Loss a powerful motivator for change

Change management: In August, the Strategic Capability Network hosted an event with John Oesch, assistant professor of organizational behaviour at the University of Toronto’s Rotman School of Management. Oesch talked about how to influence change by focusing on the people affected. For more information about SCNetwork, visit www.scnetwork.ca.

But people are more willing to take greater risks to avert potential losses than for the promise of potential gains, said John Oesch, an assistant professor at the University of Toronto’s Rotman School of Management.

“We’re going to try and avoid losses much more strongly than we will embrace gains,” he said.

To get employees to fully support a major change, organizations should communicate the benefits as well as what they stand to lose if the change doesn’t happen, he said.

This was one of Oesch’s “five unusual ideas about change” that he presented at a Strategic Capability Network event in Toronto last month.

Research shows 60 per cent to 70 per cent of “big-time” change efforts — that is cultural and strategic change — fail, said Oesch.

“There is great room for improvement,” he said.

Traditional change models focus on the structural aspects of change. There is good science behind them and structural models of change are very important, said Oesch, but it’s equally important to look at the psychology of change — how to get employees on board and fully committed to the change.

To do that, organizations need to communicate honestly with employees about the change, he said. This includes being open about how the company, and the senior executives, will benefit from it.

“If we don’t (communicate that), they’re going to guess,” said Oesch. And often their guesses will paint the organization in a very negative, and likely false, light.

Communicating with employees helps them feel as if they’re partners in the change, which will make them more committed to it, he said.

Honest communication is also a way to overcome the “data dilemma,” said Oesch. Organizations tend to be very data focused, using facts and figures to support proposals and asking employees to make imperial-based, data-driven decisions.

But when it comes to change, there are no hard and fast numbers upon which to rely. Instead, the senior executive team is asking employees to forget about the tangibles and take a big risk without a clear idea of what the future will hold.

“We’re asking them to take a leap of faith to an unknown, untested future,” he said.

The best way to have employees take that leap is to let them know the senior executive team doesn’t have all the answers either, but they know the risks of maintaining the status quo outweigh the risks of the unknown.

People prefer status quo

Unfortunately, there is a lot of anxiety that goes along with uncertainty, so most people prefer the current situation, even if it’s not working anymore, said Oesch.

“There is a strong bias towards the status quo. Even if the status quo is bad, it’s known. People will cling to the status quo even when they shouldn’t because they know exactly what is going to happen in the morning when they go into the office,” he said.

Organizations often help perpetuate this bias by punishing employees who try something new but fail, while completely ignoring those employees who never take a risk, said Oesch.

To overcome this bias, an organization needs to re-communicate its goals to employees and examine if the existing situation is helping the organization achieve those goals, he said. This examination can include several alternatives to see which scenario, including the status quo, is going to help the organization succeed.

“If what we’re doing isn’t going to get us there, we need to change,” said Oesch.

But sometimes it isn’t the senior executive team, or even the CEO, who has the most influence over employees’ willingness to change, said Oesch. Sometimes employees need to be pulled by external forces, rather than pushed by internal ones.

“If your customers demand a different business process, people will respond to those customers and are more likely to change than if it’s just you telling them to change the business process,” he said “There’s a pull factor there.”

Organizations can tap into this “pull” through a stakeholder analysis — of customers, donors or boards of directors — to find out what these key players are looking for from the organization.

Employers can also use data mined from recorded service calls or customer satisfaction surveys to support the need for change, said Oesch.

Major change a long-term process

Major change takes a long time and can occur in one or more of three different strategic levels: business strategy; competitive strategy; and functional or operational strategy (such as finance or human resources).

“A true cultural change takes five to seven years,” said Oesch. “It takes a long time to change assumptions and how employees do what they do.”

One way major change fails in an organization is when the executive team recognizes the need for change and then implements it, skipping the steps in between — such as raising awareness about the change, assessing readiness to proceed and gaining stakeholder endorsement — that are necessary to ensure the change will be accepted and successful.

“You can’t send a memo to change the culture,” said Oesch.

