Six drivers for successful business transformation

EY teams and the University of Oxford’s Saïd Business School look at what it takes to get transformations right and how the human morale can be a critical factor.

In brief

• The vision for transformation needs to come from the top and there should be clear communication on why the change is needed, not just what needs to be done.
• It is important to create a culture of experimentation and use technology to realise the transformation vision.
• Co-creation is key in transformation. For transformations to be successful, leaders need to provide a safe space where new digital and agile ways of working can help nurture innovation and employee engagement.

The only constant since the outbreak of the COVID-19 pandemic has been transformation. Organisational change amid continued disruption has been driven by business transformations to help deliver efficiencies and growth. For transformation programmes to be successful, there is a need to pay close attention to human aspects that have a critical role to play. Human emotion – of both leaders and employees – determines the success or failure of the transformation on the one hand and are also impacted by the transformation’s success or failure on the other.

EY research¹ conducted with the University of Oxford’s Saïd Business School suggests that 85% of senior leaders have been involved in two or more major transformations in the last five years alone. And 67% of those senior leaders have experienced at least one underperforming transformation during this time. Our research studied the workforce response to transformation and found that 79% of employees reported positive emotions after a successful transformation. Underperforming transformations stoked employees’ stress levels with 66% of them reporting negative emotions such as sadness or depression.

“Without any supportive intervention, workers and leaders alike lose hope. To help keep and build talent, rather than put them at risk, organisations should put humans at the centre of transformation,” said Laura Flynn, Partner Head of People Consulting, EY Ireland.

The impact of transformation failure can lead to negative emotions along with burnout and stress for the employees impacted by the change. The research has shown that the emotional strain on the workforce increases by more than 130% during an underperforming transformation with subsequent impacts on motivation, productivity, and employee engagement.

“Organisations need to now move towards continuous transformation. This means new ways of doing things, which is a transformation inside a transformation. It is important to shape and size programmes for success in this environment, test and improve the process, and accept that you will not get it right the first time. Every organisation has different challenges and needs to address those to move to continuous transformation,” said Katie Flood, Partner and Head of Strategy & Transformation, EY Ireland.

What drives transformation success?

There is no one straight route to the success of an organisation’s transformation. It is a systematic change that comes with its share of twists and turns. The key is to create a culture of experimentation, accept the non-linearity of it, and use technology to realise the transformation vision.

The predictive model of our study identified six key drivers which can increase the scope of success of transformations.² The six drivers are:

Lead

In our survey, employees ranked leadership as the top driver regardless of the success or failure of the transformation. Leaders identified its leadership as the number one driver in successful transformations, but underestimated the role that leadership had to play when a transformation underperformed. Those leading transformation need to be completely honest about their fears and self-doubt, and also be open to ideas from others. 47% of respondents in high-performing transformations said that leaders accepted ideas from more junior personnel versus 29% of respondents in low-performing transformations. Accountability is key in all transformations. 52% of respondents in high-performing transformations said that leaders made decisions that were best for the whole organisation, not just their areas of responsibilities.

Inspire

The vision for the transformation needs to come from the top. Nearly half (48%) said the transformation they were a part of succeeded as the leadership clearly articulated why the organisation needed to change. In comparison, only 25% of respondents in low-performing transformations said the same. There needs to be clear communication on why the change is needed, not just what they need to do.

It is important to have clear measures of success identified earlier and KPIs that can be tracked throughout the programme which give confidence that those targets and outcomes will be met. So, it is not just about measuring the outcomes but the indicators of success as well.

Care

To keep transformations on track, leaders need to keep employees motivated and engaged by encouraging everyone to express their opinion. It is important to create a space where people can express their views and also put processes in place to manage concerns, looking for solutions, mitigations and clear actions to help the programme move forward with people’s needs at the centre.

It’s important for organisations to be prepared for transformations and leaders need to harness the right emotions by keeping anxiety and burnout at bay. Our predictive model indicates that providing the required emotional support improved the average likelihood of transformation success by 17%. In the research, employees involved in underperforming transformations said they felt unheard, stressed and unsupported during and after the transformation. Listening, therefore, is essential to any transformation journey. Leaders need to listen to what their people have to say, understand their concerns and address issues in an emotionally supportive and constructive way.

Collaborate

There is great power in co-creation. For transformations to be successful, leaders need to provide a safe space where new digital and agile ways of working can help nurture innovation and employee engagement. According to our research, 44% of respondents in high-performing transformations said that their organisation’s culture encouraged new ways of working, compared to 28% in low-performing transformations. It is important to consciously create interdependencies across teams to foster meaningful change management.

Empower

Our research suggests that transformations are not linear. There are likely to be ups and downs, and stops and starts. It is, therefore, necessary for leaders to provide the required structure to take a transformation programme forward while leaving room for creative freedom. Autonomy to execute is also a critical factor. In our research, 52% of respondents in high-performing transformations said that employees were assigned clear roles and responsibilities. Leaders need to instil the “fail fast” mindset and foster a culture of experimentation to help realise opportunities.

“The upside of maintaining a positive culture in the transformation programme during the delivery is that people see it in a different light after and success is more likely. Transformation programmes can be a great place to shape a career, can be a fun environment, and can help create belief and momentum in the leadership and delivery team. It becomes a virtuous cycle that supports the programme’s success,” Katie Flood elaborated.

During and following a transformation, leaders should empower employees to be part of the change and involve them in the process. Leaders must be accountable and emphasise a “we, not me” approach by fostering collaboration, driving consensus, and creating two-way communication.

Build

Encouraging a digital-first mindset is a step towards seamless transformation. Use of the right technology is critical to facilitating the process of transformation. Respondents to our survey ranked effective use of technology as the number two driver of success and ineffective use of technology as the number two driver of underperformance. While 48% of the respondents in successful transformations said that their organisation had invested in the right technologies to meet their transformation vision, only 33% of the respondents from underperforming transformations said the same. Leaders need to prioritise progress over perfection, and they need to prove the value of new technology-enabled approaches early in the journey.

“Organisations should instil an innovative culture where employees can share their ideas and are encouraged to bring them forward to management. This requires a safe space where new digital and agile ways of working can help nurture innovation and employee engagement,” explained Laura Flynn.