Voices on transformation 3
Corporate transformation under pressure
8
It’s relatively rare for transformation programsto succeed; many surveys, including our own,put the success rate at less than 40 percent.
1
Ourrecent research, however, underscores the factthat certain tactics promote successful outcomes.The most important tactics are setting clearand high aspirations and targets, exercising strongleadership from the top, creating an unambigu-ous structure for the transformation, andmaintaining energy and involvement throughoutthe organization.
2
Companies that used all of these tactics succeeded more than 80 percent of the time.
3
The same research also shows that what we calldefensive transformations (those undertakento stem trouble) have lower success rates thanprogressive ones (launched, for instance,to boost growth or to move from good to great
performance). This nding seems to contra-
dict the common wisdom that it is hardest totransform a company when it lacks an acuteand apparent need for change. In our experience,however, while employees are more likely to see the need for change when a company is in
crisis, this advantage is outweighed by difcult
circumstances.
Moreover, we nd that many companies under
pressure do not make use of proven tacticsfor implementing change. Instead, they tendtoward secrecy and may have small groupsof troubleshooters plan the transformation ratherthan involve the whole organization andset clear, widely communicated aspirations andtargets. Our research shows that companiesusing proven change tactics when they undertakedefensive transformations boost their chancesof success considerably. As more and more companies face pressure totransform their performance, it is crucialfor them to understand how proven changetactics increase their chances of successand how to avoid approaches that underminemany transformation efforts.
Building successful transformations
We surveyed executives from around the worldabout recent corporate transformation processesthey had experienced. These transformationshad a wide range of objectives. Some were clearly undertaken on the offense, such as movingfrom good to great performance or expandinggeographically; others were clearly defensive,such as reducing costs or turning around a crisis.Some—for instance, merger integration andpreparing for privatization—didn’t fall clearly intoeither category. Slightly more than a thirdof all respondents said that their companies had been very or extremely successful at hittingthe target.To compare the success rates of transformations begun for clearly offensive and defensive reasons,
we limited the sample to them and rened the
comparison by taking into account how they weretriggered. Some were undertaken in reactionto external shocks, market pressure, or poor
nancial performance; others were initiated
proactively. The most successful transformationsare those that are both offensive and proactive— we call them “progressive”—which have a47 percent success rate. Defensive transformationshave a 34 percent rate of success (Exhibit 1).
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Two ndings should encourage leaders who
must now mount a defensive effort: the tacticsused in all successful transformations, regardlessof type, are nearly identical, and in defensivetransformations that fail, those tactics are rarely used.
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The key successful tactics that ourresearch highlights (Exhibit 2) can be organizedin four well-known transformation designthemes:
aspirations
(well-dened stretch targets),
leadership
(strong CEO involvement),
process
(a clear structure for the transformation),and
energy
(for instance, efforts to ensurefrontline ownership of change). It’s not enoughsimply to bring these tactics to bear, of course; executing them well is the other half of the battle (see sidebar, “Successful transfor-mations, step-by-step,” on page 12).
1
For example, see “Organiz-ing or successul changemanagement: A McKinseyGlobal Survey,” July 2006; and“Creating organizationaltransormations: McKinseyGlobal Survey Results,” August 2008, both availableon mckinseyquarterly.com.
2
See Josep Isern andCaroline Pung, “Drivingradical change,”mckinseyquarterly.com,November 2007; and“Organizing or successulchange management: A McKinsey Global Survey,”mckinseyquarterly.com,July 2006.
3
See “Creating organizationaltransormations: McKinseyGlobal Survey Results,”mckinseyquarterly.com, August 2008.
4
Transitional transor-mations—M&A, preparingor privatization, anddivestitures—are all aboutas successul as deensivetransormations.
5
These same tactics arealso correlated with successin the other three types otransormations.
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