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How can the moments that threaten your transformation define its success?

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15 minute read 22 Jan 2024
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Consulting
Transformation Realized
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Transformation programs using the power of their people to solve emerging issues are 12 times more successful at navigating turning points.

In brief

  • Critical moments will affect most transformations – 96% of programs experience turning points, according to our new research.
  • Turning points begin when a sense of progress becomes a sense of stagnation. This leads to reduced motivation and thus, discretionary effort of the workforce.
  • CEOs can successfully navigate critical moments by bringing humans to the center of the process. This is key to greater success in transformation programs.

Why do most transformations fail to deliver the value that organizations expect? And what should CEOs do when a transformation goes off track? These questions have confounded companies the world over for decades. In 2021, the University of Oxford’s Saïd Business School and EY (EYGS LLP) formed a long-term research collaboration to find out why.
We began with the hypothesis that the human factor is the secret to success in transformation programs. Our research has brought this to life. The heart of a successful transformation is an environment in which people thrive: an environment in which they can do the work needed to deliver the transformation; an environment of experimentation and learning.

Our 2022 research report identified six factors that help create this environment. Organizations that excel in addressing these six factors increase the likelihood of a successful transformation 2.6-fold – from 28% to 73%.

The CEO Imperative Series provides critical answers and actions to help leaders reframe the future of their organizations. Chief among the constant questions we faced when we talked with C-suite executives and board members about our initial research were: What do I do when things go wrong? How can I detect the problem earlier? Some CEOs with extensive transformation experience even asked: How can I use these pivotal moments to my advantage? This is the focus of phase two of our research.

Almost every transformation (96%) has at least one moment of truth, when the program goes off course and leaders intervene. We call these crucial moments “turning points.” How CEOs plan for them and respond to them can make or break the entire transformation.

Successful transformation programs are built to anticipate and navigate turning points. Through our research, we have found that they deliver multiple benefits, including:

  • Accelerating momentum as people across the transformation work together to solve challenges
  • Dramatically improving the chance to exceed outcome measures
  • Developing greater capability and setting the organization up for future transformations

All too often, however, turning points are poorly addressed. Leaders may panic and drive a flurry of uncoordinated action that causes chaos and stalls the program. Alternatively, they react too late, convening a small leadership group that imposes solutions on the wider program that tend to focus on the symptoms rather than the cause. Both reactions aggravate the situation, diminishing workers’ emotional well-being and performance, and greatly decreasing the chances that the transformation will succeed. This highlights a paradox whereby embracing tensions or issues can accelerate and amplify the impact of transformation programs.

There are a couple of deeply human reasons addressing turning points is more complex than we would like:

CEOs often subconsciously pressure the program to “get to green”

Humans have a deeply embedded aversion to “failure” – and the psychological damage that it causes. Furthermore, leaders are often achievement-oriented drivers1 – people who strive for success and are constantly driving for results. Perhaps subconsciously, the fear of failure, and their achievement orientation, often means that CEOs are signaling that the program needs to be progressing faultlessly – that they want to be presented with green dashboards, even if the underlying issues are trending red.

CEOs believe that people feel safer to speak up than they do

Senior leaders often inadvertently signal their team to be quiet. Research2 shows that senior leaders and their teams diverge widely on whether it’s safe for team members to speak up. CEOs base their belief on how safe they feel expressing their views. Teams on the other side of the power dynamic don’t share that optimism. They feel their voices are heard less. The most recent EY Workforce Reimagined Survey supports the divergent perceptions of trust. Where 81% of leaders say that employees feel trusted and empowered by their leaders, only 64% of employees feel the same way. CEOs should start by assuming their teams don’t feel safe speaking up – and then find authentic ways to hear their voice and how they are feeling.

