A World of Change Dave McBride and Tracey Malcolm September 19, 2013 2013 Towers Watson. All rights reserved.
A Show of hands Who has been responsible for leading change initiatives? Who has had an active role in participating in change? What has been the nature of some of your change initiatives? 2
Playlist Exercise What is your playlist on leading and managing change? Where are you today? Where do you hope or need to be? (with help from today s event!) 3
What is the nature of your organizational change? Changing regulatory environment Changing markets and competition Increasing customer expectations More management data and information Constant Change New technology Workforce demographics/ Need for talent Increasing environmental awareness Faster and easier communications 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 4
New workforce skills for new business realities Skills in Highest Demand Over Next 5-10 Years Agile thinking Dealing with complexity and ambiguity Ability to consider and prepare for multiple scenarios Innovation Managing paradoxes, balancing opposing views Ability to see the big picture Global operating skills 0 10 20 30 40 50 60 % of respondents Digital business skills Digital business skills Ability to work virtually Understanding of corporate IT software and systems Digital design skills Ability to use social media and Web 2.0 Relationship building 0 10 20 30 40 50 60 % of respondents Foreign language skills Ability to manage diverse employees Ability to work in multiple overseas locations Cultural sensitivity Understanding international markets 0 10 20 30 40 50 60 % of respondents Relationship building (with customers, partners, government, etc.) Teaming (including virtual teaming) Collaboration Co-creativity and brainstorming Oral and written communication 0 10 20 30 40 50 60 70 % of respondents 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 5
Discussion Outline Why is change so difficult? Change Leadership vs. Change Management Effective Change Management The Importance of Change Leaders Leading Change in HR 6
Characteristics of most change initiatives High Emphasis Not So High Emphasis Rational Stuff Emotional Stuff 7
The small c and big C of change management Performance impact c C Change Part 1: Current employee readiness technology implementation, communication, shifting from today to using the new technology Change: New Technology Platform that will fundamentally improve the linkages between sales and back office Change Part 2: To realize ROI and leverage the technology need entirely new organization capability, roles and skills. Ultimately changes to the workforce time 8
Change is also difficult because it involves both rational and emotional processing Rational processing My grasp of the problem we re trying to solve My agreement with our strategy and work plan My analysis of the data My understanding of the technical issues involved My understanding of the business case My knowledge about how people will be affected by the changes Emotional processing My fear of the unknown My sense of loss My need to feel in control My lack of trust in mgt My resentment about not being consulted My confidence in our collective ability to deliver My insecurity about succeeding in the new world My confusion about what I m supposed to do My feeling that the changes aren t fair 9
Recent research is shedding light on this challenge Emotions play a much bigger role in how people behave and make decisions Predictably Irrational By Dan Ariely People don t always behave in ways that would be defined as rational If we understand the sources of resistance, we can do a better job of preparing people for change and getting them to embrace change How We Decide By Jonah Lehrer Nudge By Richard H. Thaler and Cass R. Sunstein 10
Options MIT students played a computer game that paid real cash to look for money behind three doors on the screen 11
Change requires people to let go of things that are important to them Before Existing behaviors Comfort zone High competence Relative security An established identity or meaning Existing relationships Requires letting go During and immediately after New behavior New rules for success Lower competence Unpredictability New identities and meanings New relationships Requires accepting the new 12
Change Management vs. Leading Change Management Programmatic capability Applies methodology, framework and tools to define change and assess impact, plan and support change readiness Enables awareness, understanding and skills Provides clarity around behaviour Fundamental purpose: programmatic approach to ready stakeholders Leadership Engages and aligns people around the change Empowers individuals to make vision happen, despite obstacles Executes through inspiration Provides clarity around norms and behaviour Fundamental purpose: alignment approach to inspire stakeholders 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 13
There are many models for change management Traditional view Change as a discrete event to be managed with a beginning, middle and an end Progressive view Change as an ongoing process; leaders create an environment in which the organization is more adaptable and employees are more resilient to constant change 14
