When organizations undertake a large-scale transformation, research shows that their efforts fail about 70 percent of the time. In this video, Jon Garcia, a senior partner and a leader in McKinsey’s Transformation Practice, shares his perspective on the most common failures. While the odds of success are stacked against organizations when embarking on a transformation, those odds can be flipped by avoiding four common pitfalls. An edited transcript of his remarks follows.
Jon Garcia: The transformation journey can be difficult, and well-intentioned efforts often get derailed or fall by the wayside before they even get off the ground. No one sets out to fail, but research shows that 70 percent of the time companies do just that. In our experience, it isn’t a lack of knowledge that leads to unsuccessful outcomes. Well-intentioned management teams generally know what needs to be done. We’ve led hundreds of comprehensive, at-scale transformations, and through these efforts we’ve identified four of the most common pitfalls that undermine success.
The first is a failure to set fact-based, high aspirations. Rather than seeking to achieve the full potential of their organizations, leaders aim at too low of a target—one that simply isn’t backed up by the facts. Executives arrive at a number based on consensus rather than on data. Setting a fact-based stretch target is essential to transformation efforts.
Second, organizations often fail to attach a compelling “why?” to their effort. Successful at-scale transformations require that thousands—or tens of thousands—of employees choose to get on board with this new way of working. For many, simply protecting the bottom line isn’t sufficient motivation. Leaders need to provide all their employees with a compelling reason that explains why they should do things differently.
A third cause for transformation failure is poor execution. Too often, managers focus on the activities surrounding the transformation, rather than remaining laser-focused on the outcomes. In addition, many act too slowly when it comes to making difficult people decisions. This wastes valuable time, energy, and momentum in the transformation process.
Finally, organizations often fail to sustain the impact that they’ve achieved. Performance disciplines end with the transformation effort. Incentives and budgets are not fully aligned with new objectives. And management teams fail to keep investing in the future, leaving them unprepared for the next horizon or unforeseen headwinds.
Transformational change is hard. Organizations go into the effort with the odds stacked against them. Those odds can be flipped by avoiding these common pitfalls. Success requires a fact-based and compelling aspiration, a rigorous execution infrastructure, and a performance culture that ensures sustained impact.