ADI IGNATIUS: I’m Adi Ignatius.
ALISON BEARD: I’m Alison Beard and this is the HBR IdeaCast.
ADI IGNATIUS: All right Alison, it is quiz time. What percent of attempted transformations at organizations fail?
ALISON BEARD: I know it’s a lot. I’ll say half.
ADI IGNATIUS: All right, that is a good guess. It’s actually worse. 70 percent or more than two thirds fail or at least fall short of their intended goals.
ALISON BEARD: Wow, that is a depressing statistic. And I guess the follow-up question I would have is why? Why did they fail?
ADI IGNATIUS: Well, that is the good journalistic question. Look, it’s of course about poor execution, but a lot of it can be understood to the lens of behavioral science as opposed to pure strategic discipline. So it’s understanding what it means to have true alignment, to have agency, and to understand the emotional issues that are involved in a big transformation.
ALISON BEARD: That makes a lot of sense to me. It sounds like you’re saying that people skills are really the most critical ones for leaders to have.
ADI IGNATIUS: They’re up there. Leading a transformation involves humans who are grappling with how to make decisions, how to be persuasive, how to test their biases and so on. So yeah, very human things that can make or break a successful transformation.
So speaking on that today is Julia Dhar, who’s managing director and partner at Boston Consulting Group and founder of BCG’s Behavioral Science Lab. She’s the co-author along with Kristy Ellmer and Philip Jameson of the book, How Change Really Works: Seven Science-Based Principles for Transforming Your Organization. And here’s our conversation. All right, Julia, welcome to IdeaCast.
You assert … And this isn’t controversial, I think this is well known, but I want to talk about this, the idea that most change efforts fail. So what do you mean by that and what does failure mean in this context?
JULIA DHAR: We actually mean one of two things. Either they fail to return value to shareholders over the specified period and/or they didn’t achieve the objectives that the people who set up the change initiative or the program set out at the beginning of the effort. And that in and of itself is pretty bad.
An even more unfortunate under discussed element of that is it is expensive to try and change an organization to shift how groups of people get something done together. And so when we look at that failure rate and that rate has consistently hovered somewhere between 60 and 75 percent for the last several decades, that’s an enormous waste of human potential and talent and frankly, optimism.
ADI IGNATIUS: And is your sense that the plans are good, but the failure’s in the execution or that somehow the plans that we’re drawing up are not even getting us in the right direction?
JULIA DHAR: It’s a little of both. That we don’t bring far enough upstream the “how” of change. And I have a little bit of sympathy with that. I think that there is an assumption in some camps that that is boring or unglamorous. I could imagine that some people might even say that is work that should happen lower down in the organization. That isn’t really the work of executives. My co-authors and I completely disagree with that, that successful strategy is very much grounded in the how. So that’s part of it. We don’t talk about the how early enough.
The second is we don’t talk enough about the idea that it is not just a shift in concept or product or pricing, but generally we are talking about a behavior shift and we don’t ask deeply enough often enough, is it likely that the people who we need to change their behavior are going to do this? Will they do it because they have the right incentives? Can they do it because they have the right skills? Will they be excited to do it because they have the right motivation? That’s all in a bundle of topics and concepts that in behavioral science we talk about as take-up. We don’t spend enough time saying, is the change we desire other people to make probable?
ADI IGNATIUS: So let’s talk about some of the challenges. So we’ve all been through transformations where let’s say leadership says we’re going to do this dramatically new thing. And often employees, if I can generalize, they’re like, “Ah, come on. Oh, please.” They’re used to doing things one way and somebody says, “We’re going to do things other way.” So you have this gap. Talk about that gap and why it matters and how leaders can try to narrow it and get past that.
JULIA DHAR: I love the way you started, which is to say we all, if we have pretty much any amount of work experience, we’ve all seen a movie of this before. One of our primary motives as we went into this work was to attack some of those cliches associated with change in organizations. A classic one when things start to ebb or get a little bit low on steam or enthusiasm is someone usually senior in the organization says, “Well, after all, people just don’t like to change.” And so the first question we were asking was, “Is that true?”
