Change Framework Analysis to Business Situation

Change Framework Analysis to Business Situation

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Instructions

Apply Kotter’s Change Framework to a business situation with which you are familiar. Describe the business situation, introduce and describe Kotter’s methodology, then apply Kotter’s change framework to the business situation in detail with the appropriate steps and expected outcomes to resolve the business situation. Do not forget to justify why Kotter’s framework is the best tool of choice for the situation.
An example business situation could be a software company’s product extremely behind in technology architecture and features; prompting a corporate mandate to scrap the existing product and develop anew from starting point zero. Implications to undertaking this goal, overhaul needed in the company’s mindset, working culture, motivation, incentive, and overall strategic steps needed to accomplish the goal within an aggressive timeline of 1year. Apply Kotter’s change framework to this situation.

Leading Change
Why Transformation Efforts Fail
page 1
The Idea in Brief The Idea in Practice
COPYRIGHT © 2006 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED.
Most major change initiatives—whether intended
to boost quality, improve culture, or
reverse a corporate death spiral—generate
only lukewarm results. Many fail miserably.
Why? Kotter maintains that too many
managers don’t realize transformation is a
process,
not an event. It advances through
stages that build on each other. And it
takes years. Pressured to accelerate the
process, managers skip stages. But shortcuts
never work.
Equally troubling, even highly capable
managers make critical mistakes—such as
declaring victory too soon. Result? Loss of
momentum, reversal of hard-won gains,
and devastation of the entire transformation
effort.
By understanding the stages of change—
and the pitfalls unique to each stage—you
boost your chances of a successful transformation.
The payoff? Your organization flexes
with tectonic shifts in competitors, markets,
and technologies—leaving rivals far behind.
To give your transformation effort the best chance of succeeding, take the right actions at each
stage—and avoid common pitfalls.
Stage Actions Needed Pitfalls
Establish a
sense of
urgency
• Examine market and competitive realities
for potential crises and untapped
opportunities.
• Convince at least 75% of your managers
that the status quo is more dangerous
than the unknown.
• Underestimating the difficulty of driving
people from their comfort zones
• Becoming paralyzed by risks
Form a powerful
guiding
coalition
• Assemble a group with shared commitment
and enough power to lead the
change effort.
• Encourage them to work as a team
outside the normal hierarchy.
• No prior experience in teamwork at the
top
• Relegating team leadership to an HR,
quality, or strategic-planning executive
rather than a senior line manager
Create a
vision
• Create a vision to direct the change effort.
• Develop strategies for realizing that vision.
• Presenting a vision that’s too complicated
or vague to be communicated in five
minutes
Communicate
the vision
• Use every vehicle possible to communicate
the new vision and strategies for
achieving it.
• Teach new behaviors by the example of
the guiding coalition.
• Undercommunicating the vision
• Behaving in ways antithetical to the
vision
Empower
others to act
on the vision
• Remove or alter systems or structures
undermining the vision.
• Encourage risk taking and nontraditional
ideas, activities, and actions.
• Failing to remove powerful individuals
who resist the change effort
Plan for and
create shortterm
wins
• Define and engineer visible performance
improvements.
• Recognize and reward employees contributing
to those improvements.
• Leaving short-term successes up to
chance
• Failing to score successes early enough
(12-24 months into the change effort)
Consolidate
improvements
and
produce
more change
• Use increased credibility from early
wins to change systems, structures, and
policies undermining the vision.
• Hire, promote, and develop employees
who can implement the vision.
• Reinvigorate the change process with
new projects and change agents.
• Declaring victory too soon—with the
first performance improvement
• Allowing resistors to convince “troops”
that the war has been won
Institutionalize
new
approaches
• Articulate connections between new
behaviors and corporate success.
• Create leadership development and
succession plans consistent with the
new approach.
• Not creating new social norms and
shared values consistent with changes
• Promoting people into leadership positions
who don’t personify the new
approach
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Leading Change
Why Transformation Efforts Fail
by John P. Kotter
harvard business review • hbr.org • the tests of a leader • january 2007 page 2
COPYRIGHT © 2006 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED.
Leaders who successfully transform businesses do eight things right
(and they do them in the right order).
Editor’s Note:
Guiding change may be the ultimate
test of a leader—no business survives over
the long term if it can’t reinvent itself. But,
human nature being what it is, fundamental
change is often resisted mightily by the people it
most affects: those in the trenches of the business.
