Why would you do things differently when you already have a formula for success? Look no further than Xerox, Toys r Us, Nokia, Blockbuster and another business school case favourite Kodak for a sobering answer.
“Transformation is becoming unavoidable in the face of unprecedented changes and challenges businesses are facing,” insists Dr. Andrew White, Senior Fellow in Management Practice at Saïd Business School, University of Oxford. “From digitalization, climate change and new and existing competitors, there is so much disruption happening now that you can’t ignore it – you have to lean into it.”
Successful transformation is critical for organizations to thrive, and research from Saïd Business School and EY, the global consulting firm finds that the drive for change is accelerating. Based on a survey of 935 CXOs and 1,127 members of the workforce from 23 countries and seven industries, 85% of respondents have been involved in two or more major transformations in the past five years.
At the same time, the rate of failure for transformation projects remains stubbornly high, with 67% of respondents having experienced at least one underperforming transformation during the same time.
So what are the factors that can lead to transformation success? The EY and Oxford Saïd research identifies six drivers, and prioritizing emotions is key.
“In a successful transformation, leaders invest at the outset to build the conditions for success, both at a rational and emotional level,” says Errol Gardner, EY Global Vice Chair – Consulting. “By contrast, the emotional strain that both leaders and employees experience in a failed transformation comes at a high human cost.”
Leaders who prioritize workforce emotions in their transformations are 2.6 times more likely to be successful than those who don’t, according to the research.
“The key to turning transformation failure into success relies on the ability of organizations and their leaders to completely redesign transformations with humans at the center,” explains Gardner.
The Transformation Leadership research by EY and Saïd Business School aims to provide businesses with insights on how to successfully deliver large scale transformations. Participants came from businesses in both the public and private sectors with annual turnovers ranging from US$1bn to more than US$50bn. The research also included 25 deep dive interviews with CXOs from global companies.
“For many businesses, transformation is do or die,” asserts Dr. Andrew White. “Too often, however, it is seen as a dirty word, a fig leaf for redundancies, where a failure in vision and leadership leads to an overworked, stressed and untrusting workforce. This research shows that bringing emotions to the heart of transformation significantly increases the chance of success and safeguards the well-being of workforces,” he adds.
According to White, it’s a win-win situation. Putting emotions at the forefront of an organisation’s transformation seems the obvious thing to do. “Leaders must embrace the inevitable emotional journey that flows through every transformation and lead their people through each step of it, if they are to turn vision into reality and make change exhilarating,” he notes.
The researchers identified a clear link between organisational success and significance being assigned to employee emotion – according to the survey, 52% of respondents in high-performing transformations said that their firm provided them with the emotional support they needed during the process.
According to the study from Oxford Saïd and EY, there are six things that firms must consider when looking to undertake a transformation. They are:
1. Adapt and nurture leadership skills: The workforce ranks leadership as the top driver regardless of the success or failure of the transformation.
2. Create an inspirational vision that the workforce can believe in: Nearly half (49%) of respondents in a high-performing transformation said the vision was clear and compelling compared with 27% of those in a low-performing transformation.
3. Build a culture that embraces and empowers everyone’s opinion: Leaders need to harness the right emotions to keep workers engaged and motivated, while providing enough emotional support to prevent anxiety and burnout.
4. Set clear responsibilities and be prepared for change: Leaders should provide the structure and discipline, as well as the creative freedom to explore and innovate, while creating autonomy for the organization to execute.
5. Use technology to drive visible action: Leaders should prove the value of new technology-enabled approaches early and enlist early adopters and influencers to bring the workforce along.
6. Find the best ways to connect and co-create: Leaders need to create a safe space where new ways of working can emerge to nurture innovation, engagement and fulfilling work.
Norman Lonergan, EY Global People Advisory Services Leader, acknowledges that many leaders know their organizations need to transform, but many are unsettled by the prospect of change. “By harnessing both the rational and emotional power of their people, leaders can ensure measurable success of their organization’s transformations,” he assures. “This is facilitated by having and communicating a shared vision, effectively managing their peoples’ emotional journeys, and empowering them to turn vision into reality.”
To coincide with the research, Oxford Saïd’s Andew White and EY’s Adam Canwell interviewed Geoff Skingsley, Chairman of L’Oréal UK and Ireland for the podcast series, Transformation Leadership2050.
For White, L’Oréal is a particularly interesting example of a firm that has successfully transformed itself. By adopting a digital-first approach a decade ago, it was able to get ahead of future disruption, such as the coronavirus pandemic.
But being ahead of the curve looks easier with hindsight, as Geoff Skingsley explains in the interview. “In the 2020s, everybody assumes digital is a natural state of affairs but if you roll back eight, ten years, digital was still in its infancy.”
He emphasizes the need to take a different approach. “If the top team is going to understand that this is about a transformation, then the method used to kick start the process can’t be the normal mode of operation. It’s a step, change, something different.”
Taking the time to disconnect from the status quo was important, and Skingsley remembers the CEO taking L’Oréal’s executive committee for one week to Silicon Valley. “He said: ’OK, empty your diaries everyone. You are going to meet the disruptors, you are going to meet the people who in other areas that have changed their industry. You will bathe in disruption.’”
L’Oréal facilitated transformation through recruitment, and brought in people from outside who were already digital experts, and planted them in key parts of the organization. This reinforced the importance of humility to learn at a senior level.
As the Chairman of L’Oréal UK and Ireland explains in the Transformation Leadership2050 podcaast, “I will have to learn from people 20 years younger than me, who are digital natives.”