately, some of the most popular models for implementing organizational transformation were designed for a world that no longer exists—where change was less frequent, more predictable, and more controllable. Furthermore, these models presumed that there was only one “right” way to change, when the truth is companies must determine the right model for the particular change they must undergo. Not only that, some organizational transformation actually requires different models for different elements of the change, as well as a way to integrate those changes together without overwhelming the organizational culture.
How to Lead Successful Transformations
In our work transforming hundreds of companies representing different industries, sizes, and cultures, we’ve found there are actually two types of organizational transformation: “fail-safe” and “safe-to-fail.” Understanding when and how to apply each type, as well as integrate their outcomes, leads to lasting change, and more importantly, employees who understand how to continue to change and grow in response to future market demands.
Organizational Transformation through a Waterfall Approach
These changes are what leaders often think of when they hear “change management”: organizational-wide, high-impact changes like a reorg or new leadership. When NOBL first started, we were skeptical of this approach because all too often, it’s associated with “suits” who invade an organization with so-called best practices, lay off half the employees, and leave the survivors to deal with the aftermath. And despite being the go-to solution, it frequently fails to successfully transform organizations in the long-term—especially when it focuses on slogans and rallies about “vision” and “transformational change,” rather than introducing new behaviors that make a real difference to teams’ day-to-day work.
That’s why we took the opposite approach, applying a more agile, iterative change process to problems like restructures. Quite frankly, it was painful, ineffective, and it frustrated senior management. They had a desired outcome in mind, but constant tinkering wasn’t getting them where they wanted to go. We quickly realized that traditional change management is a fine approach when applied to the right challenges—it’s just over-applied to most challenges organizations face.
In situations where the transformation process impacts the entire organization at once, and where changes are painful to undo, it’s important to get change initiatives right the first time to prevent damaging the organization. Adjustments and reversals only make things worse: imagine, for example, an organization that goes through a restructure every other month.
The good news is that even though these changes are riskier to carry out, there are usually only a few options to choose from. And while there may not be one perfect option, there are probably better or worse solutions. For instance, despite consultants reinventing the “matrix” organization every few years, there are really only a few structures in which to organize teams.
Of course, we still put our own spin on the transformation process. Whereas traditional consultants might disappear into a back room to map out the future state of the organization, for example, we may involve executive leaders in the creation of the solution.
The Four Stages of Waterfall Organizational Transformation
First, we bring the leadership team together to evaluate options. We put together some initial drafts so that the team has something to react to. In the case of a restructure, for instance, we might have an organizational structure for “region” vs. “product.” Then, we facilitate as the team redesigns and creates alternatives.
Next, we explore trade-offs involved in each option. Most organizations get in trouble when they focus on “fail-safe” solutions that attempt to fix everything, rather than the right thing. So we ask leadership to determine, based on the organization’s future growth plans, what each option excels at. How does it fail? What other changes could we implement to minimize those failures?
We align on a decision. For truly momentous decisions, it’s essential for leaders to fully understand their choice and present a united front. We run “pre-mortems” and other exercises to anticipate and address potential problems in advance, and ask leaders for potential objections to a course of action. If they believe the result will fundamentally hurt the business, we work with them to design a solution they believe reduces risk. But if they don’t personally prefer the decision, we ask them to “disagree and commit.”
Finally, we plan the roll out the transformation plan while reducing change resistance. This includes both implementation and communication plans. Unfortunately, leaders get distracted from change projects because they have to triage the next thing, but then a year later, wonder why they’re still experiencing the same problems. Developing a clear road map makes sure the transformation actually happen, rather than getting trapped in a committee room.
Organizational Transformation through an Agile Methodology
Fortunately, most organizational transformations—whether that’s implementing new business strategies, introducing new technologies, or new processes like onboarding or all-hands meetings—can be reversed without much cost or harm. In fact, they actually benefit from rapid experimentation, allowing them to adjust based on feedback and changing conditions.
Which brings us to the other stereotype of change management consultants: the solutions they recommend are things that employees already know—or worse, that they know won’t work. This results in the rank-and-file getting demoralized as they see money being spent on very expensive, very ineffective consultants, often while they’re forced to argue for additional headcount for their overworked teams.
