July 18, 2022
Summary. It’s not news that organizational transformations are prone to failure. To understand the skills, mindsets, and capabilities behind successful transformations in today’s dynamic environment, EY and Oxford University formed a research collaboration to investigate what it takes to lead a successful transformation. One of the authors’ most important findings is that, in order for transformation to be successful, leaders must approach it in ways designed to mitigate emotional harm to — and drive emotional commitment from — employees. The workforce bears the brunt of failed transformations, and the emotional damage can be substantial as employees lose confidence in leaders and become skeptical of further attempts at transformation. Drawn from their research, the authors present seven ways for leaders to set their transformations up for success by prioritizing their employees’— and their own — emotions.
The road is littered with failed transformation programs that were set up in the traditional way: Leaders define objectives, design a project plan, agree on KPIs, and recruit the right people. As many executives, academics, and consultants can relate to, the rate of failure in transformations is still far too high, and one that organizations can ill afford in these disruptive times.
To understand the skills, mindsets, and capabilities behind successful transformations in today’s dynamic environment, EY and Oxford University formed a research collaboration to investigate what it takes to lead a successful transformation. We surveyed 935 CXOs and 1,127 members of the workforce. Approximately 50% of them represented a successful transformation project and 50% an unsuccessful one. The respondents came from 23 countries, seven industries, and 16 sub-industry sectors. We also conducted 25 in-depth interviews with CXOs from multiple global companies. Before their interviews, each leader was asked to identify three critical turning points in their transformation. The interviews then focused on each turning point to understand when and why it happened, what actions were taken, and how they impacted the outcome of the transformation.
One of our most important findings is that, in order for transformation to be successful, leaders must approach it in ways designed to mitigate emotional harm to — and drive emotional commitment from — employees.
What makes transformations successful — and unsuccessful
In general, we found that leaders and workers started transformations at the same point emotionally: excited and optimistic. As the transformations got going, they all showed a reduction in positive emotions and an increase in negative emotions. All transformations are tough, and confidence is bound to dip. This is not only inevitable, it’s key to the transformation’s success: Heightened stress raises performance (up to a point), and leaders who learn from their emotions bring those lessons into the transformation. This maintains a zone of high performance, which is an accelerator for a transformation.
For emotions to be accelerators rather than inhibitors of transformation, leaders must put conditions in place in advance so that the transformation can come through this “pressure zone.” They must create psychological safety and construct mechanisms for all voices to be heard. And as the pressure increases, support, such as listening sessions and employee coaching, needs to increase along with it.
Without that corresponding increase in psychological safety and support, transformations spiral downward. The workforce is left feeling anxious and overworked. People lose faith in transformation when there’s no compelling vision, no visible progress, and no practical and emotional support from leaders. When key stakeholders and the leaders themselves lose faith in the transformation, they may start to distance themselves from it, looking to reduce damage to their own brands and jumping to different activities.
Seven steps for a successful transformation
The workforce bears the brunt of failed transformations, and the emotional damage can be substantial as employees lose confidence in leaders and become skeptical of further attempts at transformation.
Drawn from our research, here are seven ways for leaders to set their transformations up for success by prioritizing their employees’— and their own — emotions.
1. Address the unsustainable status quo.
The first step in any transformation is recognizing that the status quo is unsustainable. This takes courage and an ability to hold and facilitate the emotionally uncomfortable conversations that lead you to accept the delta between where you are today and where you need to be tomorrow. It’s about working on yourself first by becoming aware of what mindsets and assumptions underpin your view of success and beginning a transformational emotional journey.
Understanding the unsustainability of the status quo can mean putting yourself as a leader in a different place, often physically, in order to see yourself, your company, and the part of the world you operate in and impact differently. An executive from the consumer goods industry demonstrated this point in speaking about a 10-day executive trip to Silicon Valley:
For me the key to the start of the transformation was the Silicon Valley trip. Those of us in the top team saw what the world looked like somewhere else and realized just how different and successful it was. We thought, if we don’t do this, we could be toast in 10 years’ time. Speaking for myself, personally, I came away from Silicon Valley thinking, I have to undergo a pretty profound re-education.
2. Detach from the status quo.
The next step is to consciously detach from the status quo. Embrace the unknown and adopt the humility required to challenge the mindsets and assumptions you have about your company and its current ways of working, as well as the industry and what constitutes success.
This step is about understanding your own ego’s need to be an expert and recognizing the importance of being open to learning during this time of transformation. This is where the real work of leaning into the emotions of anxiety, fear, and excitement occurs as your identity and status moves to the backburner. You must view not knowing what the future might look like as a key capability, rather than a sign of personal weakness.
This means understanding the system in which you’re located (beyond direct competitors), how it’s changing, and what opportunities and risks are being created. This can be uncomfortable. Embrace this discomfort; don’t shy away from it.
This step also requires exposure to new ideas that will inform and structure the future of the industry you’re in and therefore your company. For example, a CEO of a multinational retailer described to us how they attended an eight-week bootcamp on circular economics to understand how the idea would inform how their company needed to transform its operations to align with environmental challenges.
3. Develop a purposeful vision.
Embracing the unknown and adopting humility enables you to develop a purposeful vision because it allows you to see more clearly what needs to change and why. It allows you to understand why you exist, independent from the current mindsets and assumptions and the ways your company operates and creates value. You can then imagine how you might create value differently at a functional, product and service, or even entire business model level. The leader of a healthcare business reflected:
When we began the transformation, the mindset in the organization was that our business model was razors and razorblades. I said, no, that’s not our business, our business is that we give people much needed answers and we change people’s lives. Now our teams are connected to a purpose and show up with their heart, not an arrogant approach…It doesn’t matter who you report to, or what your status is, it’s having a purpose that you can connect to, such as to make people’s lives better, and coming to work every day with a great attitude and a growth mindset. That’s transformation for us in a nutshell.