And the way that we set out to answer that question was to take 6,000 people in a dozen countries around the world, a thousand executives and 5,000 non-executives and give them a version of a really simple change in their daily life and said, or in this case, in their professional life, a change is coming to your professional life, you don’t yet know what it means for you, it’s the impact on the organization, the magnitude of the change. Instinctively, how do you feel about the change from very positive to very negative?
70 positive of executives feel very positive or positive. And this is where you know nothing about the change. The change could have been, we have decided we can do without you on the executive team, for example, but there’s a hardwired enthusiasm among those senior leaders for change.
But about 45 percent of employees also feel positive or very positive. So thing number one, it’s clearly not true that people just hate to change. We also generally are somewhat favorable towards change, but nowhere near as favorable as executives. There is a huge gap between the predisposition of executives for change and for employees in organizations. And so that means that when you run into that other fairly common cliche in big change programs that we just need to get everybody excited.
The goal shouldn’t be to get everyone as excited or optimistic as executives. That’s probably a fool’s errand. It should be to try and bridge that distance through very specific ideally behaviorally focused interventions that bring people closer to an understanding of what needs to change, why, and very practically, what are we going to do not only to make that change achievable, but ideally also pretty attractive.
ADI IGNATIUS: You have a great line in the book that says, “The emotions that employees feel during a transformation may not be your fault, but they are your problem because they affect your chances of success.” And that to me is interesting. There is an emotional component to change. I think for employees, change feels like something that will happen to them. Maybe it’s executives that feel like this is something that will benefit them. But it’s interesting because you can either say, look, get with the program or you’re out or you can get engaged in a more sophisticated way on these emotional levels in narrowing these gaps.
JULIA DHAR: That line that you just quoted that the emotions of executives during change may not be your fault, but they are your problem was written by one of my coauthors, Phil Jameson, who had also pitched an alternative title for the book that was not ultimately successful for reasons that are about to be very obvious but was charming. The alternative that he had pitched was shut up and change.
And there’s so much about the way in which we often do change in organizations that has an element of shut up and change to it or we might more gently say people just have to get on the bus or we will leave them behind as opposed to saying we have a sincere interest in reasons why adopting a new behavior is challenging.
And we know these really basic laws of behavioral science like the number one way in which we can help someone adopt a new behavior in a context is to provide a very specific set of expectations. The second is to remove obvious barriers and the third is to make sure that it’s consistent with any other sets of incentives that they have inside the organization or other pressures that they have in their lives.
When we say those sorts of things in a meeting room, I think people instinctively nod and agree. When we describe those challenges in relation to a customer, for example, often executives are extremely curious, very passionate about knowing in detail what the challenges or concerns of moving, for instance, a customer through a digital sales funnel might be. But we lose a little bit of that same empathy, curiosity, helpfulness even maybe, or sympathy for the objections that people have when it comes to people that we know much better, hopefully have at least as much care for, which is our own employees in the organization.
ADI IGNATIUS: So I think what you’re saying is that the emotional resistance or the questions that employees have is understandable, needs to be managed. How do you even gauge and measure the emotional response to the process that’s underway? If your goal is to eventually get as much alignment as you possibly can, but by the way, to maybe get feedback from down below that will help tweak the strategic process in ways that leadership might not have seen initially.
JULIA DHAR: One of the things that we asked people in addition to what’s your instinctive reaction to this change is what are the emotions that you instinctively feel as we describe this? The number one emotion is curiosity, which is really encouraging. It’s people saying, “I want to learn more.” That’s really consistent with basically everything else ever written on change that says one of our failures is a failure to communicate and to successfully explain to people what we are doing. But the number two emotion is anxiety. And so that means that we have a group of people, often thousands of people existing in the organization in a state of curious anxiety that does need to be managed or at least really well understood.
Let me talk a little bit about day-to-day what I do in some of my own work. One is literally ask people all of the time very often through a survey. For example, at the start or end of a shift, if you are in a factory or a store, the start or end of the day, if you do a job that is desk-based, what are the emotions that you are feeling? And that actually is not the easiest thing in the world for people to do, but if you give people a moment to reflect on it, people are able and generally very willing to share that.
The two other questions that I really encourage, frankly, everyone leading a change in organizations to ask of the people they are requesting make a change is, number one, would you recommend this transformation to a colleague?
