Running Head: Why Change Efforts Fail Within Organizations and Strategies for Success

Why Change Efforts Fail Within Organizations

Strategies for the Successful Implementation of Change on the Basis of Kotter’s Model

Ardavan A. Shahroodi

Northeastern University

HRM 6045—Change, Challenge, and Competence

Professor Michelle Del Rosario

Tuesday March 25, 2014

Why Change Efforts Fail Within Organizations and Strategies for Success

Introduction

Organizations adopt change strategies in order to improve their effectiveness, enhance their position with respect to their rivals, avoid existential threats from the external environments, increase their productivity, fulfil their untapped potential, transform themselves and as a result seize new opportunities or re-invigorate their long lost growth. Regardless of these varied goals, the change process itself involves a number of specific steps one succeeding the other, all indispensable in the transformational endeavor. The crucial point being that change efforts either wither away or never reach their intended promise in the event that any of these invaluable steps are eliminated or for that matter implemented in a haphazard, cursory and unconvincing manner. In this light, this paper has utilized Kotter’s (2006) model in order to analyze the necessary steps that ensure the successful implementation of an organizational change campaign.

Background

Kotter (2006) defines change as when organizations endeavor to “remake themselves into significantly better competitors” (p. 149). Whether these change processes are labeled as “total quality management, reengineering, rightsizing” (Kotter, 2006, p. 149) or “restructuring, cultural change, and turnaround” (p. 149), Kotter (2006) submits that the purpose has always been to alter “how business is conducted in order to help cope with a new, more challenging market environment” (p. 149). Kotter (2006) points to two overall patterns that are evident in successful change efforts. First, he observes that the change process “usually requires a considerable length of time” (Kotter, 2006, p. 150) containing a “series of phases” (p. 150) that must be sequentially and individually experienced by organizations. Here, missing a stage “creates only the illusion of speed and never produces a satisfying result” (Kotter, 2006, p. 150). Secondly, Kotter (2006) emphasizes that in implementing organizational change “critical mistakes in any of the phases can have a devastating impact, slowing momentum and negating hard won gains” (p. 150). With these principles in mind, Kotter (2006) has created a model containing eight indispensable ingredients whose absence or lack of proper implementation will lead to the failure of organizational change efforts.

Establishing a Sense of Urgency

Kotter (2006) argues that at the most elementary level; attempts to implement organizational change must be initiated with “establishing a great enough sense of urgency” (p. 150). This urgency may be emanating from deteriorating competitive conditions, “crises, potential crises, or great opportunities” (Kotter, 2006, p. 150). The crucial dimension would be “to communicate this information broadly and dramatically” (Kotter, 2006, p. 150) in order to secure “the aggressive cooperation of many individuals” (p. 150). Kotter (2006) contends “without motivation, people won’t help, and the effort goes nowhere” (p. 150). As much as this may sound obvious or involving minor difficulties, Kotter (2006) reports that “50% of the companies... [he has] watched fail in this first phase” (p. 150) due to the senior leadership not fully comprehending “how hard it can be to drive people out of their comfort zones” (p. 150). In addition, change efforts fail at this level because executives “overestimate how successful they have already been in increasing urgency” (Kotter, 2006, p. 150), “lack patience” (p. 150) or “become paralyzed by the downside possibilities” (p. 150). On many occasions, senior leadership worry that some employees “will become defensive…morale will drop…events will spin out of control…short-term business results will be jeopardized…stock will sink, and that

