A framework for transformation

In late 2014 during a ‘quiet’ period I set myself the task of writing what I thought would be a short deck on change management. Perhaps about 30 or so slides positioning a 60 to 90 minute presentation and discussion; something I could potentially use in an early client meeting.

It didn’t take long to fail on that one.

Four or five weeks and around 250 slides later it still felt like an incomplete work. The 30 or so slides had evolved into a two module seminar covering aspects of both change management and business performance improvement. No longer 90 minutes it would take a couple of days to go through it, and even with this amount of time the topics could really only be covered in a cosmetic, overview sense.

The problem is that change management is such a vast subject. Where exactly do you start? An academic or general management consultant might use John Kotter’s work as a logical point of origin, but I have my own ideas. For my part you can’t really make sense of change at the micro-organisational level without a pretty robust understanding of the macro-economic, financial and social factors extant at the moment. I have a firm belief that the ‘big’ issues and trends in the world have a pretty direct and causative link to what happens, or should happen, at organisational level. Organisation strategy, or the considered reaction to these elements, then becomes the link between your work as a senior transformation agent, your industry context and the world as a whole.

So that becomes a starting point in designing a transformation programme. We need to understand what is going on within the organisation’s industry, and the relevant macro factors before diving head first into the detail. Digital is clearly one of the most important trends around at the moment but there others also in the arena. It makes sense to undertake a strategic review of all of them, and perhaps prioritise by impact before attempting to position a corrective change in direction.

With a broad understanding of the global and industry factors we can take a more informed look at the organisation itself. It could be that some immediate action is required. Certainly with many of the companies I have worked with there has been a need to react quickly to a shift in market conditions. Technology changes have become particularly important in recent years as new entrants and competitors have identified and exploited cutting edge capabilities and functionality. The net result has been that revenue streams are often negatively affected for those that fail to recognise the opportunities. They have not reacted quickly enough either operationally or strategically. Thus, we are left with the classic situation of a cost base being out of step with a revenue base: costs must therefore be reduced.

A ‘transformation programme’ is a common reaction. Most organisations have not yet become used to the idea that transformation is now a perpetual need and that improvement should be continual. Operational line managers don’t generally raise a cheer when transformation programmes are launched due to a combination of ‘me’ issues and their disruptive effects on business as usual activity. My view is that they can live with them because they still see a transformation as an ephemeral activity; in other words it will go away at some point, at which point life can resume as before….

Putting the cultural reactions to one side, how should a transformation programme be approached? Fifteen to twenty years ago I entered the world of change management through a senior strategy role. The concurrent integration of four telecoms companies had created opportunities for cost saving synergies and a need to reduce the recurring cost base. There was no need to explore broader market factors or global trends; that had already been done. What we needed to do was to work out how to cut the organisation’s costs without impacting service levels.

I worked as a junior operational strategy director at the time but had already come into contact with the rigours of management consulting. As a senior manager I had been seconded into a number projects and programmes led by a succession of the big management consultancies. All were useful and have helped shape the approach I now take towards transformation work.

A simple and obvious concept soon adopted was that of finding ‘method improvements’ to help address the challenges of restructuring. Even today the boards of companies and other organisations in distress will simply apply an arbitrary reduction to current budgets. In the desire to remove cost there is often little thought applied to the implications for service quality, of a reactive and often ill thought out directive. On the face of it a 20% cut in costs looks like it will directly translate into a 20% saving in cash. This is rarely the case. Work cannot simply disappear without some consideration about where it will go. Method improvements are the necessary means for eliminating the work that will still be needed in order to deliver goods or services. It is vital to identify the required method improvements or a transformational restructuring will not be sustainable. In the absence of careful planning, people whose jobs have previously been made redundant will need to be re-hired to address the inevitable backlogs and customer complaints that tend to arise when service levels are not effectively maintained. Cost savings are therefore at risk of becoming transitory.

Method improvements addressing the removal of work can include all sorts of initiatives. A decision to withdraw from a market because it is no longer profitable will clearly destroy work, thus the removal of any associated resource becomes a rational and justifiable action. Cost savings relating to removing these activities will be sustainable. Process improvements can also remove unnecessary work. Lean Six Sigma techniques eliminate both the steps in processes and improve the efficiency of those steps remaining. After undertaking such exercises lower levels of resource are usually needed to undertake the work. Likewise, automation has clear and obvious advantages. Manual labour is reduced and work can usually be undertaken at a faster pace and with improved quality. Digital thinking can foster an environment where the end customer can be persuaded to undertake some of the required work, and its presentation can often be an improved customer experience. Centralisation and outsourcing are likewise options which can often help rationalise a proposed reduction in budgets. The need to match resource capacity with demand has also increased in recent years. A reduced down time or increased utilisation does not necessarily destroy any work but it can help an organisation work with a lower level of resources.

The key from a transformation perspective is to undertake a comprehensive review of the challenges ahead and options available before attempting to build that MSP plan. A transformation programme could include multiple initiatives ranging from developing demand/capacity plans, establishing shared service centres, outsourcing, manual process improvements or a comprehensive digital/IT project. An initial analytical and evidence based review should set the scene, the options, benefits and preferred route to achieving the objectives. Only then can the actual transformation programme be designed and later implemented with any confidence of success. First analyse, then implement.

By definition a transformation programme is finite. It has a beginning, middle and an end. However, the process of transformation is not finite. Organisations have always changed but the difference today is the pace of change: when one programme stops another one is usually around the corner. The real challenge at the moment is to get organisations to think in terms of continuous and unavoidable transformation. It will never stop, nor will the pace slacken. Whether led by a ‘Chief Transformation Officer’ or a ‘Chief Digital Officer’ the goal must be to force the pace at which the organisation moves from 20th Century approaches towards addressing 21st Century imperatives. This means a cultural shift in thinking, a move from dealing with change as a ‘one-off’ initiative needed “every three or four years” (a quotation from a CEO whose programme I was once assigned to) to something that will always be there. At programme level the disciplines of analysis and then implementation will still be required, but the whole process of transformation needs to become a business as usual production line.

There is little choice if organisations are to survive and thrive.

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