Every organisation faces the need for serious or radical change sometimes. A time when just making more incremental or small-scale changes won’t be enough. This is when words like ‘transformation’ and ‘transformational leadership’ are perhaps banded about to refer to the big-scale, deep-seated changes leaders seek to make. But what exactly is meant by these terms and, more significantly, why it is that research consistently reveals that over 70% of transformations fail ? And are there any key principles than can increase the odds of success ?
In my view – based both on the management literature and my consulting experience – a transformation is best defined as being a major shift around an organisation’s core ‘strategic fundamentals’ – involving all or most of the elements of vision, business focus, capabilities, business model and identity – with the aim being to achieve a ‘step-change’ in performance which the organisation could not deliver previously.
A transformation involves a substantial re-invention of the organisation. This contrasts to ‘change management’ which is best thought of as delivering a few discrete, well-defined and quite focused shifts. A transformation is much more wide-ranging, looser, holistic and dealing with a range of initiatives which are usually interdependent and cross-functional. A transformation is also unpredictable, iterative and experiential with a much higher level of uncertainty and risk. In contrast, change management focuses on executing a specific set of known/wanted adjustments to how an organisation operates and is mostly about managing a pool of specific projects in a systematic and efficient way.
Many books and articles have been written on ‘change management’ and there is a large number of different change ‘models’ (e.g. Kotter) available to guide leaders and managers with sound principles and suggested tips – for example, making the business case for change, building a coalition of leaders, getting early results, engaging stakeholders, executing with discipline. However, despite many of such tips still being relevant and useful for dealing with transformations, in most cases leaders struggle with carrying out a transformation. A lot of the problem, of course, is the much bigger scale and complexity involved with a transformation, but I think it’s often because leaders don’t see the core difference in leadership approach needed between a change and transformation.
True transformation is very much about inspiring people’s hearts, minds, motivations, beliefs and aspirations – as individuals and collectively. It’s about moving people emotionally and changing the overall culture in an organisation. In my view, this is the stuff of true ‘leadership’ – it’s where leadership combines with radical change.
The term ‘transformational leadership’ (or transforming leadership) was initially introduced by political historian and biographer James MacGregor Burns, who in a seminal book published in 1978, contrasted it with ‘transactional leadership’. Transforming leadership occurs when both leader and followers raise each other’s motivation and sense of ‘higher purpose’. Transactional leadership, on the other hand, relies on motivating employees through rewards or punishments: an ‘exchange’ between leader and followers in return for followers’ compliance with the leader’s wishes, with no sense of any higher purpose.
Transformational leadership, according to Burns, addresses people’s ‘higher-order’ needs for achieving self-esteem, self-actualisation and sense of contribution to the ‘common good’ (reflecting, of course, the well-known Hierarchy of Needs model developed by Maslow). Transactional leadership is best suited to situations that require routine, consistency, reliability and structure – areas were there is not much need for innovation. On the other hand, transformational leadership is ideally suited to situations where there is frequent change in the environment and creativity is important.
Burns’s ideas around transforming leadership were notably expanded upon by researcher Bernard M. Bass to develop what is today referred to as Bass’s Transformational Leadership Theory. According to Bass, transformational leadership can be defined based on the impact it has on followers: through the strength of their vision and personality, transformational leaders inspire followers to change their expectations, perceptions and motivations to work towards common goals. They are able to do this particularly by garnering trust, respect and admiration from their followers.
Bass suggested that there are four different components of transformational leadership:
a) Inspiring Motivation – transformational leaders have a clear vision that they are able to articulate to followers. They are also able to help followers experience the same passion and motivation to fulfil those goals.
b) Intellectual stimulation – transformational leaders not only challenge the status quo, they also encourage creativity amongst followers. The leader encourages followers to explore new ways of doing things and new opportunities to learn.
c)Individualised Consideration – transformational leadership involves offering support and encouragement to individual followers. In order to foster supportive relationships, transformational leaders keep lines of communication open so that followers feel free to share ideas and so that leaders can offer direct recognition of the unique contributions of each follower.
d) Idealized Influence – the transformational leader serves as a ‘role model’ for followers. As followers trust and respect the leader, they emulate this individual and internalise her/her ideals.
What are some typical signs of a transformational leader ? They include a person who brings a driving purpose and direction to a group by conveying a clear vision for the group’s goals; a person who shows a real passion for the work of the group; a person who leads by example; a person who gives positive feedback for good performance; and a person who makes the rest of the group feel energised and re-charged. Such leaders are also invariably genuine, open, positive, energetic and trustworthy.
Research shows that groups led by transformational leaders achieve higher levels of performance and higher levels of individual satisfaction than groups led by other types of leaders. A lot of this is because transformational leaders believe their followers can do their best and they lead them to feel inspired and empowered. Staff turnover in such groups tends to be low as the leader is able to engender a great deal of commitment and loyalty. Also, in such a group, there is a positive influence on employee well-being.
Despite all these positives, though, transformational leadership may not be the best choice in all situations. In some cases, in particular, groups may need a more managed or even autocratic style with closer control and more direction – especially where group members are relatively inexperienced, unskilled or there is a need for a lot of oversight.