What Change Management is and what it is not What it is A plan developed in response to a major initiative to ensure successful execution Specific tactics designed to ensure that people are ready to be successful Based on insights and experiences about the way people react to change A form of risk management identifying all the people-related things that may go wrong and developing a plan to mitigate those risks A way to sustain changes in mindset and behavior by ensuring that people begin operating differently What it is NOT Something you do once the strategy and design are complete and you are ready to implement Abstract theories from famous psychologists A separate stream of work done by those touchy-feely people in OD A way to make everyone feel happy about what is changing Something that slows down the project and causes it to go over budget Solely about communication (i.e., something we do TO people) Rocket science or magic fairy dust 15
Many change initiatives fail But six activities really count We have identified six levers that influence overall change success the Big Six 16
Leading, measuring and sustaining activities have the biggest impact on overall change success Equips leaders to inspire confidence in the change, creates clarity among employees and fosters a sense of community Uses a balanced set of metrics to define success and support continuous improvement Fosters understanding and guides employee actions Creates intentional opportunities for employees to shape direction, unearth challenges and model the way forward Ensures that people have the knowledge and skills to adapt to change and be effective in their roles Reinforces behavior change over time through structure, technology, process and people programs 17
Leading activities have the most influence on overall change success How effective is your organization at the following aspects of leading change? Leading activities are not owned only by the C-suite. Communication and change champions also have an important role to play. Finding executive sponsorship for organizational change Developing a clear vision of desired organizational change Creating an integrated communication and change management strategy 56% 26% 48% 19% 37% 15% 72% 85% 84% Creating strong employee motivation for making organizational change 9% 32% 67% Overall High Change Effectiveness Low Change Effectiveness 18
Measurement is among the biggest drivers of overall change success, and it cannot start midway through the initiative How effective is your organization at the following aspects of measurement? Good measurement is essential to keeping the change on target, on time and within budget. Many organizations struggle with measurement as a change management lever. Anticipating the business impact of changes Defining clear, measurable goals for the impact of changes Measuring progress against goals established for change initiatives 13% 14% 12% 40% 39% 37% 81% 76% 73% Overall High Change Effectiveness Low Change Effectiveness 19
Communicating activities align the organization from the top down, and guide employees How effective is your organization at the following aspects of communicating change? The majority are good at communicating the business rationale for change, but even the highly effective organizations could do a better job of communicating with employees. Communicating the business rationale for change Communicating what the change means to individual employees Encouraging employees to provide input Clearly articulating what employees need to do differently to be successful 13% 15% 12% 28% 41% 40% 39% 55% 68% 65% 66% 87% Overall High Change Effectiveness Low Change Effectiveness 20
Involve employees early on to avoid resistance later How effective is your organization at the following aspects of involving employees? Companies that are effective at change management are more likely to create a sense among employees and leaders that they are all in it together. Developing support from enough employees for change initiatives to succeed Creating a sense of ownership about organizational change initiatives 11% 9% 35% 32% 70% 66% Dealing with resistance to change initiatives 10% 29% 61% Overall High Change Effectiveness Low Change Effectiveness 21
Learning activities can help push a change initiative along, and they re worth attention How effective is your organization at the following aspects of employee learning? Focusing on learning activities alone is a common mistake. Learning activities ensure that people have the knowledge and skills to adapt to change and be effective in their roles. Creating accountability for employees to learn new skills required for changes Creating accountability for employees exhibiting new behaviors required for changes Encouraging rapid employee feedback on best practices around new behaviors and skills required for changes 36% 12% 29% 9% 23% 6% 48% 56% 62% Overall High Change Effectiveness Low Change Effectiveness 22