People’s beliefs hard to transform

SCNetwork’s panel of thought leaders brings decades of experience from the senior ranks of Canada’s business community. Their commentary puts HR management issues into context and looks at the practical implications of proposals and policies.

‘Change management’ faces major changes

Organizational effectiveness

By Tom Tavares

Many issues in the area of organizational performance resurface in different guises over the years. Before change management there was concern about the low level of innovation in organizations because change is a constant and companies unable to continually innovate and adapt would lose ground. Long before business schools offered courses in managing change, they were teaching creativity and lateral thinking.

Concerns about change management have been intensifying for three decades. Problems became evident in the restructuring era of the 1980s when efforts to improve the speed of corporations damaged morale and productivity. Issues persisted during the 1990s as the cultural conflicts caused synergies expected from mergers and acquisitions to fail. As change has accelerated in the new millennium, breakdowns in public and private sector institutions have increased in frequency.

Major changes such as cultural shifts receive much more attention from academics and consultants than minor modifications to manufacturing or administrative processes. Strategic shifts are much more complex because people must question their basic assumptions about how things work. Despite the development of complicated change-management models, large-scale changes can take upwards of five to seven years to take root, and 60 per cent to 70 per cent of them fail to meet expectations.

To overcome resistance to change, it makes sense to highlight the risks of clinging to the status quo and to be forthright about the uncertainty of the future. However, it is impossible to ignore what has happened to the North American automotive industry, the tech sector and the financial services industry — not to mention health care and regulatory agencies. Surely this widespread buckling calls for more than refinements on existing techniques.

It is often said if people don’t change, leaders need to change people. However, the behavioural patterns creating inconsistencies in the execution of changes are highly uniform across organizations. Regardless of industry, company culture or the people involved, firms struggle with confusion about direction, a backlog of problems and unsustainable levels of activity.

On a more hopeful note, in unusual cases, a new leader arrives or a team jells and the speed and flexibility of organizations improve dramatically. Unfortunately, experts disagree about what is behind these shifts: culture, leadership or employee engagement?

The first step in addressing a serious threat is often the most difficult because we have to admit how negative the situation really is. The future will only grow more complex. Isn’t it time for a major change in thinking about change management?

Tom Tavares is SCNetwork’s lead commentator on organizational effectiveness and a senior organizational psychologist. In addition to managing in large corporations, consulting in varied industries and coaching executives, he has written extensively about the relationship between business performance, behaviour and change. He can be reached at [email protected].

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Why change if we are likely to fail?

Strategic Capability

By Karen Gorsline

Almost every speaker or author on change opens with a rather gloomy report that most change efforts fail. This is followed by ideas on how to have a successful change. These ideas and models, whether standard or unusual, beg the larger question: “Why change?” Yes, change is a constant — a fact of life. But employees resist, clinging to the status quo, and the embedded, existing culture echoes: “Why change?”

Most of these models, techniques and human behaviour concepts are very helpful but they gloss over the need to articulate a compelling business case for change. With this foundation, managers are more prepared to execute some of these change models and concepts. But why is this so problematic?

Large change is directional: It often impacts many facets of how business is conducted and many processes need to be altered. To inform an organization on what is different, so it can make these adjustments, leaders articulate a vision or goal. The organization is provided with destination co-ordinates and a new compass heading. But, along the route there may be detours and potential hazards and these uncharted waters need to be acknowledged ahead of time.

The picture we paint is overstated: In order to “inspire,” change leaders focus on a rosy future and the gloom of the status quo. Many in an organization proudly cling to the status quo. After all, they worked hard to get the organization there. And, frankly, the rosy future is often unrealistically positive. The status quo was once the rosy future. Employees can also become cynical if the change pendulum swings back and forth dramatically. An organization that moves from centralization to decentralization, for example, and then switches back can look like a fish flopping on a dock. But if a company is alternating its focus in a systematic way to incrementally evolve with each change to gain the benefits of both forms of organization — it’s tacking like a sailboat to get to shore.