The other one that I find very, very useful in figuring out whether the what has connected successfully to the how is asking people, do you think we are likely to be successful with the goals that we have set out? And so note that’s not, do you agree with the goals? Do you think they will be good for you personally? Do you generally think that we are likely to be successful in achieving them? And so that allows people to move into a more objective stance, but also to consider whether or not, based on what they’ve been told about what we are trying to do here, whether or not it’s probable that that will unfold.
ADI IGNATIUS: If you get this right in terms of this employee engagement, this emotional understanding, narrowing the gap through intelligent ways, then what? Are you saying that that is the key to a successful transformation that increases the odds? I mean, what’s the value precisely of getting that right?
JULIA DHAR: It doesn’t guarantee that you move from being unsuccessful to successful, but incrementally it increases your probability of being successful. Because you have a much better understanding of how in fact that change is actually taking place in the organization. Of course, there are many mountains beyond having climbs the first mountain of empathy and understanding and those are really specifically what does behavioral science recommend in terms of successfully and sustainably reaching people who need to change and who perhaps need to change on a very sustained and consistent basis. They need to make some pretty significant effort to move from the status quo.
We talk about seven of them in the book, but a couple that I really like are making much stronger use of stories and symbols, thinking about and considering momentum as a resource that the organization has and can steward to appropriately manage the discretionary effort of individuals, and getting really sharp about what the barriers are to people doing something differently in an organization.
And indeed there is a small number of people who appear to be allergic to change, persistently very negative about change, but it clearly isn’t most people. And so where we run into resistance in an effort to make some kind of change in the organization, a pretty reasonable assumption is not that those people generically hate to change, it might be that they’re just not currently buying what you’re selling.
ADI IGNATIUS: Julia, so talk about the IKEA effect in employee engagement. You mentioned that as one approach for executives to improve levels of employee engagement. Talk about what that is.
JULIA DHAR: Have you ever assembled flat pack furniture, IKEA or otherwise?
ADI IGNATIUS: Oh my God. So many times.
JULIA DHAR: Including maybe with someone you loved or cared about?
ADI IGNATIUS: Yeah. Initially we probably weren’t talking by the end of it, but yeah.
JULIA DHAR: The IKEA effects brilliantly described and documented by Mike Norton at Harvard Business School basically says that people who have had a hand in creating something disproportionately valued. That’s the important takeaway for executives. The way experimentally he demonstrated this was by having people build IKEA boxes, maybe you have one of these in your house and then asking what they would be willing to pay for it versus one assembled by a professional.
And you can probably guess the ending to this story that people were willing to pay 63% more for their own, I’m going to assume, inferior boxes than they were for a professionally assembled one. People do not burn down the houses that they have had a hand in building, people don’t sabotage projects that they helped to create. And a consequence of that is to say we don’t always have to make it unbelievably easy for people to participate in change. But giving people a reasonable opportunity, a sincere and genuine opportunity to shape an element of the project that affects them is an important and really useful step to be able to take.
I often think things that executives can immediately do is upfront as we are designing a project ask people how comprehensive the understanding of the problem is and give them an opportunity to have input at that point. Allow people to do things like name a project or to determine the right sequence of events for certain changes to be rolled out. Of course, not everything in an organization can be by consensus. It cannot be a democracy, but if we keep the IKEA effect in mind that people who have shaped something take care of it, it quickly becomes their agenda as opposed to the CEO’s agenda you start to see intuitively, although this has also been proven analytically, that the chance of success is much higher.
ADI IGNATIUS: So we’ve been talking mostly about the extent to which there’s alignment between leadership and employees, but there’s also … And we’ve seen this where even among leaders, executives aren’t fully aligned. And this I think gets into the storytelling aspect to a degree. I’ve been involved with startup companies and been involved with efforts to tell their stories. And tell their stories is useful for investors, for the public, for the media, but also internally. Sometimes it’s in the storytelling that you realize that senior people aren’t completely aligned. So to what extent is that a problem in transformation efforts and to what extent can that be broken down?
JULIA DHAR: One of the things I feel we know for sure is that perhaps the most underused tool for behavioral change is the well-told story and the powerful visible symbol. Human beings, we are profoundly narrative, which I guess is good for people like you and me who love words, but it’s actually good for people who think that they are only mobilized by numbers or by data. Stories are memorable to us. They mobilize us to action. They captivate our attention.
