1 of 9 https://berkeley.courseload.com/#/content-26000/address/230/print 4/25/2016 11:38 PM 2 of 9 https://berkeley.courseload.com/#/content-26000/address/230/print 4/25/2016 11:38 PM 3 of 9 https://berkeley.courseload.com/#/content-26000/address/230/print 4/25/2016 11:38 PM 4 of 9 https://berkeley.courseload.com/#/content-26000/address/230/print 4/25/2016 11:38 PM 5 of 9 https://berkeley.courseload.com/#/content-26000/address/230/print 4/25/2016 11:38 PM 6 of 9 https://berkeley.courseload.com/#/content-26000/address/230/print 4/25/2016 11:38 PM 7 of 9 https://berkeley.courseload.com/#/content-26000/address/230/print 4/25/2016 11:38 PM 8 of 9 https://berkeley.courseload.com/#/content-26000/address/230/print 4/25/2016 11:38 PM 9 of 9 https://berkeley.courseload.com/#/content-26000/address/230/print 4/25/2016 11:38 PM www.hbrreprints.org B E S T O F H BR Leaders who successfully transform businesses do eight things right (and they do them in the right order). Leading Change Why Transformation Efforts Fail by John P Kotter . Included with this full-text Harvard Business Review article: 1 Article Summary The Idea in Briefthe core idea The Idea in Practiceputting the idea to work 2 Leading Change: Why Transformation Efforts Fail 10 Further Reading A list of related materials, with annotations to guide further exploration of the article's ideas and applications Reprint R0701J BEST OF HBR Leading Change Why Transformation Efforts Fail The Idea in Brief The Idea in Practice Most major change initiativeswhether intended to boost quality, improve culture, or reverse a corporate death spiralgenerate only lukewarm results. Many fail miserably. To give your transformation effort the best chance of succeeding, take the right actions at each stageand avoid common pitfalls. 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 mistakessuch as declaring victory too soon. Result? Loss of momentum, reversal of hard-won gains, and devastation of the entire transformation effort. COPYRIGHT 2006 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED. By understanding the stages of change and the pitfalls unique to each stageyou boost your chances of a successful transformation. The payoff? Your organization flexes with tectonic shifts in competitors, markets, and technologiesleaving rivals far behind. 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 diculty of driving people from their comfort zones Becoming paralyzed by risks Form a powerful guiding coalition Assemble a group with shared commit- No prior experience in teamwork at the top ment and enough power to lead the change eort. Relegating team leadership to an HR, quality, or strategic-planning executive Encourage them to work as a team rather than a senior line manager outside the normal hierarchy. Create a vision Create a vision to direct the change eort. Presenting a vision that's too complicat Develop strategies for realizing that vision. ed or vague to be communicated in ve minutes Communicate Use every vehicle possible to commu- Undercommunicating the vision the vision nicate the new vision and strategies for Behaving in ways antithetical to the achieving it. vision Teach new behaviors by the example of the guiding coalition. Empower others to act on the vision Failing to remove powerful individuals Remove or alter systems or structures who resist the change eort undermining the vision. Encourage risk taking and nontraditional ideas, activities, and actions. Plan for and create shortterm wins Dene and engineer visible performance improvements. Recognize and reward employees contributing to those improvements. Consolidate improvements and produce more change Declaring victory too soonwith the Use increased credibility from early wins to change systems, structures, and rst performance improvement policies undermining the vision. Allowing resistors to convince \"troops\" that the war has been won Hire, promote, and develop employees who can implement the vision. Reinvigorate the change process with new projects and change agents. Institutionalize Articulate connections between new new behaviors and corporate success. approaches Create leadership development and succession plans consistent with the new approach. Leaving short-term successes up to chance Failing to score successes early enough (12-24 months into the change eort) Not creating new social norms and shared values consistent with changes Promoting people into leadership positions who don't personify the new approach page 1 Leaders who successfully transform businesses do eight things right (and they do them in the right order). BEST OF HBR Leading Change Why Transformation Efforts Fail by John P Kotter . COPYRIGHT 2006 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED. Editor's Note: Guiding change may be the ultimate test of a leaderno 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 difcult. 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 factorsfrom 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 denitive. harvard business review january 2007 Over the past decade, I have watched more than 100 companies try to remake themselves into signicantly 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 or- page 2 Leading Change B EST OF HBR 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 Now retired, John P. Kotter was the Konosuke Matsushita Professor of Leadership at Harvard Business School in Boston. harvard business review january 2007 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 nancial performance. They focus on the potential revenue drop when an important patent expires, the ve-year trend in declining margins in a core business, or an emerging market that everyone seems to be ignoring. They then nd ways to communicate this information broadly and dramatically, especially with respect to crises, potential crises, or great opportunities that are very timely. This rst 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 