Why transformation efforts fail

Editors Note: Gulding change may be the ultimate test of a leader – no busrness

survives over the long term if it can’t reinvent itself’ But’ human nature betng

what it is, fundamental change is often resisted mighttly by the people it most

affects: those tn the trenches of the business’Thus’ leading change is both

absotutely essential and incredibly difficult

Perhaps nobody understands the anatomY of organizatronal change better

than retired Harvard Business School professor John P Kotter’This article’

original ly pubtished in the spring of 1995′ prevtewed Kotter ‘s 1996 book Leadtng

Change. l t outl ines ergnt cr i t icalsuccess factors – f rom establ ishtng a sense of

e\traordinarY urgencY, to creating short-term wins’ to changtng the culture (“lhe

way we do things around 6srs”) lt will feel famitiar when vou read it’ in pan

becauseKot te r ‘ svocabu laryhasentered the lex iconand inpar tbecause i t

con ta ins thek indofhomet ru ths tha twerecogn ize , immedia te ly ‘as i fwe ‘d

always known them. A decade later, his work on leadtng change remains

def initive.

Leading Change why Transformati0n Efforts Fail

I L l

l t

Leaders who successful ly t ransform

in the r ight order) .

businesses do eight th ings r ight (and they do them

by John P. Kofter

i

I

vER THE PAST DECADE, I have watched more than loo

companies try to remake themselves into significantly

better competitors’ They have included large organiza-

tions (Ford) and small ones (Landmark Communications)’

companies based in the United States (General Motors) and else-

where (sritish Airways), corporations that were on their knees

(Eastem Airlines), and companies that were earning good money

(erir,ol-lt4y.rs Squibb). These efforts have gone under many ban-

ners: total quality management, reengineering, rightsizing’ re-

structuring, cultural change, and turnaround’ But’ in almost

au.ry .ur”, the basic goal has been the same: to make fundamen-

,ul .hung., 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 suc-

cessful. A few have been utter failures’ Most fall somewhere in be-

tween, with a distinct tilt toward the lower end of the scale’ The

lessons that can be drawn are interesting and will probably be rel-

evant to even more organizations in the increasingly competitive

96 Harvard Business Review I January 2007 I nbr’org

o

: I

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, usuallv requi re a considerable length of t ime. Skipping steps creates only the illusion of speed and never produces a satisfy_ ing result. A second very general lesson is that crit ical 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 Most successful change efforts begin when some individuals or some groups start to look hard at a company’s com_ petitive situation, market position, tech_ nological trends, and financial perfor_ mance. They focus on the potential revenue drop when an important pat_

/7 ./’/< l L t )

ent expires, the flve-year trend in declin_ ing margins in a core business, or an emerging market that everyone seems to be ignoring. They then find ways to communicate this information broadly and dramatically, especially with re_ spect to crises, potential crises, or great opportunities that are very timely. This first step is essential because iust get_ ting 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 oV€r loyo of the com_ panies I have watched fail in this first phase. What are the reasons for that failure? Sometimes executives under_ estimate 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 lac l< pat ience:”Enough wi th the pre l im- inaries; let’s get on with it.,’ In many cases, executives become paralyzed by

the downside possibilities. Thev worrv that employees with seniority wilt be- come defensive, that morale will drop, that events wi l l sp in out of contro l , that short-term business results will be ieop_ a rd i zed , t ha t t he s tock w i l l s i nk , and that they wil l be blamed for creatine a crisis.

A paralyzed senior management of ten comes f rom having too many managers and not enough leaders. Management ‘s mandate is to min i_ mize risk and to keep the current sys_ tem operating. Change, by definition, requires creating a new system, which in turn always demands leadershio. Phase one in a renewal process typ i_ cally goes nowhere until enough real leaders are promoted or hired into senior-level 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. Ifchange is needed in a division, the division general manager is l<ey. When these indiv iduals are io t

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nbr.org January 2007 i Harvard Business Revjew 97

THETESTSoFALEADERIgH ‘sT t }F ‘ . { gR lLead ingChange :WhyTrans fo rma t i onE f fo r t sFa i |

new readers, great readers, or change termfutureoftheorganizationisputin

outsideof thenormalhierarchybydef-

champions, phase one can be a huge jeopardy’ inition’