However, a really important thing is to note that in order for a story to work well as a tool for behavior change in an organization, the very first step is that it must be true and it must be honest and specific about the reality and the request that the storyteller is making of the listener.
We talk about three different types of story of mobilizing for change in an organization. Type number one, threat. We have to change or we will suffer and maybe die. Ford did this really successfully after the auto bailouts, after global financial crisis and in rebuilding and turning around that organization often a couple more times after that. The second type is fitness. And this by the way is most of the change efforts in organizations. We need to continue to get incrementally better at what we do best or we have gotten a little sloppy, a little loose, a little undisciplined at what makes us really good and we need to be more consistent. And then the third type is destiny. To say by making this shift, we can actually realize the promise of what this company was always meant to be. We can become who we really are.
John May, when he talked about the transformation of John Deere towards being not just a hard iron company that sold tractors and farming equipment, but to one that also sold software that allowed farmers to be much more productive, that was a really good example of a destiny story. Threat, fitness, or destiny. The thing that leaders have to make a choice about is where are they genuinely in the business cycle, in the strategy cycle, in the change cycle, and invite people to participate accordingly.
ADI IGNATIUS: I know you write about momentum in the book. When you’re launching a transformation, should you think about momentum? Should you think about, we’re going to have this early win, but we have to think about … Let’s not just see what happens and hope that it works. Let’s actually stage a plan for momentum so that there is this constant, let’s say positive feedback as we keep moving, as we hit another milestone. Should we plan momentum into our transformation strategies?
JULIA DHAR: 100%. It might be one of the only really, truly controllable variables. And what I mean by that is basically in any organization, there will never be enough money, there will never be enough time, there will never be enough executive attention, but we can be really deliberate about momentum, including asking, are we continuing to increase momentum to gain yardage? For example, are we stuck where we were a week ago and what will it take to give people a sense of progress?
Because one of the things we know for sure is that if individuals or groups of people believe that they are capable of doing something, that turns out to be a self-fulfilling prophecy. And the best way to do that is not just to tell people to be confident, but it’s to give them the experience of acquired competence and success over time. And so in that way, momentum can start to move towards perpetual motion.
I do think there is one pretty ugly truth about momentum that we don’t talk about nearly enough in the planning phase or the deciding phase of change, which is like a lot of efforts to change our own behavior. It’s not just that it gets messy in the middle.
Sometimes it gets boring in the middle and that sometimes what we could say is a loss of momentum or we diagnose as a problem of motivation or morale somewhere deeper in the organization is actually just that executives have lost interest and have moved on to something else and actually asking critically examining now the structure of the program to say, is there a set of rituals? Is there a weekly cadence and drumbeat for the program that will actually give it its own momentum so we don’t have to think too hard about whether or not we’re all still in this together would be very helpful for everyone.
ADI IGNATIUS: What are some early signs that a transformation is starting to stall in that way or in any other way and what do you do about it?
JULIA DHAR: So I think a couple are those really obvious but also easy to ignore daily or weekly signs. Things like an executive suddenly not attending a meeting. Not because of an emergency but somewhere else that they had decided to be, for example. You can get around that by saying we have a very rigorous set of expectations for one another upfront, but that’s a sign that you might be experiencing not so much loss of momentum in the organization, but a little bit of boredom from executives.
The second is if you are not systematically saying, let’s measure and understand the behaviors and emotions of the organization, when you start to revert to expressions, cliches, frankly, like I think the organization is tired, clearly not. An organization cannot be tired. People in an organization of course can be tired, they can be burnt out, they can be overworked. It is highly unlikely that it is everyone in the organization and it cheapens that experience to just say, “Well, I think the organization is tired. I think there is general change fatigue so we should just back off a little bit.” As opposed to saying that’s an opportunity to make deliberate choices about where energy and effort, and by the way, other resources including money, including expertise, are going in the organization.
And then I think the final one is if we under use celebration, we under use praise, appreciation, recognition. It’s I think often a painful reality about the early phases of change that you need some early wins. We need this sense of endowed progress to keep going. We often have to talk about those early wins for much longer than we want to. They’re much more humble than we would hope that they are. But knowing that those are visible to people that they remind everyone in the organization that change is possible and that change is appreciated is a really important act for executives who can amplify those successes, who can transmit their expectations through them.