rst 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 denition, 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 rst 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, at 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 rst-ever customer satisfaction surveys, knowing full well that the page 3 Leading Change B EST OF HBR results would be terrible. He then made these ndings 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 trans- formation 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 ve 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 rst. But in the most successful cases, the coalition is always pretty powerfulin terms of titles, EIGHT STEPS TO TRANSFORMING YOUR ORGANIZATION 1 2 3 4 5 6 7 8 harvard business review january 2007 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 t 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 page 4 Leading Change B EST OF HBR 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. information and expertise, reputations, and relationships. In both small and large organizations, a successful guiding team may consist of only three to ve people during the rst 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 nd 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 denition. 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 ve to 35 executives attend a series of these retreats over a period of months. Companies that fail in phase two usually underestimate the difculties 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 harvard business review january 2007 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 ve-year plans. A vision says something that helps clarify the direction in which an organization needs to move. Sometimes the rst 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 ve 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 rst pass at a vision contained two-thirds of the basic ideas that were in the nal 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 nal versiongetting out of low value-added activitiescame 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 nd 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- page 5 Leading Change B EST OF HBR minute lecture. Buried in his answer were the basic elements of a sound vision. But they were burieddeeply. A useful rule of thumb: If you can't communicate the vision to someone in ve minutes or less and get a reaction that signies 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 rst, 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 sacrices. Employees will not make sacrices, 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 sacrices 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 t (or don't t) into the bigger picture. In a regular performance appraisal, they talk harvard business review january 2007 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 t within the broad parameters of page 6 Leading Change B EST OF HBR 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 sufcient 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 difcult 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 ofcer 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 ofcer'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 prot. But despite the fact that they backed the renewal effort, the other ofcers 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 ofcer. 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. harvard business review january 2007 In the rst 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 nd quality beginning to go up on certain indices or the decline in net income stopping. You nd some successful new product introductions or an upward shift in market share. You nd 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 page 7 Leading Change B EST OF HBR 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. harvard business review january 2007 After a few years of hard work, managers may be tempted to declare victory with the rst clear performance improvement. While celebrating a win is ne, declaring the war won can be catastrophic. Until changes sink deeply into a company's culture, a process that can take ve 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 rst 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 nd 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 quantied 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 ve an eight, year six a four, and year seven a two. The peak came in year ve, fully 36 months after the rst set of visible wins. Error 8: Not Anchoring Changes in the Corporation's Culture In the nal 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 rst 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 sufcient time to make sure that the next generation of top management really does personify the new page 8 Leading Change B EST OF HBR 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 ts. The retiring executive in one case tried unsuccessfully to talk his board into a less seasoned candidate who better personied 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 harvard business review january 2007 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. Reprint R0701J To order, see the next page or call 800-988-0886 or 617-783-7500 or go to www.hbrreprints.org page 9 BEST OF HBR Leading Change Why Transformation Efforts Fail Further Reading ARTICLES Building Your Company's Vision by James C. Collins and Jerry I. Porras Harvard Business Review September-October 1996 Product no. 96501 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 To Order For Harvard Business Review reprints and subscriptions, call 800-988-0886 or 617-783-7500. Go to www.hbrreprints.org 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. BOOKS 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. For customized and quantity orders of Harvard Business Review article reprints, call 617-783-7626, or e-mai customizations@hbsp.harvard.edu page 10