Flexibility of leadership style and the speed to respond to external drivers are essential for making change stick, according to Australian-based CEOs
The success of a major change program hinges on leadership style and the role played by the CEO, recent study has found. CEOs need to be chameleon-like, and flexible enough to choose the “right” leadership style to initiate a transformation and change at different points in time along the program, to achieve set objectives.
“There is no one right leadership style for success, but it is critical that the CEO walks the talk,” said Steve Woolley, partner with PricewaterhouseCoopers, which conducted the study.
Based on 40 face-to-face interviews with CEOs and other executives of leading ASX-listed companies and large government departments, the study found people, processes and technology remain the three levers for change, but can no longer be looked at in isolation.
In designing and executing successful large change programs that draw all of these levers together, CEOs said they have learnt lessons in seven key areas.
1. “Right” leadership dictated by type and time.
The type of change an organisation is undertaking will ultimately dictate the leadership style required to get it started. “Radical change may require a more dictatorial style to cultural change, which benefits from a charismatic or visionary style,” said Woolley. “But, change is not a one-hat wonder. There is no one effective leadership style for the length of a complete change program. CEOs need to be flexible and adapt to different styles at points in time along the program.”
Graeme Liebelt, CEO of Orica, said: “There is a clear objective, but you have to leave room for flexibility. The leadership style needs to be ‘pace-setting’in the short-term”.
Today, CEOs are the face of an organisation’s change: Bernie Brookes, Myer; Graeme Liebelt, Orica & Sol Trujillo, Telstra. But CEOs don’t work alone. They emphasised the importance of establishing the transformation team early and building a team that is trustworthy, loyal, has experience in change, is able to remove “blockers” and will live the new culture early.
Woolley said that staff members are receptive to change, however the same cannot be said for middle management. “Organisations are challenged to break through the crust (middle management) within the first 90 days. The emphasis needs to be on speed, so consensus management, which restricts agility, is not favoured,” he said.
With the average cost of a transformation often equivalent to or more than a capital investment such as a big acquisition, it is not surprising that non-executive directors increasingly want to be more engaged from the beginning. “While non-executive directors recognise the CEO is the leader and empower them and their management team to lead, they look at the change through a different lens and want the opportunity to help design the roadmap and the vision,”Woolley said.
2. Need for speed in driving change
Successful transformation requires a swift, shared understanding of the response to real and potential drivers of change, the study found. The Board and CEO need to be aligned with the vision and roadmap before embarking.
Critical reports and crisis tend to provide a well-defined vision for change. These situations make a more solid foundation for effective stakeholder communication. Crisis situations also require an organisation to react quickly to external drivers, which are increasingly replacing internal drivers as the levers for change.
“Where there is no crisis, the CEO needs to paint a clear vision for employees to help them understand what would happen if the change doesn’t take place,”said Woolley. More than a quarter (27 per cent) of respondents said cultural change was the driver of their organisation’s transformation. In comparison, only 15 per cent said their programs were driven by change to processes or enabling technology.
“Increasingly, people and culture are replacing IT and processes as the drivers of change. The future phenomenon is customer-centric transformation,”Woolley said.
3. Customer: number one
A common theme was a focus on customers and improvements to the service delivery model to create value. “While there is much talk about customer-centric transformation, it is difficult to realise and to measure,” said Woolley.
“The primary focus must be the customer experience. The first step is to provide business units with responsibility for customer relationships and revenue growth”.
Numerous respondents revealed that customers reaped the benefits of being more engaged and satisfied as a result of cultural change that reshaped employee behaviours.
On customer-centric transformation, Telstra CEO Sol Trujillo said: “What we do is put the customer at the centre. We don’t just say that. We know customers’ underlying driving needs, so that when we talk to them we talk about what they care about, and we talk with them at the times and through the channels they want”.
4. Cultural change
Making culture stick is a key ingredient of successful transformation, Woolley said. While there was a question about culture as enabler of change or a valuable business objective in its own right, there was consensus that transforming an organisation’s operating model challenges existing mindsets, values and behaviours.
“Setting cultural performance metrics is difficult. People internally and externally need to be the assessors of change through mechanisms such as surveys and feedback programs. Culture needs to be baselined so a starting point is known,” Woolley said.
One respondent said behavioural change was one measure they used to assess the extent and success of cultural change. About 70 per cent of respondents said staff were receptive to change, but that, equally, transformation fatigue was inevitable. A good approach is to maintain a strong focus on employee values and design a program that is dynamic so that staff remain fresh, engaged and clear on the vision, according to Woolley.
“Communicate too,” he said. “People want to know when success has been achieved and it shouldn’t be a one-off benefit. “
5. Invest in stakeholder communication
Underestimating investment in communication was one of the top three lessons learnt, according to CEOs and transformation leaders.
Effective stakeholder communications requires careful planning. Take time to design a roadmap that incorporates all stakeholders, their communication requirements and expectations, methods to sustain those needs and effective communication through a diverse range of channels. “Effective communication is a dialogue and relies on timing, consistency, clarity and speed,” said Woolley.
Victorian Workcover Authority CEO Greg Tweedly said: “You need to paint a picture and keep the message consistent.”
Another key lesson learnt was the need to under-promise and over-deliver to internal and external stakeholders. Ambitious deadlines are motivational, but leaders should avoid committing to deadlines they cannot meet. This particularly applies to technology implementations, said Woolley.
6. Model for transformation
Resource constraints were a significant issue, the study found. It is vital for leaders to ensure that business can continue as usual and this requires additional resourcing, according to Woolley.
“There is no easy solution to the resourcing challenge – budget and plan for it. Find a way to reduce or eliminate some existing projects and create a more stable environment from which to build change,” he said.
“There is no easy solution, but, in our experience, large-scale technology-led change is best executed when key resources are dedicated to the project. Embedding change around people, culture and process early in business-as-usual dramatically assists success.”
Organisations also need to have a sound retention strategy in place that gives members of the transformation team line of sight of their future, he said. “One of the common mistakes we see is businesses too quickly taking their best people out of the business for transformational roles then putting them back into the business before the change is embedded as business-as-usual.”
7. Measuring success
The study found that three-quarters (77 per cent) of private sector business respondents reported a positive correlation between their change programs and an increase in shareholder value. However, the majority of respondents believed that share price was not a realistic measure of success.
“You get what you measure. Successful execution is impossible without early baselining of ‘as is’– the development of clear metrics and the communication of success,” Woolley said.
“It is essential to agree on and put in place quantifiable, tangible metrics at the start. Don’t try to do it in one big bang either. Make them bite-size, so measuring and reporting is timely and current.”
He also recommended celebrating quick wins during the first 100 days, which will be more possible if you start with a baseline.