ADI IGNATIUS: So if somebody’s listening to this and is feeling, “Yeah, I’m leading a transformation effort. I really want it to succeed. I believe in this. I understand that it’s complicated. What are a couple of things to think about that are within their grasp, that are reasonable to grasp onto as a starting point to kind of increase the chances that this transformation’s going to succeed?
JULIA DHAR: Step number one, before you go too wide that you change maker, ask yourself, is what I have false alignment? A bunch of people often in senior roles saying, “This sounds good or do I have true agreement?” An incredibly easy tactical way to test this is have that core team take out a pen, a piece of paper. This is a very low tech test. And write down what it is that we have agreed to do, what is changing and how is it going to work? Until you have that consistently agreed, all of us are able to write down approximately the same thing, approximately the same what, and approximately the same how. You don’t really have a change agenda.
The second one is to focus on take-up and so you know this line from often misquoted from Field of Dreams, ‘If you build it, they will come.” In change programs, I think it’s a really safe assumption. If you build it, they still probably won’t come unless you have created a plan for take-up for people to do the behaviors that you hope that they will do. And a take-up plan if you are sitting there by yourself saying, “I have no resources, I have no behavioral science inside my organization,” is as simple as this.
It is asking a project manager or a project owner to write down the answer to the question, which specific individuals and roles in this organization need to change their behavior? What behavior change do we expect and is it likely that people will make that shift based on the plan that we have? If no, you need a better take-up plan because your business case assumes that people are going to change and you know that they won’t.
So you can do this whole audit on two pieces of paper. Number one, do we have true agreement? You’ll know you do when everybody is writing down the same story for change, the same what and the same how. And you’ll know you have a pretty robust take-up plan, a good plan for behavioral shifts if you know who you expect to change, what behaviors you want them to do and could explain to someone why you think it’s likely that they will be able and willing to do that.
ADI IGNATIUS: And do you have an example in your head of a company that has gone through a transformation that just should be inspirational to everybody, that they really handled it well and the outcome was positive?
JULIA DHAR: I think a company that has proven that they can do all of the things that we’ve been talking about over and over again by keeping the employees who they are making requests of right at the center is Delta Air Lines. Coming out of bankruptcy, like really at the ends of that period of the company’s history. And remember Delta Air Lines is 101 years old this year, 100,000 people work there. Instituted a practice that exists to this day, which is called Velvet. And Velvet is effectively an opportunity for senior executives and leaders across the organization to spend time with, appreciate, recognize, but also to hear from and to speak with employees across the organizations, cabin crew, mechanics, check-in agents, baggage handlers.
And in doing that, they are living up to a very, very strong theory of change that has existed and has been talked about, but also lived throughout the company’s history, which is if senior leadership take good care of employees, employees will take good care of customers and customers who have been taken care of will lead to shareholders and the share price and financial performance taking care of itself.
There’s a lot that is wrapped around that as an organizational strategy. Velvet is one really obvious example of ways in which people literally physically come together and get appreciated. It gets matched in terms of the incentive program with profit sharing and other ways to directly appreciate people’s efforts. But to me, that is a really good example of saying we have a really clear understanding of how all of our different stakeholders come together to change. We ask leaders to change before we ask employees to change and we ensure that their incentives are aligned to do so that we are not asking people to volunteer for a change that they themselves will never see the benefit of.
ADI IGNATIUS: Julia, I want to thank you for being our guests on the HBR IdeaCast.
JULIA DHAR: Thank you very much for having me.
ADI IGNATIUS: That was Julia Dhar, managing director and partner at Boston Consulting Group and coauthor of the book, How Change Really Works: Seven Science-Based Principles for Transforming Your Organization.
Next week, Alison looks at how leaders often overthink their problems and what they can do about that.
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And thanks to our team, senior producer Mary Dooe, audio product manager, Ian Fox, and senior production specialist, Rob Eckhardt. And thanks to you for listening to the HBR IdeaCast. We’ll be back with a new episode on Tuesday. I’m Adi Ignatius.