Perception gap
of leaders say their employees feel empowered by their leaders
of employees feel trusted and empowered by management

Turning points are an opportunity to increase success

To overcome these challenges, organizations need to reframe transformation programs into processes that embrace experimentation and learn from “good” failure. CEOs need to create psychologically safe environments that recognize the complex and unknown territory that the organization is charting and encourage the team to speak up.

Turning points are not a problem to avoid; they provide an opportunity to increase success by accelerating progress. One implication of this research is that we need to redefine how we approach transformation programs, designing more adaptability into program discipline and changing the way they are led. Collective action among leaders and workers is key.

Using a combination of predictive modeling and in-depth case studies, we identified three key steps that harness the power of people and increase the likelihood by 12 times that a turning point will pivot the transformation program onto a trajectory that will deliver significantly greater value (from 6% to 72%).


The three steps are:

  1. Sensing – build an early detection system to rapidly identify when issues emerge and determine if intervention is necessary. This means looking beyond traditional KPIs (which are often lagging indicators) to monitor changes in the behavior and emotions of the people involved in the transformation, which are better predictors that a program is going off course.
  2. Sense-making – once an issue is identified, bring people together across the transformation program to deeply and rapidly understand where the issues are.
  3. Acting – re-establish the program conditions that enable and encourage people to do the right work together, using the six factors we identified in phase one of the research.

All of this will require a mindset shift. Instead of fearing or disapproving of challenges or turning points, CEOs need to accept that they will always be there, and embrace the opportunity to accelerate and increase success.

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1

Chapter 1

What are turning points and why do they matter?

Turning points are a part of any transformation. When successful, they are 1.9 times more likely to help a transformation overperform its KPIs.

The turning point is a moment of potential – where performance can be elevated and people can move into a space where they can thrive (which can be seen in their emotional experience) – or where the entire program could fail.

Successful turning points not only address underlying issues (73% vs. 33% of unsuccessful turning points); they are 2.1 times more likely to improve the speed of execution (80% vs. 39%) and 1.9 times more likely to lead to the program overperforming its target KPIs (31% vs. 17%). Moreover, they are 1.9 times more likely to improve workforce readiness and motivation for the next transformation (79% vs. 41%) – preparing the organization to embrace a state of continuous change.

Conversely, unsuccessful turning points fail to improve performance and make the situation worse. They are 1.6 times more likely to lead the entire transformation to underperform (50% vs. 31% of successful turning points) and 3.4 times more likely to leave workers grappling with negative emotions such as sadness and anxiety (41% vs. 12%), which can be detrimental to their well-being and the organization at large.


Turning points are ubiquitous – 79% of leaders agree they are an unavoidable part of any transformation.

While turning points can occur at any time during the program, three-quarters (75%) take place during the planning and early implementation phases, when management’s intent to transform needs to turn into action across the organization. Embracing these early turning points sets the transformation program on an upward trajectory – as the act of successfully navigating a turning point builds an adaptive capability into the program. At these points, the real pain of transformation has yet to be felt, so leaders often see no compelling reason to intervene. By the time the pain is being felt, it is too late; leaders need to tune into these human signals to act early enough.


What’s going on here?

What causes turning points to emerge? There appear to be two meta factors. First, there are external threats such as pandemics, wars or economic shocks. These are often interconnected (pandemics beget economic shocks, for example) and occur more frequently in this age of volatility. There are also internal issues and challenges. These will surface as the act of transformation shifts the organization into misalignment. Organizations are aligned to deliver results for today. Organizations that launch a transformation program are deliberately moving to a new state of being. This tips the organization into a state of misalignment otherwise known as the liminal space, or the space in between. It creates an imbalance on both the rational (technology, operating model, incentives, capability) and emotional (ownership of the solution, power dynamics, behaviors) sides of the organization.

This state of internal misalignment and the external volatility that all organizations face makes turning points ubiquitous.

As issues hit the transformation program, they undermine people’s belief in the vision and the leaders of the transformation. They also reduce the level of psychological safety, as people don’t feel heard. This can be seen clearly in our data: employees felt that the issues they flagged weren’t escalated (33%), their concerns weren’t taken seriously (32%), and leadership never asked for their input in the first place (32%).

