Five Questions That Should Shape Any Change Program

Most organizations will shrink or disappear in the long term: only a third of excellent companies remain excellent for decades, and when organizations try to transform themselves, even fewer succeed. But as economic, political, social, and technological change continue to accelerate, and competitive pressure grows more intense, leaders can't afford those odds. The likeliest way to overcome them, we found as we wrote Beyond Performance, is to address the underlying problem: organizations that focus too much on short-term financial performance, at the expense of organizational health, are those that most typically need transformational change; but, unfortunately, the change programs they create are similarly shortsighted.

Change programs that succeed, we've seen, put an equal emphasis on both performance and health in answering five basic questions that should shape any change program. Leaders who do this not only get near-term improvements, but also successfully build their organization's capacity to learn and keep changing over time — keeping them ahead of the pack.

1) Where do we want to go? Sounds simple, but answering this question for both performance and health means setting an aspiration at the intersection of where market opportunities exist, what capabilities your company has, and where you and your employees are passionate about making a difference. Wells Fargo CEO John Stumpf knew the company needed to improve performance, which was becoming increasingly difficult in the lead-up to the financial crisis. Stumpf was also passionate, however, about positioning the company for success in the longer term, by creating a new spirit and way of thinking in the company. So he and his top team set the aspiration of "One Wells Fargo," which included equal focus on performance measures such as earnings growth and cross-sell and on creating a lasting culture of customer-centricity and collaboration.

2) How ready are we to get started? Leaders of most failed change programs we've seen moved straight from aspiration to action. But you can't know what actions to take if you don't have a clear view of the capabilities and mindsets you'll need to develop to make the change stick. When Pierre Beaudoin took over the aerospace division at Bombardier with a mandate for change, he and his team understood that boosting factory performance would require building lean capabilities, something the company sorely lacked despite its engineering experience. Crucially, they also took the time to figure out that ensuring those capabilities were put to full use would mean changing workers' mindsets, from a focus on what engineering could make possible, to valuing individuals, enhancing the role of teamwork, and understanding the needs of customers.

3. What practical steps do we need to take? We've found that leaders need to be as clear about what the company won't do anymore as about what it will do to improve both performance and health. A.G. Lafley, in his famous turnaround of Procter & Gamble, established a portfolio of performance initiatives that, for instance, gave priority to four core businesses. At the same time, he created a "not-to-do" list including projects that were driven by technology rather than customer needs. What's more, he ensured every initiative — whatever its specific focus — included building mindsets and capabilities related to focusing on customers and forging external partnerships as part of its implementation.

4. How do we manage the journey? Implementing a portfolio of performance initiatives can take different forms — everything from running pilots to 'big bang' roll outs. But too often leaders underestimate the amount of energy that is needed to roll out large scale change. To avoid losing momentum, Julio Linares, the CEO of Spain's incumbent telecom operator, Telefónica de España, used three tactics that we've seen succeed at many companies. The first was clear communication so people understood how their project contributed to that year's targets and to the overall transformation program. Second, Linares ensured that a large portion of the company's 20,000 employees felt a meaningful degree of ownership of the changes by involving people at different levels in designing and tweaking them as they went on. Finally, Linares made sure they were making real progress and that the goals were still relevant by holding regular progress evaluations, the results of which were also widely communicated.

5. How do we keep moving forward? Those few leaders who actually reach their performance goal too often see it as the end of the road, and don't plan a transition to a period of continuous improvement. This creates a risk that the company won't be able to sustain the impact it's achieved. Avoiding this trap involves re-purposing some of your transformation infrastructure to have an ongoing role in facilitating knowledge sharing and learning methods, and providing expertise to help the company continue to improve. For these to be embraced in the long term, the right leadership skills and mind-sets must also be in place. After the formal end of a transformation program at ANZ Bank, for example, the company trained more than 6,000 leaders in areas such as self-awareness, resilience, and the ability to energize oneself and others. With these leaders, ANZ has enjoyed an era of continued high performance for more than a decade.

These five questions are straightforward, but too few leaders answer them with equal emphasis on performance and health. The benefits of putting in the time to do so, however, add up to nothing less than far better odds to achieve, sustain, and improve your change aspirations over time.

Scott Keller and Colin Price are directors at McKinsey & Company. Their new book, Beyond Performance: How great organizations build ultimate competitive advantage, is based on more than a decade of research and practical experience with clients.

Thanks to Scott Keller and Colin Price / Blogs HBR / Harvard Business School Publishing
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