In reality, the people who do the work on a daily basis, those closest to their customers, already have great insight into what the organization needs to perform at its best. Of course it’s possible that they’re wrong—just as it’s possible for outside consultants to be wrong—but it’s an informed opinion, and more often than not, there’s a germ of a great idea there. So that’s where we start a change effort: by simply asking people what they’ve always wanted to try.
We think of this process as an agile methodology (although we’re more committed to the spirit of agile and not a rigid doctrine) and we have to admit, we think it’s led to our high rates of successful transformations.
The Four Stages of Agile Transformation
First, we designate “Squads” to lead the transformation. To make sure we’re getting a diverse organizational perspective, we build a truly cross-functional team of change leaders, including representatives from different departments and different tenures at the organization. At the same time, as we bring together those who typically wouldn’t work on the same projects, it gives them greater insights into the broader challenges the organization is facing. As a result, the members of the Squad quickly become change ambassadors, spreading information and new ways of working naturally.
Next, we empower Squads to implement organizational change. We introduce the challenge and ask the Squad how they want to try solving it. Surprisingly, even among teams of senior leaders, this often confuses them—they’re so used to being directed to do something, or they’ve had their hand slapped when trying something new, that they hesitate. So our first goal is to get them to believe that this is a major opportunity to try new things, and that “failure” is really learning.
We then coach Squads through testing and learning from different solutions. Every week, we work alongside Squads as they figure out what new way of working or business practices they want to test, what’s not working for them, and how they can troubleshoot it. In addition, we also teach teams new skills, like how to facilitate meetings or “skateboard” a solution.
Finally, we scale the transformation. Only once we’ve tested a potential solution do we start to spread it to other parts of the organization. If it continues to succeed, we’ll create a playbook or Center of Excellence to continue to instill these practices in the organization for the long-term. But just as importantly, the systematic approach to transformation stays with the team, making them more adaptive over time.
Integrating the Different Types of Organizational Transformation
Most true organizational transformation involves both types of change, as well as a way to continually connect the dots between the initiatives. For example, to create a more customer-centric organizational culture, corporate leaders may decide to reorganize the team to focus on critical customer segments (a waterfall-style change). This may be necessary, but it’s not sufficient: to see actual changes in organizational performance, they must also redesign their decision-making processes to include more customer feedback and insights (an agile-inspired change).
In order to reach their desired future state, our transformation process stitches these changes together. The most critical component is frequent communication, which might look like:
- Asking people to share what they’ve learned in weekly scrum meetings. Maybe they’ve developed a new strategic brief process, or had an interaction with a client that indicated a new market opportunity. These frequent touch points are opportunities to spread learnings within an organization, and encourage employees to seek out further information.
- Holding Learning Roundtables every month. These are moments for different Squads or teams to come together to provide insight into what they’ve learned, and the progress they’ve made on the change initiative.
- Facilitating retrospectives every quarter to evaluate what’s working, what’s not, and what organizational changes they want to try next. This encourages people to reflect on the work, rather than just carrying on with “business as usual.”
Reducing Resistance to Organizational Transformation
Regardless of which approach is best for any given organizational change, humans are only likely to make a change when they’re motivated, capable of, and need to change. That’s why no matter which type of transformation we’re implementing, we make sure to:
Engage every layer of the organization in change. We glean insights and needs from front-line employees and key stakeholders, we workshop business strategy with executives, and we empower organizational leaders to own and drive the change. We need everyone’s participation in order to implement successful change.
Recognize and create space for feelings and sensations during change. We make space for feelings of loss, and we train leadership skills like spotting and managing change resistance within teams.
Focus on behaviors, attitudes will follow. Other consulting companies waste time with pithy change slogans and empty promises for an idealized future state (which often increase resistance), when what most leadership teams really want are changed behaviors.
Amplify social proof. We highlight the folks who have made change in order to prove it’s possible to implement change, and to create internal incentives to further motivate people.
Build capacity for change, not dependence. Knowing that change is the “new normal,” teams we work are more equipped to continue successful change management after we leave. In everything we do, we hope not only to accomplish stated business goals, but also to train others to take our place.
What Achieving Successful Organizational Transformation Looks Like
Once we started applying these principles, we saw a dramatic increase in successful organizational change, as clients better understood how key activities we were making impacted each other. As a result, our clients have uncovered $15MM in new revenue, increased productivity 27%, identified $250K in cost savings each year, avoided an unnecessary reorg, and more.