4. Lead emotional transformation.
This step gets to the heart of our argument and is the key to leading the emotional journey of transformation. Transformation can be exciting and unsettling for employees at the same time. They may feel excitement about being part of a purposeful company but unsettled and anxious — for example, if they can’t see how their skills will be relevant.
Addressing these emotions is key. Bringing topics like anxiety and fear of the unknown as well as different ideas about what the organization’s future looks like into formal conversations allows them to be worked through, instead of just festering and creating resentment.
Our research suggests that listening skills are just as important as a project plan in a leaders’ toolkit of skills. Here are some psychotherapy-based steps to improve your listening. We found that these are remarkably similar to what leaders of successful transformations reported doing:
- Create the right space to actively encourage emotional awareness and expression through simple questions such as, “What are you feeling? Can you tell me more about that?” Silence and open questions allow people to explore their own emotions.
- Use techniques such as deep listening (to what is said and unsaid) and paraphrasing what you think you’ve heard to facilitate emotional regulation, which enables the exploration of primary emotions. Encouraging self-observation and self-compassion, focusing on breath and creating an environment free from judgement and reaction are all important here.
- Create workshops that enable active reflection on emotions (using tools such as meditation, poetry, journaling, and art). This will help facilitate conversations that focus on meaning making and the development of new narratives to explain past experiences and current situations.
5. Include both the rational and emotional.
When executives begin a transformation, it’s not long before they reach for a project plan. More often than not, this focuses on a rational understanding of how long it will take to deliver key activities. These plans are often overly ambitious from a cost and time point of view, and our research suggests that they miss the critical listening component, which slows down the transformation process.
Conduct listening exercises via one-on-ones, small groups, and digital interventions and workshops across the organization that enable leaders and the workforce to understand their own purpose and values and how they integrate into the wider organizational purpose.
If you’re to integrate both the emotional and rational into your plans, you need to think of the process as a corkscrew rather than a straight line — in other words, a core focus on progress but a non-linear way of getting there. This requires a different approach to project planning that integrates the rational and emotional processes and activities by bringing together the need for patience and pace. An executive in the aerospace industry described it to us like this:
It is more like a spiral, where you just go up a little bit and the turning points are positive, and then a negative one. We came back a little bit and then we go up again and went to the second cycle.
6. Align KPIs, funding, resources, and people.
This is where the benefits of focusing on the emotional journey should come to fruition. Successful transformation requires major shifts in KPIs and performance management, funding, and resources. This new reality can be difficult for some people, as their lack of belief in the transformation becomes real as they lose power, status, and even their roles in the transformed organization. While losing people is more often than not an inevitable part of a successful transformation, our research shows that making decisions about practical matters like KPIs sooner rather than later enables people to transition from one emotional state to another — from reacting to the loss of the status quo to being creative about the future. This is a critical inflection point in the emotional journey.
This quote from a media industry executive illustrates how transformation creates a clear distinction between those who are aligned with the transformation and those who are not:
So, it probably did divide the business I think a little, between people who are here for the next evolutionary stage of what our industry is going through and those who are not. Not all of those who did not see this future have left the business, some are still doing what they do, but quite a few have. So, it’s accelerated a generational change inside our business, I think. I think people are leaders in our business earlier now. A good handful of years earlier than perhaps they would have been before, if they were able to grasp this more than their managers were able to grasp it.
What this step demonstrates in how new KPIs enable shifts in resources and make the transformation a concrete reality. This brings to light those people who are inspired and energized to bring the transformation to reality and those who are not.
7. Make transformation the new normal.
In the twentieth century, many organizations followed the model of being a “machine,” where predictability, stability, and hierarchy were the norm. This model was very good at delivering predictable performance but poor at coping with disruption. Many organizations still live with this legacy approach while their stakeholders demand something very different: a more “organic” organization where continual transformational is the norm.
Enabling transformation requires giving employees the information and resources they need to develop and innovate in other directions. One media executive described how knowledge and resource sharing allowed employees to develop in this way, which can enable the organization to move toward a state of continual transformation:
It’s definitely created a more entrepreneurial sense across the business that more people can participate in this, than perhaps they could previously. Some of the knowledge was quite esoteric. If you wanted to know how to do some of these things you needed to work in a certain department and you needed to be trained in certain ways by someone face to face or hand to hand, to actually show you how to do them. So, it was quite difficult for you to train yourself how to do the things that we do as an agency business. Now anybody who wants to, who has the time an inclination can access all of our tools and systems, discover online all the training that they need to know how to master them and can feedback and help work into what the next situation is likely to be.
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Leaders are expected to deliver continual, rather than episodic, transformation and evolution. Transitioning to this state will not only require new leadership skills, organizational structures, processes, and KPIs — leaders need to bring all these things together to operate within this new paradigm.
- Andrew White is a senior fellow in management practice at Saïd Business School, University of Oxford, where he directs the advanced management and leadership program and conducts research into leadership and transformation. He is also a coach for CEOs and their senior teams.
- Michael Smets is a professor of management at Saïd Business School, University of Oxford. His work focuses on leadership, transformation, and institutional change.
- ACAdam Canwell is head of EY’s global leadership consulting practice. Adam has published extensively on leadership and strategic change. Adam has sold and delivered transformation programs across multiple industries in both the UK and Australia, working with FTSE 100 (or their equivalent) organizations