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TRANSFORMING ORGANIZATIONS

Organization Transformation Culture Alignment M&A Integration Organization Design

Organization Transformation

Leading a transformation is a specific leadership skill. We define it as:

The inspiring, energetic and collaborative pursuit of a strategy that requires a change in the fundamental nature of the business. It is relentlessly driven forward by leaders of integrity. They lead by example and a demonstrated commitment to the greater good of the company. They engender the trust and support necessary from those they lead.

By definition, a transformation, requires a major change effort. This is mostly the consequence of a change in strategy.

Once the strategic direction is defined, we support CEOs and senior leaders in architecting change.

This involves translating the new strategy in to organizational and leadership implications. Perhaps a change in culture, structure, processes, skills or mindsets.

We build transformation roadmaps and we guide leaders through the changes over time, offering advice and support on the strategic leadership and organizational issues, while others implement operational and process changes.

Example

example diagram of an organizational transformation roadmap

In addition to architecting big change, we also support the creation of new organization models. See Organization Design.

Communication and the Importance of Storytelling During Change

The strategic story is the heart and soul of any change. What is the vision? What is the end-state? How is the strategy changing, and what is not changing?

Authoring this strategic story is fundamental to any change. It inspires action.

To be most effective, it should follow the principles of good storytelling (a protagonist, an inciting incident, a call to action, a dreadful alternative, a conflict, an antagonist, the quest, and so on).

Culture Alignment

Strategy is what is visible, on the surface. Culture is unseen. But in a battle between culture and strategy, culture always wins.

Redefining the strategy is much easier than reshaping the culture.

It can take years, and is a formidable challenge that should be owned and led by the CEO and the leadership group. Because culture is the result of what leaders do; how they behave.

What is culture and why do people want to change it?

Culture is a set of assumptions that a group shares. They are taken for granted; unquestioned. As new members join the group they learn the assumptions. They are usually formed around whatever is successful. Products that are successful. Processes. Technology. The organization becomes inseparable from the cause of that success. Microsoft and Windows. 3M and innovation. Southwest and low-cost/fun service. Enron and….

When leaders talk of the need for organizational change, it usually means they want to change the culture. But you don’t change culture. You change leaders, or change the behavior of leaders; which changes the culture.

The visible manifestation of the culture is behavior. In particular, the behavior of leaders. There is some set of accepted behaviors that worked in the past but now gets in the way of success. Old habits die hard.

How do leaders go about changing a culture?

(Assuming the strategic story is unambiguous and there is a clear picture of the end-state)

You remove the leaders stuck in the old world. You also promote or hire new leaders who believe in the new world.

You work hard on defining and rewarding the new behaviors.

You work hard on helping everyone understand and make it through the changes.

3 signs of a culture in trouble

image of numeral one

It is really hard to implement any strategic change of course.

image of numeral two

People, especially leaders, protect their position at all costs.

image of numeral three

Decision-making is unusually slow.

What to do

Diagnose to create shared language and plans

In medical practice there is a common adage; “Intervention without diagnosis is malpractice.” This is as true for social systems like organizations as it is for biological systems like the human body.

Transformational leaders understand that significant change requires diagnosing the organization’s (1) readiness for transformation, and (2) existing health.

They also know that they must engage leaders in the act of diagnosis before treatment. This builds consensus and commitment to the hard work that must be done.

Assemble the right leaders

Those that believe in the new world. About a third will. Another third will resist. Remove them. The final third? They will be on the fence. Encourage the third that ‘get it’ to engage this group; to bring them on the journey.

Dialogue enables change

As CEO, deploy the ’Rule of Seven.’ You need to communicate at least seven times before your message is heard. During transformations, staff are only interested in three things ‘me, me and me.’ Will I have a job? Will it be the same job? Who will be my boss?

What will change and what will not must be unambiguous. Communication is at the core of culture change. Not ‘command and control’ communication. Rather, Conversational Leadership. The most effective way to communicate and build trust. It is a style that encourages discussion. It is informal and personal. You can’t control the message in today’s world. But you can listen authentically, ask questions, draw people out; the vitality of dialogue.

M&A Integration

It’s exhilarating chasing the deal. It’s logical deciding which factories to close. It’s rational choosing which processes to merge.

But still most M&As fail.

They wouldn’t if the same discipline and diligence that is applied to the financials of closing the deal are also applied to leadership and cultural issues.

M&A Reality

The goal of any M&A activity is to achieve the strategic and financial promise with sustained results. Yet most mergers fail to achieve their targeted value.

The Facts
  • Two years after the deal closed, 53% of the transactions did not meet the expectations articulated at the time of the merger announcement.
  • 50% of all transactions actually destroy value and additional 33% do not increase value.

Focus on Leadership and Talent is the Key to Success

The Evidence
  • Proactive pre- and post-merger leadership and talent management improves M&A performance by 45%.
  • Effective leadership integration increases M&A success rate to between 60% – 70%.
  • 90% of successful M&As address culture within first 30 days after announcement.

How? Create the Leadership Game Plan

Pre-Close: First 100 Days: Months 4-6: Months 7-12:
Strategic Alignment Launch Implementation Consolidation and Leverage

Evaluate acquisition targets.
Align vision and scope of integration.
Identify key leadership roles.
Develop retention plan.
Develop overall integration Plan.

