Transformational change is still hard, according to a new survey. But a focus on communicating, leading by example, engaging employees, and continuously improving can triple the odds of success.
After years of McKinsey research on organizational transformations, the results from our latest McKinsey Global Survey on the topic confirm a long-standing trend: few executives say their companies’ transformations succeed. Today, just 26 percent of respondents say the transformations they’re most familiar with have been very or completely successful at both improving performance and equipping the organization to sustain improvements over time. In our 2012 survey, 20 percent of executives said the same.
But some companies have beaten the odds. We asked respondents whether their organizations follow 24 specific actions that support five stages of a transformation. At organizations that took a rigorous, action-oriented approach and completed their transformations (that is, all of their initiatives have been fully implemented), executives report a 79 percent success rate—three times the average for all transformations. According to the results, no single action explains the difference; in fact, the more actions an organization takes, the more likely its transformation is to succeed. Still, the results suggest that some transformation practices correlate much more closely than others with success. These practices include communicating effectively, leading actively, empowering employees, and creating an environment of continuous improvement so organizations can keep their performance from stagnating (or even regressing) once a transformation’s goals are met. By implementing continuous-improvement activities that enable the organization to look regularly for new and better ways to work, respondents’ organizations double their chance of successfully sustaining improvements after the transformation.
The power of action—and communication
To test which transformation practices correlate most with success, we asked executives about 24 specific actions that support a transformation’s five stages (see sidebar, “The 24 actions of transformation”). Indeed, the results indicate that when organizations follow a rigorous approach and pursue all of these actions during a transformation, the overall success rate more than doubles from the average (26 percent), to 58 percent (Exhibit 1). Among only completed transformations, respondents report a success rate of 79 percent—about triple the average success rate for all transformations.
While the results show that success links closely to a greater overall number of actions, they also indicate that not all 24 actions are created equal. Communication, specifically, contributes the most to a transformation’s success (Exhibit 2). At companies where senior managers communicate openly and across the organization about the transformation’s progress, respondents are 8.0 times as likely to report a successful transformation as those who say this communication doesn’t happen. Good communication has an even greater effect at enterprise-wide transformations, where company-wide change efforts are 12.4 times more likely to be successful when senior managers communicate continually.
It also helps when leaders develop a clear change story that they share across the organization. This type of communication is not common practice, though. When asked what they would do differently if the transformation happened again, nearly half of respondents (and the largest share) wish their organizations had spent more time communicating a change story.
Lead, don’t manage
According to respondents, leadership matters as much during a transformation as it does in the company’s day-to-day work. It can’t be delegated to a project-management office or central team—the presence (or not) of which has no clear bearing on a transformation’s success—while executives carry on with business as usual. Indeed, when senior leaders role model the behavior changes they’re asking employees to make (by spending time on the factory floor or in the call center, where work is done), transformations are 5.3 times more likely to be successful (Exhibit 3). Success is twice as likely when senior leaders and the leaders of initiatives spend more than half of their time on the transformation. In practice, though, only 43 percent of these leaders say they invested that much working time in the transformation’s initiatives.
But even if they’re involved, senior leaders face some potential pitfalls. First is the perception gap between them and everyone else in the organization (Exhibit 4). Eighty-six percent of leaders say they role modeled the desired behavior changes when transformation initiatives were being implemented, yet only half of all employees who were part of the transformation (but didn’t play an active role) say the same. Overall, senior leaders are also 2.5 times as likely as other employees to rate their companies’ transformations a success.
A second pitfall, in addition to outsize optimism, is overplanning. Few initiative leaders—only 22 percent—say they would spend more time planning the transformation if they could do it over again. Instead, these respondents most often say they would spend more time communicating a change story (49 percent) and aligning their top team (47 percent).
Choose the right people and empower them
An involved team of senior leaders is only half the battle. Executives report that for transformations to truly succeed, companies must think about the role that employees play as well as their people needs across the organization. If the transformation happened again, the largest share of executives say they would move faster to keep people resistant to changes out of leadership or influencer roles.
According to respondents, it’s important to define clear roles so employees at all levels are prepared to meet the post-transformation goals—a factor that makes companies 3.8 times more likely to succeed (Exhibit 5). Also key to an effective people strategy is allocating enough employees and the right ones—that is, the high performers and active supporters—to work on the transformation. One effective way to hold these people accountable, according to the results, is using transformation-related metrics. Executives who say their initiatives’ leaders were held accountable for their transformation work in annual evaluations are 3.9 times more likely than others to report a successful transformation.
Prepare for continuous improvement
Once initiatives are fully implemented, the change effort does not end; almost 40 percent of respondents say they wish they had spent more time thinking about how their organizations would continue to improve. Several specific practices that help companies connect strategy to daily work, deliver value more efficiently to customers, enable people to contribute to their best ability, and discover new ways of working all link to an organization’s long-term health—and can keep companies from backsliding on performance gains and support continuous improvements after transformation.
For example, in organizations where people understand how their individual work supports the company’s broader vision, executives are 5.5 times likelier than others to say the transformation has been successful (Exhibit 6). To achieve long-term success, that link must also be reinforced with a company-wide commitment to identifying opportunities for improvement—a practice that more than quadruples the likelihood of success. Likewise, executives report a much higher rate of success when their companies have a systematic process for developing people’s capabilities and for identifying, sharing, and improving upon best practices.
Of the eight continuous-improvement actions we asked about, one was an outlier: only one-third of executives say teams of employees begin their days discussing the previous day’s results and the current day’s work, compared with strong majorities of executives who agree that their organizations take each of the other actions. But respondents whose organizations had implemented daily discussions were twice as likely as others to report success.
Focus on people, not the project. Transformations are about the people in the organization as much as they’re about the initiatives. The long-term sustainability of a transformation requires companies to engage enthusiastic high-potential employees, equip them with skills, and hold them accountable for—as well as celebrate—their contributions to the effort. Companies should, in our experience, take the same steps toward developing people throughout the organization. To build broad ownership, leaders should encourage all employees to experiment with new ideas: starting small, taking risks, and adapting quickly in their work. Doing so can create far-reaching and positive support for change, which is essential to a transformation’s success.
Communicate continually. When embarking on a transformation, executives should not underestimate the power of communication and role modeling. The results suggest that continually telling an engaging, tailored story about the changes that are under way—and being transparent about the transformation’s implications—has substantially more impact on an effort’s outcome than more programmatic elements, such as performance management or capability building. But the communication doesn’t end once the change story has been told. Leaders must continually highlight progress and success to make sure the transformation is top of mind across the organization—and to reduce the gap between what employees believe is happening and what they see.
Take more action. Transformation is hard work, and the changes made during the transformation process must be sustained for the organization to keep improving. There is no silver bullet—and while some factors have more impact than others on a transformation’s outcome, the real magic happens when these actions are pursued together. Overall, the survey indicates that the more actions an organization took to support each of the five stages of transformation, the more successful it was at improving performance and sustaining long-term health.