Thus, leading change is both absolutely essential
and incredibly difficult.
Perhaps nobody understands the anatomy
of organizational change better than retired
Harvard Business School professor John P.
Kotter. This article, originally published in the
spring of 1995, previewed Kotter’s 1996 book
Leading Change
. It outlines eight critical success
factors—from establishing a sense of extraordinary
urgency, to creating short-term
wins, to changing the culture (“the way we do
things around here”). It will feel familiar when
you read it, in part because Kotter’s vocabulary
has entered the lexicon and in part because it
contains the kind of home truths that we recognize,
immediately, as if we’d always known
them. A decade later, his work on leading
change remains definitive.
Over the past decade, I have watched more
than 100 companies try to remake themselves
into significantly better competitors. They
have included large organizations (Ford) and
small ones (Landmark Communications),
companies based in the United States (General
Motors) and elsewhere (British Airways),
corporations that were on their knees (Eastern
Airlines), and companies that were earning
good money (Bristol-Myers Squibb). These efforts
have gone under many banners: total
quality management, reengineering, rightsizing,
restructuring, cultural change, and turnaround.
But, in almost every case, the basic
goal has been the same: to make fundamental
changes in how business is conducted in order
to help cope with a new, more challenging
market environment.
A few of these corporate change efforts have
been very successful. A few have been utter
failures. Most fall somewhere in between, with
a distinct tilt toward the lower end of the scale.
The lessons that can be drawn are interesting
and will probably be relevant to even more orLeading
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ganizations in the increasingly competitive
business environment of the coming decade.
The most general lesson to be learned from
the more successful cases is that the change
process goes through a series of phases that, in
total, usually require a considerable length of
time. Skipping steps creates only the illusion of
speed and never produces a satisfying result. A
second very general lesson is that critical mistakes
in any of the phases can have a devastating
impact, slowing momentum and negating
hard-won gains. Perhaps because we have relatively
little experience in renewing organizations,
even very capable people often make at
least one big error.
Error 1: Not Establishing a Great
Enough Sense of Urgency
Most successful change efforts begin when
some individuals or some groups start to look
hard at a company’s competitive situation,
market position, technological trends, and financial
performance. They focus on the potential
revenue drop when an important
patent expires, the five-year trend in declining
margins in a core business, or an emerging
market that everyone seems to be ignoring.
They then find ways to communicate this information
broadly and dramatically, especially
with respect to crises, potential crises, or great
opportunities that are very timely. This first
step is essential because just getting a transformation
program started requires the aggressive
cooperation of many individuals. Without
motivation, people won’t help, and the effort
goes nowhere.
Compared with other steps in the change
process, phase one can sound easy. It is not.
Well over 50% of the companies I have
watched fail in this first phase. What are the
reasons for that failure? Sometimes executives
underestimate how hard it can be to drive people
out of their comfort zones. Sometimes they
grossly overestimate how successful they have
already been in increasing urgency. Sometimes
they lack patience: “Enough with the preliminaries;
let’s get on with it.” In many cases, executives
become paralyzed by the downside possibilities.
They worry that employees with
seniority will become defensive, that morale
will drop, that events will spin out of control,
that short-term business results will be jeopardized,
that the stock will sink, and that they
will be blamed for creating a crisis.
A paralyzed senior management often comes
from having too many managers and not
enough leaders. Management’s mandate is to
minimize risk and to keep the current system
operating. Change, by definition, requires creating
a new system, which in turn always demands
leadership. Phase one in a renewal
process typically goes nowhere until enough
real leaders are promoted or hired into seniorlevel
jobs.
Transformations often begin, and begin
well, when an organization has a new head
who is a good leader and who sees the need for
a major change. If the renewal target is the entire
company, the CEO is key. If change is
needed in a division, the division general manager
is key. When these individuals are not new
leaders, great leaders, or change champions,
phase one can be a huge challenge.
Bad business results are both a blessing and
a curse in the first phase. On the positive side,
losing money does catch people’s attention.
But it also gives less maneuvering room. With
good business results, the opposite is true: Convincing
people of the need for change is much
harder, but you have more resources to help
make changes.
