Ernst & Young and Said Business School Study: "Leaders Prioritizing a Human-Centered Approach to Transformation Turning Points Are Up to 12x More Successful.
TRANSFORMATION IS HUMAN
Executive summary
In the present age of volatility, an organization's performance depends on its ability to transform at pace. Fast-moving mega trends such as digital adoption, geopolitical instability and climate change mean there is constant need for adaption. The pressure on leaders and their teams to adapt has never been greater.
Yet nearly three decades on from John Kotter’s seminal research, which concluded that 70% of organisational transformations are unsuccessful,1 this is still the most common outcome. In 2021, the University of Oxford’s Saïd Business School and EY formed a research collaboration to understand why transformations fail, and to identify common patterns and challenges.
Initial research findings
Our initial research paper, The future of transformation is human, published in 2022, confirmed that not much progress has been made to improve the success of transformation outcomes: 67% of senior leaders had experienced at least one underperforming transformation in the previous five years. When we delved into why, we learned that the human emotions and behaviours of the people working at the centre of the transformation play a pivotal role in its success or failure. The key to success in transformation is your people.
Before we summarise our latest findings in this second phase of research, it is useful to recap the main learnings from our 2022 report. We identified six conditions that increase the likelihood of a successful transformation 2.6-fold – from a 28% chance of success to a 73% chance.
Key findings from the latest research
When we speak about these research findings with C-suite executives and board members, many of whom have recently experienced transformation initiatives, several questions emerge repeatedly. What do I do when things go wrong? How can I detect earlier when things may be going off track? Is there a way to use these pivotal moments to my advantage?
This white paper seeks to answer these questions.
Turning points are moments in the transformation process where a transformation has or will go offcourse and leaders choose to intervene (or not). To successfully navigate a turning point, leaders must first detect the risk that something could go wrong, or identify the issue when something has gone wrong by listening for signals that serve as the early warning system. Based on the signals, leaders must then decide whether to intervene.
For example, one of the companies we interviewed, Applied Materials, was undertaking a robotic process automation (RPA) transformation. As we describe later in this paper, Applied Materials had brought in one of the world’s leading suppliers of RPA to lead the transformation. However, early on the transformation leader noticed an issue surfacing. He sat in on the early workshops with his team and the supplier. He listened to the interactions and assessed how the RPA service provider answered the in-house team’s questions. He listened not only to what was said, but what was left unsaid – the silence in the room. 'The only way I was able to ascertain whether [it was] a signal versus just noise, was by being in the room,' He acknowledged. In making sense of what he was hearing, He recognised this moment as a turning point. The primary RPA supplier didn’t have the necessary finance knowledge and they’d lost the confidence and trust of the team. He decided to intervene and engaged a second external provider with finance experience.
Three surprising research findings provide deeper insights into how leaders can deliver transformation success.
Understanding turning points and why they matter (Chapter 1)
Our research shows that 96% of transformation programmes will experience issues that create a turning point. Rather than trying to avoid turning points, leaders and workers should concentrate on how to handle turning points because this is what can make or break the entire transformation. Successful turning points can serve as an accelerator to improve transformation performance. Conversely, unsuccessful turning points not only can fail to improve transformation performance but can make the overall situation worse. In other words, leaders are much better served if they focus on the value a turning point can provide rather than ignoring the issues that lead to a turning point, hoping they will go away.
Decoding the root causes of turning points (Chapter 2)
Often there are multiple challenges rather than a single issue that prompt a turning point. By their nature, transformation programmes propel the organisation into a state of misalignment. In this state, turning points can arise from external challenges (such as geopolitical events or new regulations), internal challenges (such as exceeding budgets or incompatible technology) or human system dynamics (feelings of a lack of ownership, power struggles or anxiety around insufficient capabilities).
Leaders who embrace the opportunity to learn from the issues, listen for the signals amid the noise and address the challenges as they arise within the context of the six conditions in our initial research (see the graphic above) will be more likely to navigate the turning point successfully.
Acknowledging the emotion in transformation (Chapter 3)
There is important data to be mined in the emotional reactions of the transformation workforce. On an individual level, a sudden shift in emotion may only be noise. However, a sudden shift in the emotional energy of a group is a signal that something is wrong.
Leaders need to listen to these emotional signals, make sense of what they’re hearing and act in ways that replenish energy levels, rebuild trust, foster new ways of working and move the transformation from a place of stagnation to one of momentum and accelerated performance.
Navigating turning points (Chapters 4-7)
Our research included a survey of 1646 respondents across industries and geographies which we used to build a predictive model to understand how organisation successfully navigate a turning point, as well as five detailed case studies (see Figure 2 and 3).
