Why Organizational Transformation Efforts Fail: Lessons Learned And The Importance Of Change Management

The Importance of Effective Leadership

Why transformation efforts fail? Discuss.

Change management is a critical aspect for the success of any organization. Rightly said, change is the only constant. Organizations go through a lot of changes in their course. This includes mergers, acquisitions, restructuring, resizing and going through a cultural change (Doppelt). It is imperative that businesses manage this change in a proficient manner. This essay highlights upon why organizational transformational efforts fail.

Leaders who competently bring about organizational changes are effective as well as efficient. This indicates that they do the right things and they do things in the right manner (Cameron and Green). Irrespective of the change strategy adopted by different business, their ultimate goal is the same. That ultimate goal lies with the growth of the firm, improved efficiency, and increased use of technology or coping with the changing market dynamics.

There are a large number of transformations that we have witnessed. A few of them have created a significant mark in the industry while a lot of them continue to serve as examples of failed transformation efforts by businesses. There can be various reasons behind why transformation efforts fail. But what can be learnt from most of these transformation stories is that any kind of transformation in business goes through a number of phases and usually requires a huge amount of time. Skipping these steps might create an illusion of speed but does not actually help the change process.

The primary reason behind failing of transformation efforts is the inability of the leadership to generate a sense of urgency within the organization regarding the need for the change (Raineri 262-272). The basic and the first effort that is required from the organization’s leaders is to identify the need for change and effectively communicate that need to the entire business. This sense of urgency plays the role of a motivator in helping involved teams understand that there is a need to change.

General motors witnessed a reducing demand in the Asian market. The biggest market for GM in the Asian subcontinent has been India. The country has been approached by various competing firms. There were enough signs in the form of lowering demand that there is something new that GM needs to do in order to successfully compete with Toyota, Maruti and Tata cars. However, instead of working towards bringing that change, General Motors completely failed to create that sense of urgency. By the time the brand introduced new models, it was late and the overall demand for GM products had drastically reduced. Since the brand could not understand the need to change, it could not cope up with the competing automobile scenario of the country. In May, 2017, the brand finally decided to cut ties with India and end its operations in the country. The business suffered from mounting losses due to poor management, near-negligible sales and little demand (Times of India, 2017).

The Role of Vision in Organizational Transformation

The next big error that organizations commit while leading any kind of transformation is the lack of clear vision. A vision is exactly what guides businesses to change and bring about that change effectively. All the teams that need to effectively coordinate must create a picture of what the future must look like. This first helps in clarifying that every team working on it in on the same page and secondly it helps in communicating with business stakeholders including investors, customers and governments. Without the presence of a sensible vision, an effort to transform can dissolve into incompatible and confusing projects.

Blockbuster was a leading home movie and video game rental business. It was founded in 1985 and continued to peak until 2004. During that year, the brand had 9094 stores worldwide. The business was into renting movies and video games to people. However, it was difficult for the leaders to understand what next. The vision for growth was entirely missing. This created room for current streaming giant Netlfix to enter the market. The clarity of the vision was missing to the extent that Netflix approached blockbuster and offered to sell their company for a sum of $50 million. However, Blockbuster denied completely as the then CEO thought that Netflix is too small a business. Currently, Netflix has over 103.95 million subscribers across the globe. This lack of clarity with the vision of the firm or the industry made it difficult for Blockbuster to survive the market and hence had to shut down.

Another mistake that businesses make while incorporating changes is not entirely removing obstacles to the new vision (Hayes). While chalking out a vision for the future, it is essential that businesses identify the the obstacles that they might face in the future. Sometimes the obstacle can be organizational structure, sometimes it can be resistance of change within the teams while sometimes there can be a lack of technology. Either way, it is essential that organizations prepare themselves for these obstacles by timely identifying them and paving a way to address them in an effective manner.