But whether the starting point is good performance
or bad, in the more successful cases I
have witnessed, an individual or a group always
facilitates a frank discussion of potentially
unpleasant facts about new competition,
shrinking margins, decreasing market share,
flat earnings, a lack of revenue growth, or
other relevant indices of a declining competitive
position. Because there seems to be an almost
universal human tendency to shoot the
bearer of bad news, especially if the head of
the organization is not a change champion, executives
in these companies often rely on outsiders
to bring unwanted information. Wall
Street analysts, customers, and consultants can
all be helpful in this regard. The purpose of all
this activity, in the words of one former CEO of
a large European company, is “to make the status
quo seem more dangerous than launching
into the unknown.”
In a few of the most successful cases, a group
has manufactured a crisis. One CEO deliberately
engineered the largest accounting loss in
the company’s history, creating huge pressures
from Wall Street in the process. One division
president commissioned first-ever customer
satisfaction surveys, knowing full well that the
Now retired,
John P. Kotter
was the
Konosuke Matsushita Professor of
Leadership at Harvard Business School
in Boston.
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results would be terrible. He then made these
findings public. On the surface, such moves can
look unduly risky. But there is also risk in playing
it too safe: When the urgency rate is not
pumped up enough, the transformation process
cannot succeed, and the long-term future
of the organization is put in jeopardy.
When is the urgency rate high enough?
From what I have seen, the answer is when
about 75% of a company’s management is honestly
convinced that business as usual is totally
unacceptable. Anything less can produce very
serious problems later on in the process.
Error 2: Not Creating a Powerful
Enough Guiding Coalition
Major renewal programs often start with just
one or two people. In cases of successful transformation
efforts, the leadership coalition
grows and grows over time. But whenever
some minimum mass is not achieved early in
the effort, nothing much worthwhile happens.
It is often said that major change is impossible
unless the head of the organization is an
active supporter. What I am talking about
goes far beyond that. In successful transformations,
the chairman or president or division
general manager, plus another five or
15 or 50 people, come together and develop
a shared commitment to excellent performance
through renewal. In my experience,
this group never includes all of the company’s
most senior executives because some people
just won’t buy in, at least not at first. But in
the most successful cases, the coalition is
always pretty powerful—in terms of titles,
EIGHT STEPS TO TRANSFORMING
YOUR ORGANIZATION
Establishing a Sense of Urgency
• Examining market and competitive realities
• Identifying and discussing crises, potential crises, or major opportunities
Forming a Powerful Guiding Coalition
• Assembling a group with enough power to lead the change effort
• Encouraging the group to work together as a team
Creating a Vision
• Creating a vision to help direct the change effort
• Developing strategies for achieving that vision
Communicating the Vision
• Using every vehicle possible to communicate the new vision and strategies
• Teaching new behaviors by the example of the guiding coalition
Empowering Others to Act on the Vision
• Getting rid of obstacles to change
• Changing systems or structures that seriously undermine the vision
• Encouraging risk taking and nontraditional ideas, activities, and actions
Planning for and Creating Short-Term Wins
• Planning for visible performance improvements
• Creating those improvements
• Recognizing and rewarding employees involved in the improvements
Consolidating Improvements and Producing Still More Change
• Using increased credibility to change systems, structures, and policies that
don’t fit the vision
• Hiring, promoting, and developing employees who can implement the vision
• Reinvigorating the process with new projects, themes, and change agents
Institutionalizing New Approaches
• Articulating the connections between the new behaviors and corporate
success
• Developing the means to ensure leadership development and succession
1
2
3
4
5
6
7
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information and expertise, reputations, and
relationships.
In both small and large organizations, a successful
guiding team may consist of only three
to five people during the first year of a renewal
effort. But in big companies, the coalition
needs to grow to the 20 to 50 range before
much progress can be made in phase three and
beyond. Senior managers always form the
core of the group. But sometimes you find
board members, a representative from a key
customer, or even a powerful union leader.
Because the guiding coalition includes members
who are not part of senior management,
it tends to operate outside of the normal hierarchy
by definition. This can be awkward, but
it is clearly necessary. If the existing hierarchy
were working well, there would be no need for
a major transformation. But since the current
system is not working, reform generally demands
activity outside of formal boundaries,
expectations, and protocol.
A high sense of urgency within the managerial
ranks helps enormously in putting a guiding
coalition together. But more is usually required.