Sustain the change over time How effective is your organization at the following aspects of sustaining change? Effective change management requires planning and implementation, but it also requires ongoing structure, technology, processes and governance to support long-term traction. Finding additional improvements to be made in subsequent years Avoiding reverting to the status quo as everyone moves on to the next thing Continuing to exhibit new behaviors and use new skills after changes have been made 8% 8% 12% 31% 30% 37% 62% 64% 70% Overall High Change Effectiveness Low Change Effectiveness 23
Change Initiatives 1. Technical Service Rep organization salary to pay for performance 2. Mergers and Acquisitions 3. Organizational Restructure 4. Outsourcing 5. Technology Re-engineering (ie legacy system to SAP platform) 24
Recent research is shedding light on this challenge Emotions play a much bigger role in how people behave and make decisions Predictably Irrational By Dan Ariely People don t always behave in ways that would be defined as rational If we understand the sources of resistance, we can do a better job of preparing people for change and getting them to embrace change How We Decide By Jonah Lehrer Nudge By Richard H. Thaler and Cass R. Sunstein 25
8 Step Change Management Process Stage 1: Plan for Change Step 1: Learn about change management Step 2: Build a business case for managing change Step 3: Determine ownership of change Stage 2: Communicate and Engage Through Change Step 4: Prepare leaders for change Step 5: Communicate change Step 6: Engage employees through change Stage 3: Measure Change Success Step 7: Track change initiatives Step 8: Measure change success post-implementation Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Ownership of Change Change Management Roles and Responsibilities Model President & Vice Presidents Human Resources Actively and visibly support change Executive presence Build the group leading change Communicate directly with employees Managers Change Develop change management strategy and action plans Provide support to managers and employees Employees Coach employees through the transition and manage resistance Communicate to employees how change will affect their everyday work Survive and thrive during the organizational change Provide feedback on implementation of change 27
Engage Employees Through Change Compliance I have to do it this new way Disengaged Reaction I will react to this change if I must Fear and/or Anger Avoidance I must avoid this change Commitment I want to do it this new way Action I will act to achieve this change Experimenting and Testing Engaged I will experiment with this change - and check that it really works Trial and Error feedback Reaction and/or Negative perception Response I feel threatened by this change Engagement I see the implications for me / us Positive perception I see the opportunity in this change Managers Team meeting One-on-one discussions Understanding I know what will change and why Awareness I am being told about something Functional VP s meeting/announcement Executive announcement 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 28
Leadership Workshop Example AWARENESS UNDERSTANDING ENGAGEMENT PERCEPTIONS What are we telling our employees? 1. What are we changing and why? 1. What are the implications to our employees? 1. How will they feel about the change? 1. 2. 2. 2. 2. 3. 3. 3. 3. 4. 4. 4. 4. 5. 5. 5. 5. 6. 6. 6. 6. 29
Management - Team Assessment Grid Willingness HIGH LOW Common Behavioural Characteristics Believe change is beneficial See opportunity May not fully understand desired outcome Skills gap to be addressed Don t understand their role or how they must act differently Do not perceive the value in change May fear the outcome Don t understand what they are expected to do Skills gap to be addressed Often misunderstand the desired outcome LOW Recruits (Fence Sitters) Resistors (Naysayer's) Ability Role Models (Early Adopters) Believe change is beneficial See opportunity Fully understand desired outcome Readily build/achieve new skills/practices, set pace for others Fully understand their role and how they must act differently Challengers (Fence Sitters) Do not agree with the desired outcome Believe they have more to lose than gain Know what they must do to change and can readily achieve new skills, but have rejected it Challenge the wisdom and value of the change HIGH 30
Template Example Nam e Early Adopters On-Board Fence Sitters Don't Believe/ Don't Understand Don't know how/ Don't know what to do Naysayers Don't want to do it Actions/Next Steps 31
In summary..things to keep in mind Change management is a business imperative not an HR owned initiative Alignment and ownership is crucial Executive Sponsorship, Senior Leader Ownership, frontline management equipped to execute with H.R. and Communications support. Leverage your existing governance, and management processes. Utilize a common set of tools and processes 32
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Leading Change Success Profiles 2013 Towers Watson. All rights reserved. 34