Toys “R” Us is a grand toy brand that has expertise in all kinds of toys for children. The brand signed a ten year agreement with Amazon to sell all their products through the latter’s E-commerce platform. However, the deal between the two organizations had established clear terms of loyalty wherein Amazon cannot allow any other brand’s toys to be sold on its platform. However, in 2004, Amazon breached the contract and started selling toys from numerous other brands. The important lesson to learn here is that even though it is important to build and maintain corporate associations with other firms, it is important that businesses don’t blindly trust each other. The association has to be strategic in nature that leads to the growth of the both the businesses.

The Significance of Removing Obstacles to Change

The inability of the firm to gauge this did not allow them with sufficient time to build their own E-commerce platform and hence they had to rely on other platforms to reach out to their customers. Toys R us announced its plan to revamp its entire website with an attempt to be reachable to their customers through online portals. However, the attempt remained unsuccessful and the brand eventually filed for bankruptcy in 2017 under pressure from $1 billion debt.

While bringing about any change in a business, there will be problems like resistance, lack of resources or lack of planning. However, it is important that the change takes place because it is imperative for the growth of the organization. It has been recommended that following Kotter’s eight step change model can assist organizations in succeeding at implementing change in the business. The first three steps focus upon creating a climate for change in the business, the next three steps are work upon linking the change to the given organization and lastly, the last two steps (steps 7 and 8) are aimed at implementing the change in an effective manner (Smith 111-128). The 8 steps for change as per Kotter are given as below:

Step 1: Creating a sense of urgency: This step would assist the firm in allowing different stakeholders to understand the need for change (Quinn et. al.).

Step 2: Create a guiding coalition: This step would create well-coordinated teams that would work together towards the change.

Step 3: Create a vision for change: This step would require the previously created teams to chalk out a vision for the change.

Step 4: Communicate the vision: This is an essential step as it helps in creating support and acceptance among employees regarding the upcoming change that they are about to experience.

Step 5: Remove obstacles: This step requires the teams involved to identify the obstacles if any and work towards removing them in an effective manner and being prepared if they arise again.

Step 6: Create short term wins: Nothing motivates more than success. This step helps in creating short terms wins to motivate the team and ensure that the project of change management is on track.

Step 7: Consolidate improvements: Change is a slow process and only after a series of prior mentioned small wins can change actually be felt. This is the right time to announce the victory to organizational stakeholders.

Step 8: Anchor the changes: This is the last step of the change process and involves bringing that change to different parts of the business and ensuring that the new change merges in the DNA of the firm at the very core of it.

Conclusion

Over 88% of the Fortune 500 companies that existed in 1955 no longer exist. Either they have merged with other firms, or they have filed for bankruptcy, or they still exist but are not listed as one of the Fortune 500 firms. This is because of inefficient change management strategies adopted by businesses. There are various organizations who have not been able to see the light of the day owing to ineffective change management practices. The various case studies discussed above help throw light on various reasons behind ineffective change management. In order to address the same, Kotter’s eight step model has been discussed which reflects upon various steps that can be adopted in order to effectively bring about change in any business.

References

Cameron, Esther, and Mike Green. Making sense of change management: A complete guide to the models, tools and techniques of organizational change. Kogan Page Publishers, 2015.

Doppelt, Bob. Leading change toward sustainability: A change-management guide for business, government and civil society. Routledge, (2017).

Hayes, John. The theory and practice of change management. (2018).

Kotter, John P. Leading change. Harvard business press, (2012).

Quinn, Diana Marie, Yousef Amer, Anne-Louise Lonie, Kim Blackmore, Lauren Kane, and Malcolm Pettigrove. “Leading change: Applying change management approaches to engage students in blended learning.” ASCILITE, (2011).

Raineri, Andrés B. “Change management practices: Impact on perceived change results.” Journal of Business Research 64.3 (2011): 266-272.

Smith, Ian. “Organisational quality and organisational change: Interconnecting paths to effectiveness.” Library Management32.1/2 (2011): 111-128.

Times of India, General Motors to stop India Sales. Web. 16th June 2018, <https://timesofindia.indiatimes.com/business/india-business/general-motors-to-stop-india-sales-on-rising-losses/articleshow/58742167.cms>