There is no crystal ball: No one knows what the future will look like. But we wouldn’t accept this ambiguity from our staff in their business cases and we should expect more from business strategy leadership. We can do projections, have a plan, acknowledge the uncertainty and develop scenarios. We can establish interim measures and checkpoints to evaluate how things are going relative to plan and share information on progress and barriers honestly and openly. We can involve our organizations in charting the course (re-planning if necessary), celebrating our progress and learning from mistakes and barriers.

Many organizations, despite the models and theories, unknowingly set themselves up for failure. They need to set themselves up for success prior to and during change. They need to ask: Is our strategy and direction still valid? Are we making progress? If progress is too slow, how can we engage our organizations to increase the learning?

We are quick to announce a venture a “failure” rather than stay the course with clarity, tenacity and honesty.

Karen Gorsline is SCNetwork’s lead commentator on strategic capability and leads HR Initiatives, focused on facilitation and tailored HR initiatives. She has taught HR planning, held senior roles in strategy and policy, managed a large decentralized HR function and directed a small business. She can be reached at [email protected].

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Missing link between change and human spirit

Leadership in action

By Trish Maguire

In his book Future Shock, sociologist Alvin Toffler illustrated what happens to people overwhelmed by change. He threw out the challenge for people to draw on change imaginatively and “humanize distant tomorrows.”

Some 30 years after he wrote that book, the majority of change initiatives (60 per cent to 80 per cent, according to John Oesch) continue to fail. Leaders are looking in the wrong place and at the wrong thing, suggests Oesch in his presentation. However, is it possible so many leaders are not listening to the power of the human spirit?

Oesch encourages leaders to rethink accepted approaches and mindsets with “five unusual ideas about change.” For instance, envision what might change if leaders, by fully appreciating employees’ fears and aversion to loss, openly discussed with employees why there is less to lose and regret by changing than staying the same.

How do you think employees would respond to hearing leaders personalize the “me” in the “what’s in it for me” rule? Rather than selling employees on why they must, should or ought to feel confident about change, how much more convinced would employees be if leaders truthfully shared their personal feelings about pending change?

Then there is the predictable status quo challenge that so easily and effectively immobilizes change initiatives. The alternative thought is for leaders to incorporate the status quo as one of the options of change and allow the process of elimination to uncover better choices. Would this not encourage a shift from under-reaction and no action to more productive behaviours?

Just like everybody else, leaders become tied to their own beliefs. In light of Oesch’s suggestions, consider how much more successful change initiatives could be if facilitated by leaders who explicitly solicited input from external influences such as customers and clients in order to pull versus push change.

The last idea highlighted leaders expect employees to take a leap of faith and embrace change. Imagine if leaders were encouraged to take the risk of reflecting on their own emotions, thoughts, beliefs and expectations. With this renewed self-understanding, leaders may find action can be taken in ways that open up employees rather than shut them down.

Human behaviour is clearly a principal theme behind Oesch’s five ideas, underscoring a major call to action for leaders to rethink how imposed change impacts people’s fears, thoughts, beliefs and expectations. So, if HR leaders are the subject matter experts on the human spirit, and they are at the table, where is that voice? How are HR leaders driving change for the better by developing and retaining leaders who challenge, inspire, support, educate, listen and call employees to greatness? In what ways are HR leaders taking Toffler’s advice to draw on change imaginatively to “humanize distant tomorrows” and reverse that 60-per-cent to 80-per-cent failure rate of change in our workplaces?

Trish Maguire is a commentator for SCNetwork on leadership in action and founding principal of Synergyx Solutions, focused on developing customized talent management strategies for small entrepreneurial businesses. She can be reached at [email protected].

Next executive series

Would you like to attend one of the upcoming Breakfast Series in Toronto? Here’s a look at the next few topics:

September: Raising emotional intelligence to improve leadership and overall corporate performance, featuring Robert Potvin, founder of CDC Coaching — Sept. 24.

October: The economic crisis and its critical trends and realities, featuring Eamonn Kelly, a partner at Monitor Group — Oct. 7.

October: Managing in the downturn — four imperatives to drive employee innovation and performance, featuring Dion Love, research director at the Corporate Leadership Council — Oct. 27.

Visit www.scnetwork.ca for more information. 

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