Through our multi-method research, which includes a survey of more than 1646 respondents across industries and geographies, predictive modelling, and five detailed case studies, we identified a dynamic process leaders can take to navigate a turning point, which, if undertaken effectively, can improve transformation performance by 12 times. This comprises:
- Sensing: Sensing serves as the early warning system to identify signals and determine whether leaders need to intervene. This means looking beyond traditional KPIs and instead monitoring changes in the behaviour and emotional energy of the people involved in the transformation.
- Sense-making: Once an issue is identified, through the emotions and behaviours of the team, leaders need to bring people together across the transformation programme to identify the root cause of the issues and co-create a path forward.
- Acting: Acting involves re-establishing the six conditions we identified in our initial research that create the conditions where people can thrive.
The culmination of our three years of research inspires a new paradigm to help organisations deliver transformation programmes successfully – one that puts humans at the centre.
In our initial research, we discovered why so many transformations fail and what leaders can do to make them more successful. We learned that transformations don’t follow a linear journey. They are dynamic. Along with all of the rational elements of transformation, leaders need to recognise the emotional journey of their people. We identified six conditions related to human behaviour that can create the necessary environment for transformation success.
Our current research is a practical application of the findings of our initial research. We learn that when leaders can build an early warning system around human emotions to help them sense when things may be going wrong, they can make sense and act on turning points using the six conditions as their guide.
In this new paradigm, leaders who embrace issues early and navigate turning points successfully, will gain maturity in foreseeing and address potential issues before they manifest as turning points.
Figure 2 – Methodology
In this phase of the research, the University of Oxford’s Saïd Business School and EY used a multimethod research methodology.
Quantitative survey
We surveyed 1646 people, including 846 senior leaders and 840 workforce members, in June and July 2023. Respondents represented companies with over US$1bn in annual revenue across 16 industry sectors and 23 countries in the Americas, Asia-Pacific and Europe, the Middle East, India and Africa (EMEIA).
Respondents were required to have been involved in a major transformation at their current organisation in the past five years. The survey focused on a single turning point – defined as 'when leadership believes a transformation has gone, or will go, off course and intervenes with the intent of improving its performance or outcomes'.
Predictive modelling to identify how to navigate a turning point successfully
To understand how organisations navigate a turning point successfully, we used predictive modelling on more than 40 actions taken before and during a turning point during the survey respondents’ transformation programmes. Using ordered logistic regression with maximum likelihood estimates, we identified three steps that increased the likelihood that the turning point would significantly improve transformation performance: sensing, sense-making and acting. Each step consists of multiple actions.
To estimate the impact of these steps on transformation performance, we used bootstrapping to compare the likelihood that a turning point improves performance with how well these steps are adopted. For this comparison, we define ‘above average’ or ‘below average’ as an increase or decrease of one standard deviation, respectively, in average adoption of the actions in each step.
Figure 3 – Case studies
We conducted in-depth case studies of five major transformation programmes across the world – all of which faced and successfully navigated turning points and delivered significant value from their transformations. The turning points acted as critical accelerators to the programmes. We conducted interviews and focus groups with leadership, middle management and the workforce.
Applied Materials is a US based global supplier to semiconductor manufacturers with US$25bn in revenue. The company embarked on a finance transformation using robotic process automation (RPA) to optimise finance processes and free up time for the team in the finance division to focus on higher-order work.
Volvo is a Sweden-based global vehicle brand with US$40bn in revenue. To continue Volvo’s tradition as a pioneer of innovation, the company wanted to have the first purpose-built heavy-duty electric vehicle (EV) truck roll off its assembly line. Although corporate leaders considered building a new factory in which to build the heavy-duty EV trucks, they opted for a mixed-model assembly approach instead, which meant that heavy-duty EV trucks would roll off the same assembly line as its internal combustion engine trucks.
ANZ is a multinational bank and one of Australia’s largest banks with more than $600bn in total assets. ANZ embarked on an ambitious, enterprisewide HR technology transformation designed to create a cloud-based, mobile, modern working environment for employees (PeopleHub) that would reduce its operational base, enhance workforce analytics and improve controls.
Rio Tinto Group is a British-Australian multinational company and the world’s second largest metals and mining corporation with annual revenues of US $55bn. Rio Tinto carried out a global supply chain transformation to standardise operations across their complex global mining operations. The aim is to become the 'best operator' in its industry, taking competitive advantage through its operational capability.
Part of LuLu Group International, LuLu Hypermarket is the fastest growing retail chain in the Middle East and Asia with annual revenues of US $8bn. LuLu Hypermarket embarked on an ambitious environment, social and governance (ESG) transformation at its Al Meshaf hypermarket location in Qatar, as a pilot for transforming the retail network of the whole group.
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