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2

Chapter 2

How to navigate a turning point

There are three steps that organizations can take to increase the likelihood of success in navigating a turning point.

Our research has identified three steps that increase the likelihood of successfully navigating a turning point. While each step is important on its own, combining them maximizes the chances of success.

1. Sensing

The first step is sensing. Programs need to build an early detection system to rapidly identify when issues arise and decide when to intervene. Our research shows that leaders need to pay attention to signals around how their people are feeling and how they are behaving. Programs need to pivot from looking at only lagging indicators in their KPIs to also looking at leading indicators – people. Our research shows that the earliest signals a significant issue has emerged come from changes in workers’ emotions and behavior, rather than traditional signals, such as missed KPIs or exceeded budgets.

This requires knowing what signals to look for, creating conditions where people can speak up freely, and putting mechanisms in place to listen – ideally, before the program begins.

A striking 72% of surveyed leaders admit it’s all too easy to overlook warning signals. This is understandable, as most programs are focused on successful delivery of the plan that so many people are invested in. Furthermore, a substantial 61% of leaders say it’s hard to know when to intervene or when it’s best to stay the course. As an interview respondent explained, “I think one of the biggest cultural issues is if you are a [transformation leader], you've got so much personally invested in it that you are quite defensive when you are told, ‘this isn't working.’”


How EY can help

2. Making sense of the issues

The second step is convening the right leaders and members of the workforce to make sense of the issues and co-create the way forward. Sense-making means bringing people from across the organization together, often in a physical location, to create a shared understanding of the issues and a sense of ownership over the outcome. They then explore the issue – to look at root cause rather than symptom. For example, when the challenges mounted at one company we interviewed, a leader organized a collaboration workshop where 25 people talked through the challenges. “And the funny part was that everyone saw the same thing,” the leader said. As a result of the workshop, the leader and their team created new ways of working.

 

3. Taking actions that put people at the center

The third step is taking actions that put people at the center to address the unique challenges facing the transformation. The six drivers of transformation success identified in our earlier research can be used to rebuild trust in leadership, belief in the program and confidence in the capabilities needed to transform. In fact, our current research validates how important these six factors are to not only resolving turning points, but to the overall impact on transformation performance.

 

For organizations that anticipate turning points early, bring the whole organization together to make sense and then take actions across the six factors, the upside is profound: Successfully navigating turning points creates value.

Our research shows that organizations need to treat transformation programs as dynamic processes that will shift. These dynamics are not to be ignored or managed back into the original plan. Embracing and navigating turning points will increase the impact of transformation programs.

Organizations need to reframe their view of transformation programs and embrace the fact that they will face challenges as they progress. The transformation will not play out as planned. There will almost certainly be turning points.

We’ve provided a preview of our latest research findings. Our full report will provide detailed insights, complete with in-depth case studies, that show how organizations can effectively sense, make sense of and act on turning points early to accelerate transformation performance.


Michael Wheelock, Associate Director, EY Knowledge, Ernst & Young LLP; AnnMarie Pino, Associate Director, EY Knowledge, Ernst & Young LLP; Paul Meijer, Partner, Ernst & Young LLP; Ron Rubinstein, Director, EY Brand Marketing and Communications, Ernst & Young LLP; Ryan Gavin, Supervising Associate, EY Knowledge, Ernst & Young LLP; and Bhavnik Mittal, Senior, EY Knowledge, Ernst & Young LLP, contributed to this article.

Summary

Turning points – moments of potential where performance can be elevated or where the entire program could fail – are part of any transformation program. Organizations that can rapidly identify when an issue is emerging, bring people together to understand what the issues are, and create the right conditions to act, can increase the likelihood by 12 times that a turning point will pivot the transformation program onto a trajectory that will deliver significantly greater value.

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    Related topics
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