This can be awkward’ but it is

challenge. when is the urgency rate high

clearly necessary. If the existing hierar-

Bad business results are both a bless- .norrgnl From whai I have seen, the

chy were working well’ there would be

ing and a curse in the first phase. on the urrr*.. is when about 75ozo oi

u .o*- no need for a major transformation’ But

positive side, losing *o.t.y does catch lll^’ management is honestly con- since

the current system is not working’

people,s attention. But it aiso gives less uin..a irrui uirri.r.r, as usuar is iotatty

reform generally demands activity out-

maneuveringroom.withgoodbusiness .rrru.c”piuut”. Anything r”r, L.

pro side of formalboundaries,expectations’

results,the opposite lstru-e: Convincing d”*;;;;;ious proulems later on

in and protocol’

people of the need fo’ tiungt is much the process’

A high sense of urgency within the

harder, but vou have more resources to rocess’

Tffffi;’IL:11fi-t::t”ill”JT#1il:l help make changes’ Frror 2. Not Greating a Powerful But more is usually required’

Someone

But whether the star t ing polnt ls ; – – ‘

good performance or ;::, ,f ,ffi; rnough

-G-;iding co-aritior needs to get these peopre together’

help

successful cases I have witnessed, an Majorrenewalprogramsoftenstartwith

them develop a shared assessment of

individual or a group always fac’itates just one or two people. In cases of suc-

their company’s problems and opportu-

a frank discussion of potentia’y un- ..rrfrrttrurrrformation”r*”r,,n.t.”0

nities, and create a minimum level of

pteasant facts about n.’* .o-p.,i ion, .*il.;;; grows and ;;;; ;”t

trust and communication’ off-site re-

shrinking margins, decreasing market time. But wheneve*orn. -ini-.,-

treats, for two or three days, are one

share, flat earnings, a lack of revenue *u$ ir rro, achieved earry in the effort,

popurar vehicle for accomplishing this

growth, or other ,.t.u*i inarces of a .’o,t i”g -“rn worthwhile.h”nn*r.

iurt. I have seen many groups of five to

declining competitive position. Because . ,f rr”or,.n said that -uiot iiu”g. ir 35

executives attend a series of these re-

there seems to be an armost universal i-porriuil unless the head of the orga-

treats over a period of months’

human tendency to shoot the bearer of nization is an active supporter.

what Companies that fail in phase two usu-

bad news, especiany if the head of the ,

“*,”ir.i”g “uout go., fu.b.yona,trur. ally _underestimate

the difficulties of

organization is not a change champion, tr, *…rrr,’t transformationrG .nuit-

producing change and thus the impor-

executives in these companies often .nui o. pr.rident or ai”irio” g*”r”r

iance of a powerful guiding coalition’

rely on outsiders to bring unwanted in- -un#r, pr,,s another nut o’

i’ o’ ‘o Sometimes they have no history of

formation. wa, street analysts, custom- ry”rrl, io*. tog”ttr”, una”a”*ioo u teamwork

at the top and therefore un-

ers, and consurtants c”, “ii u. herpful shaied commitment to

exceir* p.rio* dervalue the importance of this type of

in this regard. The purpose of all this ac- *””.” through renewal rn .nv “”p.ti

coalition. Sometimes they expect the

tiviry in the words of one former CEo “;;int, *r””1::::T.:*;;uriortttt

team to be led bv a staff executive from

of a large European company, is ,,to company’s most senior executives be-

human resources’ quality’ or strategic

make the status quo seem more danger- aurrr” ,o*. people lort *on’t buy in,

at planning instead of a key rine manager’

ousthanlaunchingintotheunknown. r”urt*tatfirst.Butinthemostslccess-

No matter how capable or dedicated

In a few of the most successful cases, fJ-.ur”r, the coalition i’ u*u’ n”T lhe :taff

head’ groups without strong

a group has manufactured a crisis. one oo*”rrui

– in terms “r

ti*t, i”r”t*u line leadership never achieve the power

CEOdeliberatelyengineeredthelargest tion and expertise, reputations, and

thatisrequired’

accounting loss in ihe company’s his- relationships’

Effortt that don’t have a powerful

tory, creating huge pressures from wall .

