101The irrational side of change management

The

irrational side

of change management

Most change programs fail, but the odds of success can be greatly improved by taking into account nine counterintuitive insights about how employees interpret their environment and choose to act.

Carolyn Aiken andScott Keller

In 1996, John Kotter published

Leading Change

Considered by manyto be the seminal work in the eld o change management, Kotter’sresearch revealed that only 30 percent o change programs succeed. Sincethe book’s release, literally thousands o books and journal articles havebeen published on the topic, and courses dedicated to managing change arenow part o many major

MBA

programs. Yet in 2008, a McKinsey surveyo 3,199 executives around the world ound, as Kotter did, that only onetransormation in three succeeds. Other studies over the past ten yearsreveal remarkably similar results. It seems that, despite prolic output, theeld o change management hasn’t led to more successul change programs.It also hasn’t helped that most academics and practitioners now agree onthe building blocks or infuencing employee attitudes and managementbehavior. McKinsey’s Emily Lawson and Colin Price provided a holisticperspective in “The psychology o change management,”

which suggeststhat our basic conditions are necessary beore employees will change theirbehavior: a)

a compelling story

, because employees must see the point o the change and agree with it; b)

role modeling

, because they must also see the

CEO

and colleagues they admire behaving in the new way; c)

reinforcing mechanisms

, because systems, processes, and incentives must be in line withthe new behavior; and d)

capability building

, because employees must havethe skills required to make the desired changes.

N ei l W e b b

Organization Practice

Colin Price and Emily Lawson, “The psychology o change management,” mckinseyquarterly.com, June 2003.

The McKinsey Quarterly

2009 Number 2102

This prescription is well grounded in the eld o psychology and is entirelyrational. One o its merits is its intuitive appeal: many managers eelthat, once revealed, it is simply good common sense. And this, we believe,is precisely where things go wrong. The prescription is right, but rationalmanagers who attempt to put the our conditions in place by applying“common sense” typically misdirect time and energy, create messagesthat miss the mark, and experience rustrating unintended consequencesrom their eorts to infuence change. Why? Because when they imple-ment the prescription, they disregard certain, sometimes irrational—butpredictable—elements o human nature.In our research and by working with companies attempting change, wehave identied nine insights into how human nature gets in the way o successully applying the our conditions required or behavioral change.As we describe these insights, we’ll show how various companieshave, either by conscious awareness or simple luck, overcome or leveragedcounterintuitive sides o human behavior in making change happen.

Creating a compelling story

Change-management thinking extols the virtues o creating a compellingchange story, communicating it to employees, and ollowing it up withongoing communications and involvement. This is good advice, but inpractice there are three pitalls to achieving the desired impact.

1. What motivates you doesn’t motivate most of your employees.

We seetwo types o change stories consistently told in organizations. The rst isthe “good to great” story: something along the lines o, “Our historicaladvantage has been eroded by intense competition and changing customerneeds; i we change, we can regain our leadership position.” The second isthe turnaround story: “We’re perorming below industry standard and mustchange dramatically to survive. We can become a top-quartile perormer inour industry by exploiting our current assets and earning the right to grow.”These stories both seem intuitively rational, yet they too oten ail to havethe impact that change leaders desire. Research by a number o leadingthinkers in the social sciences, such as Danah Zohar, has shown that whenmanagers and employees are asked what motivates them the most in theirwork they are equally split among ve orms o impact—impact on society(or instance, building the community and stewarding resources), impacton the customer (or example, providing superior service), impact on thecompany and its shareholders, impact on the working team (or example,creating a caring environment), and impact on “me” personally (my develop-ment, paycheck, and bonus).

103The irrational side of change management

This nding has proound implications or leaders. What the leader caresabout (and typically bases at least 80 percent o his or her message toothers on) does not tap into roughly 80 percent o the workorce’s primarymotivators or putting extra energy into the change program. Changeleaders need to be able to tell a change story that covers all ve thingsthat motivate employees. In doing so, they can unleash tremendousamounts o energy that would otherwise remain latent in the organization.Consider a cost reduction program at a large

nancial-services company.The program started with a change story that ticked the conventionalboxes related to the company’s competitive position and uture. Threemonths into the program, management was rustrated with employeeresistance. The change team worked together to recast the story to includean element related to society (to deliver aordable housing, or example),customers (ewer errors, more competitive prices), the company (expensesare growing aster than revenues, which is not sustainable), working teams(less duplication, more delegation), and individuals (more attractive jobs).This relatively simple shit in approach lited employee motivation measuresrom 35.4 percent to 57.1 percent in a month, and the program went on toachieve 10 percent eciency improvements in the rst year—a run rate arabove initial expectations.

2. You’re better off letting them write their own story.

Well-intentioned leadersinvest signicant time in communicating their change story. Road shows,town halls, and Web sites are but a ew o the many approaches typicallyused. Certainly the story (told in ve ways) needs to get out there, but theinsight we are oering is that much o the energy invested in communi-cating it would be better spent listening, not telling.In a amous behavioral experiment, hal the participants are randomlyassigned a lottery ticket number while the others are asked to write downany number they would like on a blank ticket. Just beore drawing thewinning number, the researchers oer to buy back the tickets rom theirholders. The result: no matter what geography or demographic environ-ment the experiment has taken place in, researchers have always ound thatthey have to pay at least ve times more to those who came up with theirown number.This reveals something about human nature: when we choose or ourselves,we are ar more committed to the outcome (almost by a actor o ve toone). Conventional approaches to change management underestimate thisimpact. The rational thinker sees it as a waste o time to let others discover