Someone needs to get these people
together, help them develop a shared assessment
of their company’s problems and opportunities,
and create a minimum level of trust
and communication. Off-site retreats, for two
or three days, are one popular vehicle for accomplishing
this task. I have seen many groups
of five to 35 executives attend a series of these
retreats over a period of months.
Companies that fail in phase two usually underestimate
the difficulties of producing change
and thus the importance of a powerful guiding
coalition. Sometimes they have no history of
teamwork at the top and therefore undervalue
the importance of this type of coalition. Sometimes
they expect the team to be led by a staff
executive from human resources, quality, or
strategic planning instead of a key line manager.
No matter how capable or dedicated the
staff head, groups without strong line leadership
never achieve the power that is required.
Efforts that don’t have a powerful enough
guiding coalition can make apparent progress
for a while. But, sooner or later, the opposition
gathers itself together and stops the change.
Error 3: Lacking a Vision
In every successful transformation effort that I
have seen, the guiding coalition develops a
picture of the future that is relatively easy to
communicate and appeals to customers, stockholders,
and employees. A vision always goes
beyond the numbers that are typically found
in five-year plans. A vision says something that
helps clarify the direction in which an organization
needs to move. Sometimes the first
draft comes mostly from a single individual. It
is usually a bit blurry, at least initially. But
after the coalition works at it for three or five
or even 12 months, something much better
emerges through their tough analytical thinking
and a little dreaming. Eventually, a strategy
for achieving that vision is also developed.
In one midsize European company, the first
pass at a vision contained two-thirds of the
basic ideas that were in the final product. The
concept of global reach was in the initial version
from the beginning. So was the idea of becoming
preeminent in certain businesses. But
one central idea in the final version—getting
out of low value-added activities—came only
after a series of discussions over a period of
several months.
Without a sensible vision, a transformation
effort can easily dissolve into a list of confusing
and incompatible projects that can take
the organization in the wrong direction or
nowhere at all. Without a sound vision, the
reengineering project in the accounting department,
the new 360-degree performance
appraisal from the human resources department,
the plant’s quality program, the cultural
change project in the sales force will not
add up in a meaningful way.
In failed transformations, you often find
plenty of plans, directives, and programs but
no vision. In one case, a company gave out
four-inch-thick notebooks describing its change
effort. In mind-numbing detail, the books
spelled out procedures, goals, methods, and
deadlines. But nowhere was there a clear and
compelling statement of where all this was
leading. Not surprisingly, most of the employees
with whom I talked were either confused
or alienated. The big, thick books did not rally
them together or inspire change. In fact, they
probably had just the opposite effect.
In a few of the less successful cases that I
have seen, management had a sense of direction,
but it was too complicated or blurry to
be useful. Recently, I asked an executive in a
midsize company to describe his vision and received
in return a barely comprehensible 30-
If you can’t communicate
the vision to someone in
five minutes or less and
get a reaction that
signifies both
understanding and
interest, you are not
done.
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minute lecture. Buried in his answer were the
basic elements of a sound vision. But they were
buried—deeply.
A useful rule of thumb: If you can’t communicate
the vision to someone in five minutes or
less and get a reaction that signifies both understanding
and interest, you are not yet done
with this phase of the transformation process.
Error 4: Undercommunicating the
Vision by a Factor of Ten
I’ve seen three patterns with respect to communication,
all very common. In the first, a
group actually does develop a pretty good
transformation vision and then proceeds to
communicate it by holding a single meeting or
sending out a single communication. Having
used about 0.0001% of the yearly intracompany
communication, the group is startled
when few people seem to understand the new
approach. In the second pattern, the head of
the organization spends a considerable amount
of time making speeches to employee groups,
but most people still don’t get it (not surprising,
since vision captures only 0.0005% of the
total yearly communication). In the third pattern,
much more effort goes into newsletters
and speeches, but some very visible senior executives
still behave in ways that are antithetical
to the vision. The net result is that cynicism
among the troops goes up, while belief in the
communication goes down.
Transformation is impossible unless hundreds
or thousands of people are willing to
help, often to the point of making short-term
sacrifices. Employees will not make sacrifices,
even if they are unhappy with the status quo,
unless they believe that useful change is possible.
Without credible communication, and a
lot of it, the hearts and minds of the troops are
never captured.