Conduct organizational due diligence.
Conduct leadership due diligence.
Plan communication.
Hold leadership meetings.
Create organization design.

Build the executive team.
Implement operating governance model.
Conduct talent reviews and succession planning.
Hold communication events.
Create KPI dashboard.

Continue to actively manage the integration.
Create and implement NewCo leadership strategy.
Carry on process discipline with emphasis on communication.

Merger Integration Must Haves

diagram of merger integration must haves

The River Strength Meter: Merger Integration


WEAK MODERATE STRONG
Hubris and Numbers Prevail Engineered: for Failure Engagement 101 Change Leadership Enlightened Integration Cracking the Code

The case for the combination is made solely on high-level strategic, industry and financial benefits.

Superficial reference to “cultural compatibility.”

Integration process delegated to the “Program Office” to configure and implement.

Q&A is defensive and conveys little insight into known issues.

Proactive, engaging communication.

Organizational issues made explicit and addressed.

Leadership questions addressed quickly.

Collaborative integration process clearly led by NewCo CEO and executive team.

Strong change leadership plus evidence of expanded organizational due diligence.

Key social issues are addressed in a transparent way.

Enlightened integration plus clear retention of key executives on both sides.

Consistent talent management framework applied across both organizations.

Organization Design

Organizations are complex social systems. Redesign requires significant changes to structure, decision-making processes and senior roles.

But this work can get messy—fast. It needs to be rigorous and disciplined.

Who does a design? The CEO is responsible. But, with boundary conditions, you can minimize politics and reduce staff anxiety by involving senior leaders.

The Promise of Redesign

CEOs and their executive teams turn to organization redesign when their strategies require new levels of performance, such as:

  • Expanding into global markets
  • Scaling up to grow rapidly
  • Integrating significant acquisitions
  • Consolidating to improve profitability

These changes are often transformational, involving more than simply changing boxes and lines.

Successful organizational redesign requires recasting the way people interact with each other within groups and aligning those groups together. It involves building new organizational capabilities, developing new skills and instilling a new culture.

This is why we call it organization “redesign” and not just “restructuring.” Design goes beyond structure, positively altering all aspects of performance.

The Odds are Against Success

image of 55 per cent in circle

of change management initiatives met initial objectives, and only 25% yielded gains that were sustained over time.

image of 90 per cent in circle

of the time back-office costs are back to prior levels 4 years after a cost-cutting program.

image of 87 per cent in circle

of respondents state that not enough focus is placed on managing change in critical projects.

Common Pitfalls and How to Avoid Them

Avoid “Ready, Fire, Aim” – Diagnose First

  • Resist the temptation to use a “back of the napkin” approach to creating new structures.
  • Determine root causes through a structured organizational diagnosis that involves leaders.

Let Strategy Drive Structure, then Staff to Win

  • Use strategy to determine organizational groups, not just cost efficiencies.
  • Identify the “golden boxes” – critical roles that must be staffed most carefully.
  • Avoid creating new roles just to retain talent.

Don’t Go it Alone – Engage Your Leaders

  • In design teams, use a combination of trusted senior executives and high-potential, growth-minded leaders.
  • Communicate constantly – avoid radio silence, which fuels rumors.

Don’t “Wing It” – Use Proven Tools

  • Apply a structured design methodology and train your leaders how to make design decisions.
  • Conduct an impact assessment to predict implementation issues and plan accordingly.

Must Haves: Tools and Methods That Work

Organization Design Process

We use a structured process for a design team(s) to take the results of an organization diagnostic and reconfigure the basic structure. It involves considering functional, market, geographic and business unit configurations and deciding which methods best support the strategic direction. It also involves designing the right processes and methods for linking parts of the organization together, beyond simply instituting a matrix structure.

Operating Governance Design

This process designs the right grouping of leadership teams needed to execute management processes (strategy development, operational reviews, talent reviews, budgeting, etc.). The result is an integrated governance model composed of distinct leadership teams that get work done effectively and efficiently.

Executive Role Redesign

With a new structure and operating governance system there is often need for one or more newly designed leadership roles, for example Chief Operating Officer, Chief Administrative Officer, Chief Innovation Officer, etc. This requires carefully configuring roles with the right responsibilities, accountabilities and appropriate scope. The result is clear job descriptions at the executive level that clearly enable clear decision making and collaboration among executives.

The River Strength Meter: Organization Design

WEAK MODERATE STRONG
Back of the Napkin Amateur Hour Engagement 101 Change Leadership Strategy Driven Design Strategy, Structure and Talent

Design decisions are made without diagnosing root causes or involving leaders in the process.

A design team works on redesign, but without a structured process or design tools.

Organizational issues are identified. Major in efficiency/cost savings, minor in strategy.

Implementation issues are addressed and there is sufficient communication during and after the design process.

Strategy clearly drives design decisions. Implementation planning is rigorous and well executed.

The new design is staffed appropriately, with plans in place for filling skill and capability gaps. Employee engagement increased.

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leadership@trgglobal.com

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