Change Management vs. Leading Change Management Programmatic capability Applies methodology, framework and tools to define change and assess impact, plan and support change readiness Enables awareness, understanding and skills Provides clarity around behaviour Fundamental purpose: programmatic approach to ready stakeholders Leadership Engages and aligns people around the change Empowers individuals to make vision happen, despite obstacles Executes through inspiration Provides clarity around norms and behaviour Fundamental purpose: alignment approach to inspire stakeholders 35
EXERCISE: Good and Poor Examples of Leading Change Jot down at least one example of good change leadership you ve observed recently and one example of poor change leadership you ve observed What are some of the key characteristics of good change leaders? 36
So what is a leader? Source: Towers Watson Global Workforce Study 2012. 37
Why Leadership matters 1. The equation is simple: Effective leaders drive sustainable engagement. Ineffective leaders create a disengaged workforce 2. The context of what is expected of leaders is changing. Some of what made leaders successful in the past will help in the future but not everything 3. HR can build change leadership Support an adaptive process in leading change Provide resources and tools to navigate the journey Recognize different leadership competencies required 38
Leadership IS a critical lever for change but also can POTENTIALLY be a barrier for success Top Ten Barriers to Success in Large-Scale Transformation Resistance to change 82% Inadequate sponsorship 72% Unrealistic expectations 65% Poor project management 54% Case for change not compelling Project team lacked skills Scope expansion/uncertainty No change management program Not horizontal process view 46% 44% 44% 43% 41% IT perspective not integrated 30% Source: D&T CIO Survey 39
Leaders of high performance companies tend to do things differently High Performance Companies Average Company 90 80 70 60 50 40 51 34 54 56 38 41 58 44 76 74 71 63 61 60 75 66 30 20 10 0 Making timely decisions Managing change Communicating down the line Establishing priorities Providing a clear sense of direction Encouraging employees to give their best Making decisions in line with values Showing interest in employee wellbeing Are your leaders doing things differently? (**) Source: Towers Watson High Performance Norm 142.432 employees from 32 companies from different sectors with high level of engagements and a net margin above its sector during the last three years 40
Towers Watson s Leader Effectiveness Point of View Leaders Live the Leadership Brand of the Organization Leaders Perform Across Four Key Dimensions Leaders Drive Employee Engagement and Business Results 41
Leader Competencies aligned to strategic priorities Leadership Effectiveness Model Competencies Aligned to Strategic Priorities Efficiency Quality Innovation Customer Service Image & Brand Envision Adapt Transform Adapt Inspire 1. Customer Focus 2. Global perspective 3. Knowing the business 4. Planning & organizing 5. Prioritization 6. Strategic visioning 7. Vaulting 1. Adaptability 2. Cross-cultural sensitivity 3. Interpersonal sensitivity 4. Learning orientation/ continuous self improvement 5. Resiliency 6. Self awareness 1. Change leadership 2. Creativity & innovation 3. Decision making 4. Networking/ Relationship management 5. Results orientation 6. Technology savvy 1. Adaptability 2. Cross-cultural sensitivity 3. Interpersonal sensitivity 4. Learning orientation/ continuous self improvement 5. Resiliency 6. Self awareness 1. Assertiveness & courage 2. Company ambassadorship 3. Influence & persuasion 4. Inspiring & motivating other 5. Socio-political savvy 6. Stakeholder management Certain competencies are more critical to develop in leadership positions particularly in leading change. 42
Practical Example Organization shifting strategy from privately held to public Moving from entrepreneurial and innovative to a focus on cost and efficiency Leadership defining new vision > extended that to align around definition of new culture and organization capabilities What are the new norms of the organization? What are some of the new key business processes and decisions? Defined profile of new leadership Competencies and requirements for role Assessment for fit New Scorecard What done internally versus specialized support? 43
Some Key Takeaways. Deadly sins Leadership is not fully aligned with the change strategy in an actionable and individual manner Leadership engagement is not optimal or strategic change needs have stalled Leadership is not providing the catalyst for an engaged organization Challenge questions to reflect on and answer Can Corporate and Business Unit leaders describe the change? How is their commitment to its execution demonstrated? What is your leadership EVP and how is it different from the organization EVP? What is the leadership really thinking? How are your leadership change programs doing? How does the organization s perception of the leaders compare to their self-perceptions? How do your talent programs bear fruit? 44
Questions 45
Today s presenters Tracey Malcolm tracey.malcolm@ 416.460.4490 46