Making transformation profitable requires holistic ownership—with butts and bonuses on the line.
By Laura Stone
In my previous column (“Changing Change Management,” May 2010), I discussed the need for mavericks to transform the outsourcing industry into one that makes change happen holistically while keeping a big-picture, strategic focus. One reason change does not currently happen this way is that the voice of the customer is too weak. Far too often, we see that employees do not own the development and implementation of new systems, nor are they held accountable for the results—dooming transformation to failure.
Today the industry demands mavericks willing to point out that transformation efforts fail when they become functional initiatives (like HR, IT, or Finance) instead of business initiatives led by the function. What is the difference? If the transformation effort is owned by the executive leadership team—and by “owned” I mean that they are held accountable for success or failure—their butts and bonuses are on the line.
If transformation is perceived or presented as “an HR initiative,” business line managers can opt out. Dates and deadlines start to slip, and the change doesn’t happen. Research indicates that the odds are stacked against transformation success—only 15 percent of all large transformational efforts succeed. And of those 15 percent, only 14 percent reap the expected reward. In our work, we’ve found that if change ends up being only functional, rather company-wide, with a major strategic focus, there’s little chance of transformation.
Look at the pharmaceutical industry, which must fill its product pipelines quickly because within five years more than $50 billion dollars of sales will be gone when drugs go off patent. Some pharmaceutical companies stand to lose half their revenues overnight. With nothing in the pipeline to fill that chasm, companies need transformational efforts that can help them get to the vitally important strategic work. If their employees don’t understand how this transformational work is prioritized, it just slips. They need to own and adopt it, so the companies can get on with the important work.
Chris McGoff, founder of The Clearing, points out that “if CEOs don’t share a clear narrative about what is at stake, clarity about the environment, current and future state, then fragmentation occurs, which incapacitates an organization.” If executives are in charge of making a transformation succeed, their ability to share the context of the story helps people to be clear about their ownership and their responsibilities.
Once people understand what they need to do, they also must be held accountable for the results of the transformation effort. Being accountable means you must make decisions—but making decisions means you might fail. But note: people very rarely get fired for failing. In high-performing organizations, what they do get fired for is not making decisions. It’s perfectly acceptable to take the initiative, and test and measure without achieving “perfect.” No one has time for perfect these days—there’s always a gap. (Mavericks are willing to say this, too.)
Take the late Jack McElwee, former CEO of John Hancock and a mentor of mine. He was a maverick who rigorously held people accountable, so much so that he would fire people for not making a decision. One of his admirers recalled, “If one of his direct reports asked Jack for his help and coaching, he would be right there. If his direct report asked him to make a decision, he would say, ‘That is what I pay you for. If you can’t make that decision, then I will find someone who can.’”
This matters, because we are what we say. This builds trust and confidence, and leads to results. People must believe in the work and the mission. Great leadership is helpful, of course. As Larry Bossidy, author of Execution, would put it, great leaders have the “emotional fortitude” to be direct and speak the truth. They say the tough stuff that needs to be said. Mavericks put it on the table, without blame, and ask, “What are we going to do about it?”
Accountability depends on language. Although we hear the same words, we bring different perspectives. Leaders can’t make assumptions—they must spend time making sure they know where their people are coming from. If you feel you don’t have people who can toe the accountability line, consider the following:
• Do they understand what is expected of them?
• Is it clear to these people what the implications are of not owning what they need to, or of failing?
• Do your metrics help them understand what to do?
• Do they understand where they fit in the corporate strategy so they “get” the magnitude of their work?
David Levine, managing director of HR delivery for American Airlines, has been involved in a multimillion dollar outsourcing initiative and offers this perspective: “Outsourcing companies want to be static versus creating a new platform to revolutionize and push the next generation.” Maybe they should do both! The client and the vendor must understand that creating a new platform requires a different mindset, and mavericks like Levine will help transform this industry. The assumption is that vendors can’t make money by being transformative. On the contrary, vendors that seek innovation will win and create a new playing field.
Stay tuned while the mavericks make transformation happen.
Laura Stone is CEO of Stone + Company, a firm that specializes in solving the most socially and organizationally complex issues. To learn more, please visit www.stoneandcompany.com or call us 781-383-8383.