1 CHANGE INITIATIVE Unit 2, you will find an article by John Kotter that details his 8-step change model. Read Kotter's 8-step change model article and the specs for the HEART OF CHANGE paper More information 1. Kotter, J. P. and Cohen, D. S. (2002). The Heart of Change: Real-life Stories of how People Change Their Organizations. Harvard Business Press, 2002 - Business & Economics. 2. Kotter, J. P. (1995). Leading Change: Why Transformation Efforts Fail. Harvard Business Review OnPoint (March-April), 1-10. Complete this activity on a change initiative undertaken by an organization. The initiative does not have to be successful, but it does have to be one that is complete. You may use one from your own organization if you wish. The initiative may be any of the types shown on the top of page 3. You may wish to use this template, and if so, expand the column where you type the description. You could also take the titles for each step and turn them into headers and then type a regular paper without a table. Due to the color requirements specified below, you need to use a color printer to submit your activity. This is worth 10% of your semester grade. The change initiative does not need to have followed these steps, or even included all these steps. The purpose of the activity is to demonstrate your understanding of the eight steps, and to take fictitious license with the activity to fit it to the steps. First, complete the information about the organization and change initiative on page 2. 2 For each step: Type in red if the organization actually followed and executed the step, what they did, and what happened. Write enough to describe the step and demonstrate your understanding. Type in blue if the organization did not follow or execute the step, and explain what you believe the organization would have done, and what the intended or likely result would have been. Write enough to describe the step and demonstrate your understanding. It is possible that a good part of, or the entire document, will be in blue. Your grade comes from: Accuracy Thoroughness Demonstrated understanding of the steps as described by Kotter in the book Clarity in writing Citations and documentation This activity is due in hard copy form at the beginning of Week 6. 3 Name of Organization: Description of Change Initiative (start with the categories on page 3, then elaborate) Scope of Change Initiative (global; company-wide, headquarters, division, unit) Objectives of Change Initiative: Actual Results (Successful/Unsuccessful - and why) Internet Links that I can access to read about the initiative (Note: you can also attach supporting physical documents ) 4 Application: Eight Step Process of Successful Change Circle one: policy procedure process method direction acquisition / other: ______________ Step Set the Stage Create a Sense of Urgency Description Application to Initiative What is the need for change and what is the importance of acting on it quickly? . Pull Together the Guiding Team Decide What to Do Develop the Change Vision and Strategy Communicate for Understanding and Buy In. Who could join or align with you in guiding this change? People with leadership skills, credibility, communications ability, authority, analytical skills, and a sense of urgency. How will the future be different from the past? What steps do you have to take to get this moving? Who are people who are affected by the change who have to understand it, accept the vision, and implement the strategy? 5 Empower Others to Act What barriers do you have to remove so that those who want to make the vision a reality can do so? Produce Short-Term Wins What would the first success, or \"victory\" look like that would tell you that the change is working? Don't Let Up What do you need to do to fight complacency once the change starts to take effect? Make It Stick Create a New Culture How can you make sure the on to the new ways of behaving, become strong enough to replace old traditions? HBR FROM THE HARVARD BUSINESS REVIEW OnPoint A R T I C L E Change initiatives are notoriously messy, and their reliance on soft skills makes most managers uneasy. Leading Change: Why Transformation Efforts Fail by John P. Kotter But there is a framework that can help you avoid the most common mistakes that befall change efforts. New sections to guide you through the article: The Idea in Brief The Idea at Work Exploring Further. . . PRODUCT NUMBER 4231 T H E I D E A I N B R I E F W hy do so many transformation efforts produce only middling results? One overarching reason is that leaders typically fail to acknowledge that large-scale change can take years. Moreover, a successful change process goes through a series of eight distinct stages. These stages should be worked through in sequence. Skipping steps to try to accelerate the process invariably causes problems. And since the success of a given stage depends on the work done in prior stages, a critical mistake in any of the stages can have a devastating impact. Leading Change: Why Transformation Efforts Fail The eight stages are: 1. Establishing a sense of urgency 2. Forming a powerful guiding coalition 3. Creating a vision 4. Communicating the vision 5. Empowering others to act on the vision 6. Planning for and creating short-term wins 7. Consolidating improvements and producing still more change 8. Institutionalizing new approaches T H E I D E A AT W O R K F or each of the stages in a change process, there is a corresponding pitfall. 1. Not establishing a great enough sense of urgency. Half of all change efforts fail at the start. When is the urgency rate high enough? When 75% of management is genuinely convinced that the status quo is, in the words of the CEO of a European company, \"more dangerous than launching into the unknown.\" 2. Not creating a powerful enough guiding coalition. In successful transformation efforts, the chairman or president or general manager of the division, plus another ve to 50 othersincluding many, but not all, of the most inuential people in the unit develop a shared commitment to renewal. 3. Lacking a vision. Without a coherent and sensible vision, a change effort dissolves into a list of confusing and incompatible projects. If you can't communicate the vision in ve minutes or less and get a reaction that indicates both understanding and interest, your work in this stage isn't done. 4. Undercommunicating the vision by a factor of ten. Use every existing communication vehicle to get the vision out. Incorporate the vision into routine discussions about business problems. 