This fourth phase is particularly challenging
if the short-term sacrifices include job losses.
Gaining understanding and support is tough
when downsizing is a part of the vision. For
this reason, successful visions usually include
new growth possibilities and the commitment
to treat fairly anyone who is laid off.
Executives who communicate well incorporate
messages into their hour-by-hour activities.
In a routine discussion about a business
problem, they talk about how proposed solutions
fit (or don’t fit) into the bigger picture. In
a regular performance appraisal, they talk
about how the employee’s behavior helps or
undermines the vision. In a review of a division’s
quarterly performance, they talk not
only about the numbers but also about how
the division’s executives are contributing to the
transformation. In a routine Q&A with employees
at a company facility, they tie their answers
back to renewal goals.
In more successful transformation efforts,
executives use all existing communication
channels to broadcast the vision. They turn
boring, unread company newsletters into lively
articles about the vision. They take ritualistic,
tedious quarterly management meetings and
turn them into exciting discussions of the
transformation. They throw out much of the
company’s generic management education
and replace it with courses that focus on business
problems and the new vision. The guiding
principle is simple: Use every possible channel,
especially those that are being wasted on nonessential
information.
Perhaps even more important, most of the
executives I have known in successful cases of
major change learn to “walk the talk.” They
consciously attempt to become a living symbol
of the new corporate culture. This is often not
easy. A 60-year-old plant manager who has
spent precious little time over 40 years thinking
about customers will not suddenly behave
in a customer-oriented way. But I have witnessed
just such a person change, and change a
great deal. In that case, a high level of urgency
helped. The fact that the man was a part of the
guiding coalition and the vision-creation team
also helped. So did all the communication,
which kept reminding him of the desired behavior,
and all the feedback from his peers and
subordinates, which helped him see when he
was not engaging in that behavior.
Communication comes in both words and
deeds, and the latter are often the most powerful
form. Nothing undermines change more
than behavior by important individuals that is
inconsistent with their words.
Error 5: Not Removing Obstacles to
the New Vision
Successful transformations begin to involve
large numbers of people as the process
progresses. Employees are emboldened to try
new approaches, to develop new ideas, and to
provide leadership. The only constraint is that
the actions fit within the broad parameters of
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the overall vision. The more people involved,
the better the outcome.
To some degree, a guiding coalition empowers
others to take action simply by successfully
communicating the new direction. But communication
is never sufficient by itself. Renewal
also requires the removal of obstacles.
Too often, an employee understands the new
vision and wants to help make it happen, but
an elephant appears to be blocking the path.
In some cases, the elephant is in the person’s
head, and the challenge is to convince the individual
that no external obstacle exists. But in
most cases, the blockers are very real.
Sometimes the obstacle is the organizational
structure: Narrow job categories can seriously
undermine efforts to increase productivity
or make it very difficult even to think
about customers. Sometimes compensation
or performance-appraisal systems make people
choose between the new vision and their
own self-interest. Perhaps worst of all are bosses
who refuse to change and who make demands
that are inconsistent with the overall effort.
One company began its transformation process
with much publicity and actually made
good progress through the fourth phase. Then
the change effort ground to a halt because the
officer in charge of the company’s largest division
was allowed to undermine most of the
new initiatives. He paid lip service to the process
but did not change his behavior or encourage
his managers to change. He did not reward
the unconventional ideas called for in the vision.
He allowed human resource systems to
remain intact even when they were clearly inconsistent
with the new ideals. I think the officer’s
motives were complex. To some degree,
he did not believe the company needed major
change. To some degree, he felt personally threatened
by all the change. To some degree, he was
afraid that he could not produce both change
and the expected operating profit. But despite
the fact that they backed the renewal effort,
the other officers did virtually nothing to stop
the one blocker. Again, the reasons were complex.
The company had no history of confronting
problems like this. Some people were afraid
of the officer. The CEO was concerned that he
might lose a talented executive. The net result
was disastrous. Lower-level managers concluded
that senior management had lied to them
about their commitment to renewal, cynicism
grew, and the whole effort collapsed.
In the first half of a transformation, no organization
has the momentum, power, or time to
get rid of all obstacles. But the big ones must
be confronted and removed. If the blocker is a
person, it is important that he or she be
treated fairly and in a way that is consistent
with the new vision. Action is essential, both
to empower others and to maintain the credibility
of the change effort as a whole.