‘-in uotrr^ r*a’ and large organiza-

enough guiding coalition can make ap-

street in the process. one division pres- tions, a successful guiding team

may parent progress for a while’ But’ sooner

ident commissioned first-ever customer .onrlra or or-rry three to nu.”p.opt” aui

or later, the opposition gathers itself to-

satisfaction surveys, knowing full well

lns trie first year of a renewal effort. But

gether and stops the change’

that the results would be terrible’ He in*bigcompanies’the coalitionneedsto

:lH[rT.,:rTj;rtiri:* m il”#.::ii:i”i:tr#i’;’,T:::ili:: ‘.:,i::.Lackins avision

risky. But there is arso risk in praying it anJbeyond. senior managers

always I-n ev;rv successful transformation ef-

too safe: when the urgency rate is not form the core of tt” sr””pl ;uL

sorne- fort that I have seen, the guiding coali-

pumpedupenough,thetransformation timeryorrnnauou’a*”‘if””‘u”p”-

tion develops a picture of the future

process cannot succeed, and the rong ##;.Jil*:\”J;::’-;;;;;;”‘ :xT;’#xiffy;1ilTJi:$ii'”1: Now retired, John P r<onut*u’ the Kono

–‘U”tut”t the guiding coalit ion in- ers’ and

employees’ A vision always

suke Marsushita professor of Leadershrp at crudesmemberswhouranotpurior*-

goe.s beyond the numbers that are

Harvard Business School in Boston ttio’ *utu”-ent’ it tenJs to ope’ate

typicallyfound in five-year plans’ A vi

98 Harvard Business Revrew I January 2007 I hbr’org

sron says something that herps clarify works at it for three or five or eventhe direction in which an organization 12 months, something much betterneeds to move’ Sometimes the first emerges through their tough anaryticaldraft comes mostry from a single in- thinling and a little dreaming. Eventu-dividual’ It is usually a b-it bruiry, at all,astrategyforachievingthatvision least initially. But after the coaliiion ls also Oevetopea.

EIGHT STEPS TO TRANSFORMING YOUR ORGANIZATION

ft EstaUtistring a Sense of Urgency I . Examining market and competit ive realit ies

. ldentl fying and discussing crises, potential cr ises, or ma,or opportunit ies

Forming a Powerful Guiding Coali t ion ‘ Assembling a group with enough power to read the change effort. Encouraging the group to work together as a team

In one midsize European company, the first pass at a vision contained two_ thirds of the basic ideas that were in the final product. The concept of global reach was in the initial version from the beginning. So was the idea of be_ coming preeminent in certain busi_ nesses. But one central idea in the final version- getting out of low value_added activities – came only after a series of discussions over a period of several months.

Without a sensible vision, a transfor_ mation effort can easily dissolve into a l ist of confusing and incompatible proiects that can take the organization in the wrong direction or nowhere at all. Without a sound vision, the reengi_ neer ing pro iect in the account i ie department, the new 36o_degree perl formance appraisal from the human re_ sources department, the plant,s qualitv program, the cultural change pio;..t in the sales force will not add up in a meaningful way.

In failed transformations, you often find plenty ofplans, directives, and pro_ grams but no vision. In one case, a com_ pany gave out four_inch_thicl< note_ books describing its change effort. In mind-numbing detail, the books spelled out procedures, goals, methods, and deadl ines. But nowhere was there a clear and compelling statement of where all this was leading. Not surpris_ ingly, most of the employees with whom I talked were either confused or alien_ ated. The big, thick books did not rallv them together or inspire change. tn fact, they probably had just ti,. Lppo_ site effect.

. Creating a vision to help direct the change efforl

. Developing strategies for achieving that vision

Communicating the Vision ‘ Using every vehicle possibre to communicate the new vision and strategies. Teaching new behaviors by the example of the guiding coal i t ion

Empowering Others to Act on i lVision

Creating a Vision

. Creating those improvements

don’t f i t the vision

. Gett ing r id of obstacles to change ‘changing systems or structures that seriousry undermine the visron. Encouraging r isk taking and nontradit ional ideas, act iv*res, and actions

I Planning for and Creating ShXrm Wins . Planning for visible perforrnance tmprovements

. Hir ing, promoting, and deveroprng employees who can

. Reinvigorating the process with new projects, themes,

v

Recognizing and rewarding emproyees invorved in the rrnprovements

Consolidating lmprovements and producing Sti l l More Change’ Using increased credibir i ty to change systems, structures, and poricies thal 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. Re_ cently, I asked an executive in a midsize company to describe his vision and re_ ceived in return a barely comprehensi_ ble 3o-minute lecture. aur ied in ; ; ; ; ; swer were the basic elements of a sound vision. But they were buried _ deeplv.

