5 Reasons Why Transformations Fail

Five reasons why transformations fail – is it that easy? Certainly not. But since we are helping organisations for years to shift from one state to another, we experienced several key reasons. Most of them concern the social and emotional aspects of transformations. Today we add another five reasons to the ones we already presented in our blogpost “How restructuring can (not) succeed“. We are talking about the rule since statistically, more than 70 per cent of all transformations fail. Do micromanagement, absent culture of failure or overtaxing managers and employees sound familiar to you? Then you are close to some evident answers to the question why transformations fail.

1. Corporate vision replaces change vision

Every change initiative or transformation needs a vision. These pictures of the future should be emotional. That’s why they are part of the social and emotional aspects of any transformation. Change visions contain a fervent desire. Admittedly, they are quite unspecific. But they point the participants in a clear direction. Just remember John F. Kennedy’s “We choose to go to the Moon” speech.

Developing a change vision could be quite complex since employees need to be actively involved. Otherwise they would hardly generate an intrinsic motivation or even desire to buy-in. But it’s time well spent because the sense of belonging as well as the change goals, strategies and measures are based on the change vision.

Unfortunately, we repeatedly find the following instead:

1. Change visions are replaced by corporate visions or even corporate strategies which have little relation to the change initiative or transformation (no focus on the role of employees in the change, no strong commitment to the change, no reference to the sense of urgency etc.).
2. Change visions are established without an adequate participation of employees.

Both mistakes together build our first – often underestimated – reason why transformations fail.

2. Overtaxing the middle management

This leads us right to reason number two: The blueprint of a change vision that aligns operating capacities & strategic objectives is known as Target Operating Model (TOM). Developing such a TOM and the related road map could be a very complex task as well. Especially when you have to deal with several dozens of improvement, innovation, cost reduction or you-name-it initiatives of the Top Management. Then it’s certainly necessary for an organisation to create such complex TOMs and TOM road maps.

However, it doesn’t make any sense to transfer this complexity one-on-one into the related change management. On the contrary! The Transformation Office must relieve the employees – especially the middle management – as much as possible. Because it relies on the managers if it wants the transformation to succeed. It’s the managers who communicate with their teams about the transformation and involve them actively – additionally to their already demanding everyday business. This requires tailored and quickly to understand materials and not just copies of complex TOMs.

Unfortunately, we have to experience time and again how managers receive completely overloaded presentations (most infos in the notes) that don’t fit their individual requirements. Even in companies with more than 3.000 managers. As a result, transformation becomes a red rag for them and they either ignore or actively obstruct it by withholding financial resources, personnel or technical support. So ultimately, overtaxing the middle management builds another reason why transformations fail.

3. No cultural shift in change management

Let’s keep our focus on the Transformation Office (TO) for failure number three: Imagine a TO that is supposed to drive a transformation with the very way of working and culture that the transformation is intended to overcome. It starts with complex micromanagement over several levels and doesn’t end with countless invitations to internal video calls replacing responsibility delegation.

Both are time-consuming and therefore cost-intensive (simply multiply the hourly rates by the hours spent on e.g. endless email reviews). They often resonate with a corporate culture where any failure is sanctioned, where no-one wants to take responsibility, where executives claim to be the only ones to make decisions. That is typical for hierarchical organisations.

Unfortunately, in companies like this transformations are managed just the same way.  Even when the change vision includes a corporate culture shift with less bureaucracy and more agility. We call this »change management by command and control«. It’s not effective, especially when it comes to cultural changes – because these kind of transformations require particularly strong intrinsic motivation. So in the end the lacking shift of culture in change management is another reason why transformations fail.

4. Wrong labelling of a change programme

Now let’s have a look at the Executive Board for failure number four: Imagine a fictive company that missed its EBIT objective by almost 1 billion EUR and would need to save hundreds of millions within the upcoming years. Also, imagine that this underperforming is not new and that the Supervisory Board had already questioned the company’s future. Given such poor conditions, you would assume that in such a fictive case (at least) a turnaround was urgently needed. To quickly (!) restore profitability / EBIT margin, revenue growth, cash flow, customer and employees satisfaction, as well as stakeholder confidence.

Refusal to call a turnaround a turnaround

It’s challenging for any CEO and executive board member to tell such a truth to the staff (and the works council). Especially regarding the risk of best performers jumping ships early. But it’s a job that needs to be done. Unfortunately, not every CEO has the courage to do so. Some rather call a de-facto-turnaround a “Transformation” and thereby give the false impression to the staff, that things will sooner or later jiggle back into order. If only employees would reduce travel expenses and the frequency of meetings, for example. Which of course should also apply to managers and board members.

Short-term cuttings instead of long-term shifts

The crux of the matter is that the workforce realises wrong labelling quickly. Because, as we have described above, in such cases the board launches numerous initiatives to reduce costs and complexity or to improve operational excellence. So employees can see that the so called “Transformation” will turn out to be a massive turnaround. That means that they will not be given the time for a long-term shift of the entire organisation (aka transformation) as they were told in the first place. Instead they will soon be facing short-term cost-cutting measures – maybe even divestitures of single units or job losses.

A failure that takes more of the rare time

As a consequence the staff will loose more confidence, which change managers resp. change communications experts will need to restore. That will take more of the rare time in a turnaround. So in the end a wrong labelling is often another common reason why transformations fail.

5. Delayed start of change management

Talking about the Executive Board: Companies in Germany change their CEOs usually every 6.8 years. That means that the average CEO is stepping down (or has to) in the first half of his or her second term. No wonder that new CEOs often start change initiatives or transformations shortly after they have been hired by the board. They want to set ambiguous goals and achieve positive results quickly. As with most transformations, the technical aspects are often at the forefront in these processes:

1. First the new CEO tells the staff that the company needs to be transformed for several reasons.
2. Then the Executive Board – usually together with external advisors – starts setting up improvement, innovation, cost reduction or you-name-it initiatives.
3. In this phase there is often only little information shared with the employees. So rumours start spreading and every single employee hears something different from the grapevine. Facts are being replaced by misinformation, negative emotions like fear or anger, resistance, distrust.
4. Finally, after months, the management starts to implement its initiatives (aka the technical aspects of the transformation) and gets the staff informed.

Another time-consuming failure

Far too often, it is only at this point that internal or external (like viadoo) driven change management gets on stage. Unfortunately, in the months behind already many employees had either left the company or had thrown their confidence and loyalty in the wind. So when it finally comes to manage change the most urgent job is to restore trust between executives and employees. This takes a lot of time and delays the transformation of being effective. But guess what? Time is the only thing most CEOs, board members and stakeholders usually don’t have. So a delayed start of change management leads inevitably to additional internal conflicts of interest and priorities. That’s our last reasons why transformations fail – for today.