5. Not removing obstacles to the new vision. Renewal requires the removal of obstacles systemic or humanto the vision. One company's transformation ground to a halt because the executive in charge of the largest division didn't change his own behavior, didn't reward the unconventional ideas called for in the vision, and left the human resource systems intact even though they were incompatible with the new ideals. 6. Not systematically planning for and creating short-term wins. Clearly recognizable victories within the rst year or two of a change effort help convince doubters that the change effort is going to be worth all the trouble. 7. Declaring victory too soon. At this stage, it's ne to celebrate a short-term win, but it's catastrophic to declare the war over. 8. Not anchoring changes in the corporation's culture. If they are to stick, new behaviors must be rooted in the social norms and shared values of a corporation. To accomplish this, make a conscious attempt to show people that the new behaviors and approaches have improved performance. Also, make sure that the next generation of top management embodies the new approach. HBR OnPoint 2000 by Harvard Business School Publishing Corporation. All rights reserved. HBR M A R C H - A P R I L 1 9 9 5 Leading Change: Why Transformation Efforts Fail by John P. Kotter 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, right sizing, 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 DRAWINGS BY KURT VARGO tilt toward the lower end of the scale. The lessons that can be drawn are interesting and will probably be relevant to even more organizations 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 John P. Kotter is the Konosuke Matsushita Professor of Leadership at the Harvard Business School in Boston, Massachusetts. He is the author of The New Rules: How to Succeed in Today's Post-Corporate World (New York: Free Press, 1995), Corporate Culture and Performance, coauthored with James L. Heskett (New York: Free Press, 1992), and A Force for Change: How Leadership Differs from Management (New York: Free Press, 1990). Copyright 1995 by the President and Fellows of Harvard College. All rights reserved. LEADING CHANGE 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 senior-level 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, custom- One chief executive officer deliberately engineered the largest accounting loss in the history of the company. 60 ers, 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 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 HARVARD BUSINESS REVIEW March-April 1995 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 HARVARD BUSINESS REVIEW March-April 1995 1 2 3 4 5 6 7 8 61 LEADING CHANGE 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 5 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, 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 5 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. In failed transformations, you often find plenty of plans and programs, but no vision. 62 HARVARD BUSINESS REVIEW March-April 1995 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 3 or 5 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 360degree 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 and 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-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 .0001% of the yearly intracompany communication, the group is startled that few people seem to understand the A vision says something that clarifies the direction in which an organization needs to move. HARVARD BUSINESS REVIEW March-April 1995 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 .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. Gain63 LEADING CHANGE ing 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 and unread company newsletters into lively articles about the vision. They take ritualistic and 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, es- 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 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 inconsis- Worst of all are bosses who refuse to change and who make demands that are inconsistent with the overall effort. pecially 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 64 HARVARD BUSINESS REVIEW March-April 1995 Too often, an employee understands the new vision and wants to help make it happen. But something appears to be blocking the path. tent 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. But 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 shortterm goals to meet and celebrate. Most people won't go on the long march unless they see compelling evidence within 12 to 24 months that the journey is producing expected results. Without short-term wins, too many people give up or activeHARVARD BUSINESS REVIEW March-April 1995 ly 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 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. 65 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 While celebrating a win is fine, declaring the war won can be catastrophic. 66 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 HARVARD BUSINESS REVIEW March-April 1995 LEADING CHANGE 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 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. Product no. 4231 HARVARD BUSINESS REVIEW March-April 1995 67 E X P L O R I N G F U R T H E R . . . Leading Change: Why Transformation Efforts Fail ARTICLES \"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 ideologyand where they want to gotheir 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 nancial performance because management focuses on the activities, not the results. By contrast, results-driven improvement programs seek to achieve specic, measurable improvements within a few months. \"Managing Change: The Art of Balancing\" by Jeanie Daniel Duck (Harvard Business Review, November-December 1993, Product no. 5416) The positive management of emotions associated with the workplace can facilitate buy-in and ownership of a change initiative, thereby increasing its chances for success. Managing change is like balancing a mobile. You have to keep two conversations in balance: the one between the people leading the change effort and the one between those who are expected to implement the new strategies. You also have to manage emotional connections even though they have traditionally been banned from the workplace, they are essential for a successful transformation. BOOK 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. Visit us on the Web at: U.S. and Canada: 800-988-0886 617-783-7500 Fax: 617-783-7555