Accepting, then, that transformational leadership can bring benefits in the right circumstances, why is it that research shows that the majority of transformations fail? On this issue I turned to the latest management literature to note the key insights or pointers. In particular, I noted the findings from a dedicated group at McKinsey that assisted over 100 clients with transformations over several years from 2010 (see reference below): below is a quick summary of a dozen things they advised organisations should particularly do to increase the odds of a transformation being successful:
a) McKinsey’s most fundamental finding was that average companies rarely have the combination of mindsets, energy and ongoing commitment needed to pull off a transformation: typically most leaders are more used to a fairly steady-state – involving quite stable structures and making only incremental changes – rather than dealing with the faster-paced, more visionary, and bruising work involved in a transformation. So, for a transformation to succeed, leaders need to start by getting out of their usual mindset and adopt a fundamentally different perspective.
b) Leaders need to tell a compelling and engaging story / narrative of why serious change is needed. It is not adequate for leaders to say to employees things like “we need to increase our bottom line by 25%” or “we need to raise our market share to become number two in the market”. Employees do not get motivated or excited by such metrics or goals! Rather, employees want to hear more about the wider context and about a wider aspirational vision for the future and, ideally, what’s in it for them as individuals, not just for the organisation.
c) Leaders should set performance goals/aspirations that will really ‘stretch’ the organisation to its full potential, rather than make them too modest or ‘safe’. To judge what is really stretching, leaders will typically need to ‘step outside’ the organisation and adopt more of the perspective of an objective outsider. Also, leaders need to ensure thinking follows from well-grounded facts and clear analysis, not untested assumptions or personal views (which will invariably be biased).
d) Don’t start by accepting assumed ‘trade-offs’ – for example, “we could cut our costs a lot, but that would mean us having to sacrifice customer experience or quality ….”. Don’t just accept such ‘either/or’ assumptions: instead be ready to challenge conventional thinking. Also, focus on thinking about growth and expansion, not just cost-cutting.
e) Appoint a dedicated person to be ‘transformation director/leader’ and make sure he/she sits on the executive team. The role of this person is to oversee, champion and lead overall delivery and progress of the transformation programme. This senior person must have the power to make decisions, not just be a ‘staff’ off-line appointment. A key aspect of their role is to emphasize the overall, organisation-level view of what is right for the organisation as a whole and to act decisively to unblock difficulties or local obstacles that will arise as the overall project evolves.
f) Set up a dedicated ‘Transformation Office’ (akin to a Programme Management Office) with a small dedicated, experienced team (typically a mixture of project managers and one or two analysts or specialists), headed by the Transformation Director. This team is there to do the detailed work of monitoring, co-ordinating, assisting and reporting on the wide array of individual initiatives and projects involved in a transformation.
g) Structure and plan the overall transformation journey carefully and in detail up-front – including, not least: main workstreams; aims/outputs and actions/activities for each workstream; accountability plan for key work areas; key timings; budgets; how work teams will feedback/share/report back to each other; and progress tracking/reporting mechanisms. Of course, the programme won’t end up following the first-cut plan, but starting with an overall structure and plan at the start will help bring a disciplined approach.
h) Make extensive use of ‘agile’ project/activity teams and agile project management techniques for developing solutions and the running of dedicated workstreams/activities. Ideally, this approach should be combined with an overall cadence of regular (weekly or fortnightly) meetings – facilitated by the Transformation Office – where the leaders of each team come together to share and discuss progress in each team and agree/shape work to be done in the next time period.
I) Ensure the organisation has the right managers and supervisors in the right positions with the right mix of talent and capabilities needed to handle the transformation. Involve middle managers early on in the overall programme in terms of winning their support for the aspirations and letting them help shape new ideas/policies/ways of working. Equip managers with appropriate tools, resources and support they need. Ensure managers and supervisors know how to provide their staff with appropriate personal support, coaching, guidance, assistance, time and space to help them make the change needed in their individual roles.
j) Align incentives well to motivate and encourage senior managers. Set a focused, small number of objectives with rewards/recognition against each. Don’t just stress financial targets but, rather, recognise the behaviours that drive he outcomes for the initiatives that really matter (e.g. finding an original solution to a big, unresolved issue). Offer an outsized pay-out for outside performance. Use non-monetary incentives, not just financial incentives – for example, a handwritten note from the CEO for an excellent contribution.
k) Keep people’s mindsets focused on overall desired outcomes from the project, not just on completing individual activities. Leaders must emphasise the ‘big picture’, not let people get lost in the small details. This is especially so because, as the overall project evolves, there is very likely to be change in what precise activities are needed compared to the very original plan.
l) Build in reinforcement mechanisms to maintain forward energy and ‘lock in’ particular changes once agreed on, so as to prevent the organisation slipping back into ‘old ways’. These include, for example, widespread/regular updates for employees (and other stakeholders) on progress and early successes/wins; incorporation of new approaches/ideas/methods straight into company manuals/procedures; public celebration and recognition of outstanding work by particular individuals or team; and widespread/maintained communication and visibility from top managers to remind people about the aims and hopes for the transformation and to help keep motivation levels up.