Error 6: Not Systematically Planning
for, and Creating, Short-Term Wins
Real transformation takes time, and a renewal
effort risks losing momentum if there are no
short-term goals to meet and celebrate. Most
people won’t go on the long march unless they
see compelling evidence in 12 to 24 months
that the journey is producing expected results.
Without short-term wins, too many people
give up or actively join the ranks of those people
who have been resisting change.
One to two years into a successful transformation
effort, you find quality beginning to go
up on certain indices or the decline in net income
stopping. You find some successful new
product introductions or an upward shift in
market share. You find an impressive productivity
improvement or a statistically higher customer
satisfaction rating. But whatever the
case, the win is unambiguous. The result is not
just a judgment call that can be discounted by
those opposing change.
Creating short-term wins is different from
hoping for short-term wins. The latter is passive,
the former active. In a successful transformation,
managers actively look for ways to obtain
clear performance improvements, establish
goals in the yearly planning system, achieve
the objectives, and reward the people involved
with recognition, promotions, and even money.
For example, the guiding coalition at a U.S.
manufacturing company produced a highly
visible and successful new product introduction
about 20 months after the start of its renewal
effort. The new product was selected
about six months into the effort because it met
multiple criteria: It could be designed and
launched in a relatively short period, it could
be handled by a small team of people who
were devoted to the new vision, it had upside
potential, and the new product-development
team could operate outside the established departmental
structure without practical problems.
Little was left to chance, and the win
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boosted the credibility of the renewal process.
Managers often complain about being forced
to produce short-term wins, but I’ve found that
pressure can be a useful element in a change
effort. When it becomes clear to people that
major change will take a long time, urgency
levels can drop. Commitments to produce
short-term wins help keep the urgency level up
and force detailed analytical thinking that can
clarify or revise visions.
Error 7: Declaring Victory Too Soon
After a few years of hard work, managers may
be tempted to declare victory with the first
clear performance improvement. While celebrating
a win is fine, declaring the war won
can be catastrophic. Until changes sink deeply
into a company’s culture, a process that can
take five to ten years, new approaches are fragile
and subject to regression.
In the recent past, I have watched a dozen
change efforts operate under the reengineering
theme. In all but two cases, victory was declared
and the expensive consultants were paid
and thanked when the first major project was
completed after two to three years. Within two
more years, the useful changes that had been
introduced slowly disappeared. In two of the
ten cases, it’s hard to find any trace of the reengineering
work today.
Over the past 20 years, I’ve seen the same
sort of thing happen to huge quality projects,
organizational development efforts, and more.
Typically, the problems start early in the process:
The urgency level is not intense enough,
the guiding coalition is not powerful enough,
and the vision is not clear enough. But it is the
premature victory celebration that kills momentum.
And then the powerful forces associated
with tradition take over.
Ironically, it is often a combination of change
initiators and change resistors that creates the
premature victory celebration. In their enthusiasm
over a clear sign of progress, the initiators
go overboard. They are then joined by resistors,
who are quick to spot any opportunity
to stop change. After the celebration is over,
the resistors point to the victory as a sign that
the war has been won and the troops should
be sent home. Weary troops allow themselves
to be convinced that they won. Once home,
the foot soldiers are reluctant to climb back on
the ships. Soon thereafter, change comes to a
halt, and tradition creeps back in.
Instead of declaring victory, leaders of successful
efforts use the credibility afforded by
short-term wins to tackle even bigger problems.
They go after systems and structures that
are not consistent with the transformation vision
and have not been confronted before.
They pay great attention to who is promoted,
who is hired, and how people are developed.
They include new reengineering projects that
are even bigger in scope than the initial ones.
They understand that renewal efforts take not
months but years. In fact, in one of the most
successful transformations that I have ever
seen, we quantified the amount of change that
occurred each year over a seven-year period.
On a scale of one (low) to ten (high), year one
received a two, year two a four, year three a
three, year four a seven, year five an eight, year
six a four, and year seven a two. The peak came
in year five, fully 36 months after the first set
of visible wins.
Error 8: Not Anchoring Changes in
the Corporation’s Culture
In the final analysis, change sticks when it becomes
“the way we do things around here,”
when it seeps into the bloodstream of the corporate
body. Until new behaviors are rooted in
social norms and shared values, they are subject
to degradation as soon as the pressure for
change is removed.