A useful rule of thumb: lf you cin;t communicate the vision to someone in five minutes or less and get a reaction

rmptement the visron and change agents

Insti tut ional izing New Approaches ‘Art icurating the connections between the new behaviors and corporate success

I

nDr.org January 2007 | Harvard Business Feview g9

THETESTS OFA LEADEH * tST * f $$* I Lead ing Change:WhyTrans format ion Ef fo r ts Fa i l

that signifies 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

l’ve seen three patterns with respect to

communication, all verY common. In

the first, a grollp 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 o.ooo1oz” of the yearly intracom- pany communication, the group is star-

tled when few peoPle seem to under-

stand 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

surpr is ing, s ince v is ion captures only

o.ooo5% of the total yearly communi-

ca t i on ) . I n t he t h i rd Pa t te rn , much

more effort goes into newsletters and

speeches, but some very visible senior

executives still behave in ways that are

ant i thet ica l to the v is ion. The net resul t

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 sacrifi ces. Employ-

ees wil] not make sacrifices, even if they

are unhappy with the status quo, unless

they believe that useful change is possi-

ble. Without credible communication,

and a lot of it, the hearts and minds of

the Lroops are never caPtured’ This fourth Phase is ParticularlY

challenging if the short-term sacrifices

include job losses. Gaining understand-

ing and support is tough when downsiz-

ing is a part of the vision. For this rea-

son, successful visions usually include

new growth possibilities and the com-

mitment to treat fairly anyone who is

laid off. Executives who communicate well

incorporate messages into their hour-

by-hour activities. In a routine discus-

sion about a business Problem, theY

talk about how proposed solutions fit (or don’t flt) into the bigger picture.

In a regular performance appraisal,

they talk about how the emPloYee’s

behavior helps or undermines the vi-

sion. 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 com-

munication channels to broadcast the

vision. They turn boring, unread com- pany newsletters into l ively articles

about the vision. They take ritualistic,

tedious quarterly management meet-

ings and turn them into exciting dis-

cussions 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 suc-

cessful cases of major change learn to

“wall< the talk.” They consciously at-

tempt to become a living symbol of the

new corporate culture. This is often not

easy. A 6o-year-old plant manager who

has spent prec ious l i t t le t ime over 40 years thinl<ing 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.

ln 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 ofthe desired behavior, and all the

feedback from his peers and subordi-

nates, 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 under-

mines change more than behavior bY

important individuals that is inconsis-

tent with their words.

WQ

100 Harvard Business Review January 2007 I hbr’org

Error 5: Not Removing Obstacles to the New Vision Successful transformations begin to in- volve large numbers of people as the process prog,resses. Employees are em- boldened to try new approaches, to de- velop new ideas, and to provide leader- ship. The only constraint is that the actions fit within the broad parameters of 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 sufficient 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 indi- vidual that no external obstacle exists. But in most cases, the blockers are very real.

Sometimes the obstacle is the orga- nizational structure: Narrow job cate- gories can seriously undermine efforts to increase productivity or mal<e it very difficult even to thinl< about cus- tomers. Sometimes compensation or performance-appraisal systems make

the new initiatives. He paid lip service to the process but did not change his behavior or encourage h is managers to change. He did not reward the uncon- ventional ideas called for in the vision. He allowed human resource systems to remain intact even when they were

l f you can”t communicate the vlsion to someone in f ive rninutes or less and get a reaction that signif ies both

understanding and interest, you are nCIt done.

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 transforma- tion process with much publicity and actually made good progress through the fourth phase. Then the change ef- fort ground to a halt because the officer in charge of the company’s largest divi- sion was allowed to undermine most of

clearly inconsistent with the new ideals. I thinl( the officer’s motives were com- plex. To some degree, he did not believe the company needed major change. To some degree, he felt personally threat- ened by all the change. To some degree, he was afraid that he could not produce both change and the expected operat- ing profit. But despite the fact that they backed the renewal effort, the other of- ficers did virtually nothing to stop the one blocker. Again, the reasons were

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After a few years of hard work, managers may be ternpted to declare victory with the first

clear performance improvement. while celebrating a win is f ine’ declaring the war won can

be catastroPhic’

THETESTS OF A LEADER *fi$T *T i lSTq

complex. The company had no history

of confronting problems like this’ Some

people were afraid of the officer’ The

CEO was concerned that he might lose

a talented executive. The net result was

disastrous. Lower-level managers con-

cluded that senior management had

lied to them about their commitment

to renewal, cYnicism grew, and the

whole effort collaPsed. ln the first 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’

i t is important that he or she be t reated

fairly and in a way that is consistent

with the new vision. Action is essential,

both to empower others and to main-

tain the credibility of the change effort

as a whole.

