Leading Change: Why Transformation Efforts Fail

Leaders who successfully transform businesses do eight things right (and they do them in the right order).

by John P. Kotter

Businesses hoping to survive over the long term will have to remake themselves into better competitors at least once along the way. These efforts have gone under many banners: total quality management, reengineering, rightsizing, restructuring, cultural change, and turnarounds, to name a few. In almost every case, the goal has been to cope with a new, more challenging market by changing the way business is conducted. A few of these endeavors have been very successful. A few have been utter failures. Most fall somewhere in between, with a distinct tilt toward the lower end of the scale.

John P. Kotter is renowned for his work on leading organizational change. In 1995, when this article was first published, he had just completed a ten-year study of more than 100 companies that attempted such a transformation. Here he shares the results of his observations, outlining the eight largest errors that can doom these efforts and explaining the general lessons that encourage success.

Unsuccessful transitions almost always founder during at least one of the following phases: generating a sense of urgency, establishing a powerful guiding coalition, developing a vision, communicating the vision clearly and often, removing obstacles, planning for and creating short-term wins, avoiding premature declarations of victory, and embedding changes in the corporate culture.

Realizing that change usually takes a long time, says Kotter, can improve the chances of success.

How Star Women Build Portable Skills

Key ideas from the Harvard Business Review article by Boris Groysberg

A star performer in one company will shine in another, right? Wrong. When stars switch firms, their performance actually dims, along with their new company’s market value, author Boris Groysberg argues. Everyone loses.

Except when the stars are women. According to Groysberg, talented women who switch firms maintain their stardom, and their new employer’s share price holds steady. Groysberg provides two explanations for this discrepancy:

• Unlike men, high-performing women build their success on portable, external relationships—with clients and other outside contacts.

• Women considering job changes weigh more factors then men do, especially cultural fit, values, and managerial style.

These strategies enable women to transition more successfully to new companies. And that has crucial implications for all professionals. By understanding successful women’s career strategies, women and men can strengthen their ability to shine in any setting.

How Employees Can Shine in Any New Organization

Groysberg recommend these two strategies:

Strategy #1: Build an external network. Most male stars depend on the internal networks they cultivate. But women lack access to those crucial networks, for these reasons:

• Uneasy in-house bonds. Women face less-than-wholehearted acceptance in male-dominated workplaces. They also avoid forging close relationships with men for fear of giving the appearance of impropriety.

• Poor internal mentorship. Women receive inadequate access to internal mentors. Thus they miss out on a vital service mentoring provides: access to an internal network of relationships.

• Neglectful colleagues. The locker-room and sports-bar cultures characterizing mostly male workforces prevent females from forging strong bonds with males.

To counter these barriers, star women cultivate relationships with external constituencies, such as customers and former mentors, that are not dependent on their current company. When they change jobs, the external relationships that promote their success are not affected.

Strategy #2: Scrutinize prospective employers. Unlike men, who focus largely on compensation, women weigh broader considerations when thinking about a job change, favoring work cultures that emphasize:

• Receptivity to female talent

• Openness to individual styles, personalities, and approaches to work

• Impartial performance measurement systems

Star women who move to employers that offer these features are more likely to succeed than the typical male star who changes companies.

How Organizations Can Foster Star Performers

By paying close attention to female stars’ careers, organizations can do a better job of attracting top performers—female and male—who will continue to excel after they’re hired.

Example: Investment bank Lehman Brothers’ equity research department encourages female analysts to participate in recruiting. The department also rigorously pursues gender-blind policies in every facet of its operations. These practices screen out men uncomfortable in a culture where women can thrive and men can learn from them. In addition, the department refuses to prescribe one “right” way to be an analyst. So people can incorporate aspects of their personal identity, including gender, as they see fit.

This approach propelled the department from 15th in the Institutional Investor rankings in 1987 to 7th in 1988 and 4th in 1989. And many female stars left other investment banks’ research departments to join Lehman Brothers.

Transforming Giants

Key ideas from the Harvard Business Review article by Rosabeth Moss Kanter

To compete in the global economy, multinational companies must respond quickly and innovatively to opportunities and challenges wherever they arise. But many big businesses are saddled with vast bureaucracies that stifle their agility.

It doesn’t have to be this way, says Kanter. Some global giants (including IBM, CEMEX, and Procter & Gamble) have achieved remarkable flexibility and creativity—despite their heft.

They’ve done it by crafting the right guidance system and communicating it widely to their workforces.

Strong guidance systems enable employees around the globe to take effective action promptly and autonomously. The crucial elements of a guidance system? Shared values stressing social good that inflame employees’ passion for making the world a better place.

Your guidance system not only unifies geographically and culturally diverse people so they can make decisions consistent with your company’s goals. It also inspires intense creativity that sparks beneficial and profitable innovations.

Benefits of a Good Guidance System

A well-understood guidance system gives your company important advantages. For instance:

• It enables people in different regions to make consistent decisions, even under pressure.

Example: Procter & Gamble’s core values include putting people’s safety first. This value helped managers at P&G’s Near East unit act decisively, without official permission from headquarters, when Lebanon was bombed in 2006. They added office locations in Lebanon to reduce travel distance to work. They also offered Lebanese-based employees evacuation to Egypt, where housing was provided for them and their families. The company evacuated employee families faster than some countries moved diplomatic personnel.

• It encourages collaboration among diverse employees.

Example: IBM is strongly committed to supporting national cultural projects throughout the world. This value enabled an international collaboration to digitize an Egyptian museum’s contents and ancient structures, including the pyramids. To achieve this, leaders of IBM Egypt exchanged ideas with leaders of a similar cultural preservation project in Russia, IBM engineers in the United States, and IBM researchers in Israel (despite political hostilities between Egypt and Israel). The completed project won wide acclaim and led to a commercial contract to digitize the Library of Alexandria’s contents.

Developing Your Guidance System

A strong guidance system has two components:

• Standardized systems. Standardization saves time that employees can channel toward innovation. For instance, in all CEMEX’s cement manufacturing plants, pipes carrying natural gas are painted the same color; those containing air, another uniform color. Transferred employees and visiting managers don’t have to waste time figuring out the plants’ setup.

• Shared values stressing social good. For many employees, such values inspire more creativity than a pay increase. And the resulting innovations enhance your company’s positive impact and reputation around the globe.

Example: P&G’s purpose is to “improve the lives of the world’s consumers” with high-quality products that represent good value. Informed by this goal, P&G’s Brazilian marketing group developed a superior feminine hygiene product that would be affordable to low-income consumers. They accomplished this by incorporating innovative technology that made the product perform well but omitting features that added cost beyond their value to the target consumers. The product’s sales revenues exceeded projections and inspired other offerings for low-income consumers worldwide.