Two factors are particularly important in institutionalizing
change in corporate culture.
The first is a conscious attempt to show people
how the new approaches, behaviors, and attitudes
have helped improve performance.
When people are left on their own to make
the connections, they sometimes create very
inaccurate links. For example, because results
improved while charismatic Harry was boss,
the troops link his mostly idiosyncratic style
with those results instead of seeing how their
own improved customer service and productivity
were instrumental. Helping people see the
right connections requires communication. Indeed,
one company was relentless, and it paid
off enormously. Time was spent at every major
management meeting to discuss why performance
was increasing. The company newspaper
ran article after article showing how
changes had boosted earnings.
The second factor is taking sufficient time
to make sure that the next generation of top
management really does personify the new
After a few years of hard
work, managers may be
tempted to declare
victory with the first
clear performance
improvement. While
celebrating a win is fine,
declaring the war won
can be catastrophic.
Leading Change



B
EST
OF
HBR
harvard business review • hbr.org • the tests of a leader • january 2007 page 9
approach. If the requirements for promotion
don’t change, renewal rarely lasts. One bad
succession decision at the top of an organization
can undermine a decade of hard work.
Poor succession decisions are possible when
boards of directors are not an integral part of
the renewal effort. In at least three instances I
have seen, the champion for change was the
retiring executive, and although his successor
was not a resistor, he was not a change champion.
Because the boards did not understand
the transformations in any detail, they could
not see that their choices were not good fits.
The retiring executive in one case tried unsuccessfully
to talk his board into a less seasoned
candidate who better personified the transformation.
In the other two cases, the CEOs did
not resist the boards’ choices, because they
felt the transformation could not be undone
by their successors. They were wrong. Within
two years, signs of renewal began to disappear
at both companies.
• • •
There are still more mistakes that people
make, but these eight are the big ones. I realize
that in a short article everything is made to
sound a bit too simplistic. In reality, even
successful change efforts are messy and full
of surprises. But just as a relatively simple vision
is needed to guide people through a
major change, so a vision of the change process
can reduce the error rate. And fewer errors
can spell the difference between success
and failure.
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Leading Change
Why Transformation Efforts Fail
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page 10
Further Reading
A R T I C L E S
Building Your Company’s Vision
by James C. Collins and Jerry I. Porras
Harvard Business Review
September–October 1996
Product no. 410X
Collins and Porras describe the glue that
holds a change effort together. Great companies
have a clear sense of why they exist—
their core ideology—and where they want
to go—their envisioned future. The mechanism
for getting there is a BHAG (Big, Hairy,
Audacious Goal), which typically takes 10 to
30 years to accomplish. The company’s business,
strategies, and even its culture may
change, but its core ideology remains unchanged.
At every step in this long process,
the leader’s key task is to create alignment
with the vision of the company’s future, so
that regardless of the twists and turns in the
journey, the organizational commitment to
the goal remains strong.
Successful Change Programs Begin with
Results
by Robert H. Schaffer and Harvey A. Thomson
Harvard Business Review
January–February 1992
Product no. 92108
Although a change initiative is a process, that
doesn’t mean process issues should be the
primary concern. Most corporate change
programs have a negligible impact on operational
and financial performance because
management focuses on the activities, not
the results. By contrast, results-driven improvement
programs seek to achieve specific,
measurable improvements within a
few months.
B O O K S
The Heart of Change: Real-Life Stories of
How People Change Their Organizations
by John P. Kotter and Dan S. Cohen
Harvard Business School Press
2002
Product no. 2549
This book is organized around Kotter’s eightstage
change process, and reveals the results
of his research in over 100 organizations in
the midst of large-scale change. Although
most organizations believe that change happens
by making people think differently, the
authors say that the key lies more in making
them feel differently. They introduce a new
dynamic—“see-feel-change”—that sparks
and fuels action by showing people potent
reasons for change that charge their emotions.
The book offers tips and tools to you
apply to your own organization.
Leading Change
by John P. Kotter
Harvard Business School Press
1996
Product no. 7471
This book expands upon the article about why
transformation efforts fail. Kotter addresses
each of eight major stages of a change initiative
in sequence, highlighting the key activities
in each, and providing object lessons about
where companies often go astray.

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