Error 6: Not SYstematical lY 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 com-

pelling evidence in tz to z4 months that

the lourney is producing expected re-

sul ts . Wi thout shor t – 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 find quality

beginning to go up on certain indices or

the decline in net income stopping’ You

find some successful new product intro-

ductions or an upward shift in market

share. You find an impressive productiv-

ity improvement or a statistically higher

customer satisfaction rating. But what-

ever the case, the win is unambiguous’

Lead i n g Change: WhyTrans format ion Ef fo r ts Fa i I

The result is not just a judgment call

that can be discounted by those oppos-

ing 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 ac-

tively look for ways to obtain clear per-

formance improvements, establish goals

in the yearly planning system, achieve

the objectives, and reward the people

involved with recognition, promotions,

and even money. For exampie, the guid-

ing coalition at a U.S. manufacturing

company produced a highly visible and

successful new product introduction

about zo months after the start of its re-

newal effort. The new product was se-

lected 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 han-

dled 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 out-

side the established departmental struc-

ture without practical problems. Little

was left to chance, and the win boosted

the credibil i ty of the renewal process’

Managers often comPlain about

being forced to produce shortterm 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 wil ltake a long time, urgency lev-

els 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, manag-

ers may be tempted to declare victory

wi th the f i rs t c lear per formance im-

provement. While celebrating a win is

flne, declaring the war won can be cat-

astrophic. Until changes sink deeply

into a company’s culture, a process that

can take five to ten Years’ new aP-

proaches are fragile and subiect to

regression. ln 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 ex-

pensive consultants were Paid and

thanked when the flrst 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 find any trace of the

reengineering work todaY.

Over the Past 20 Years, I ‘ve seen the

same sor t of th ing haPPen to huge

qualigu projects, organizational devel-

opment efforts, and more’ Typically’ the

problems start early in the process: The

urgency level is not in tense enough,

the guid ing coal i t ion is not powerfu l

enough , and the v i s i on i s no t c l ea r

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 in i t ia tors and change res is-

tors that creates the premature victory

celebration. ln 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 there-

after, change comes to a halt, and tradi-

tion creeps back in.

102 Harvard Business Review i January 2007 hbr’org

Instead of declaring victory, leaders of successful efforts use the credibility afforded by short-term wins to tackle even bigger problems. They go after sys_ tems and structures that are not consis_ tent 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 devel_ oped. 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 quantif ied 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 five an eight, year six a four, and year seven a two. The peak came in year five, fully 36 months after the first set of visible wins.

Error B: Not Anchoring Changes in the Gorporation’s Gulture In the final 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 sub_ ject to degradation as soon as the pres- sure for change is removed.

TWo factors are particularly impor_ tant in institutionalizing change in cor_ porate culture. The first 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 exam_ ple, because results improved while charismatic Harry was boss, the trooos l ink h is most ly id iosyncrat ic s ty le wi th those results instead of seeing how their own improved customer service and productivity were instrumental. Helo_ ing people see the r ight connect ions re- quires 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 ar_ ticle showing how changes had boosted earnings.

The second factor is taking suffi_ cient time to make sure that the next generation of top management really does personify the new approach. If the requirements for promotion don,t change, renewal rarely lasts. One bad succession decision at the top of an or_ ganization 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 trans_ formations in any detail, they could not see that their choices were not sood fits. The retiring executive in onelase tried unsuccessfulty to tall< his board into a less seasoned candidate who bet_ ter personifled 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 two years, signs of re_ newal began to disappear at both companies.

There are still more mistakes that Deo_ ple mal<e, but these e ight are the b ig ones. I realize that in a short article ever),thing 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 sim_ ple 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 d i f ference between success and failure.

Repr in t R07O1J; HBR Onpo jn t 1710 To order, see page 127

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