Why Change Efforts Fail Within Organizations and Strategies for Success

they will be blamed for creating a crisis” (Kotter, 2006, p. 150). Kotter (2006) analyses that “management’s mandate is to minimize risk and to keep the current system operating” (p. 150). On the other hand, “change, by definition, requires creating a new system, which in turn always demands leadership” (Kotter, 2006, p. 150). Consequently, in phase one, the change process will not experience real progress “until enough real leaders are promoted or hired into senior level jobs” (Kotter, 2006, p. 150). Kotter (2006) also offers an interesting reflection that in phase one “bad business results are both a blessing and a curse” (p. 150). In a sense, “losing money” (Kotter, 2006, p. 150) does create an existential threat and thereby a sense of urgency although “it also gives less maneuvering room” (p. 150) while positive financials may offer “more resources to help make changes” (p. 150). Nevertheless, in the latter situation, “convincing people of the need for change is much harder” (Kotter, 2006, p. 150) which requires “frank discussions of potentially unpleasant facts” (p. 150) and explaining why “the status quo … [is] more dangerous than launching into the unknown” (p. 150). In regards to both of the aforementioned scenarios, if the “urgency rate is not pumped up enough, the transformation process cannot proceed, and the long-term future of the organization is put in jeopardy” (Kotter, 2006, p. 151).

In the case of PepsiCo, their CEO from 2001 to 2006, Steve Reinemund, “believed that by seeking new opportunities in urban and Hispanic markets… [the company] could grow into a healthier and more competitive company... [he] realized that each of his businesses had low penetration in markets that had significant ethnic populations” (Thomas & Creary, August 17, 2009, p. 55). This was the condition of urgency that affected PepsiCo’s position in the market place and in order to “better understand how to appeal to ethnic populations and penetrate the markets in these areas by using targeted product and selling strategies, Reinemund believed the company needed an employee base that reflected the consumer base” (Thomas & Creary, 2009, p. 56). This sense of urgency developed during the first segment of PepsiCo’s diversity strategy and Reinemund together with his senior leadership team and the African American Advisory Board created a “business case for diversity” (Thomas & Creary, 2009, p. 56) that included “50% diverse hires, parity rate of promotions, and parity rate of turnover” (p. 56). Indeed, Reinemund added to the seriousness of the urgency by mandating that “executive bonus calculation… [be] tied to meeting diversity related objectives” (Thomas & Creary, 2009, p. 56) and when Frito-Lay division missed its diversity targets, he insisted that his and other leadership team’s bonus compensation be “substantially reduced” (p. 57). In the second segment of PepsiCo’s diversity strategy, the sense of urgency had translated into “changing the culture…to be more inviting and engaging—a culture in which every employee felt valued” (Thomas & Creary, 2009, p. 58) and “every employee would be welcomed as a key contributor” (p. 58).

Creating a Powerful Guiding Coalition

Kotter (2006) holds that organizational change programs usually begin with “one or two people” (p. 151), however in “successful transformational efforts, the leadership coalition grows and grows over time” (p. 151). Kotter (2006) brings attention to the fact that it is not sufficient to only have the “head of the organization” (p. 151) as the champion of change, rather effective transformations, depending on the size of the firm, may require 5 to 50 people to “come together and develop a shared commitment to excellent performance through renewal” (p. 151). In this second phase of organizational transformation, a number of senior leadership “just won’t buy in, at least not at first”, nevertheless, in the beginning and the interim the change “coalition is always pretty powerful—in terms of titles, information and expertise, reputation, and

Why Change Efforts Fail Within Organizations and Strategies for Success

relationships” (Kotter, 2006, p. 152). In general, Bliss (July 20, 2012, Society For Human Resource Management, Managing Organizational Change) argues, “having the right leadership and buy-in from the executive team is critical to unifying the organization behind a common strategic direction” (Management’s role). Kotter (2006) highlights that it may be necessary for the change coalition to include “members who are not members of senior management” (p. 152) operating “outside of the normal hierarchy” (p. 152). All the same, this may be required since “the current system is not working, reform generally demands activity outside of formal boundaries, expectations, and protocols” (Kotter, 2006, p. 152). PepsiCo’s African American Advisory Board and the company’s Latino/Hispanic Advisory Board who assisted in the company’s diversity efforts are examples of groups who were outside the firm’s traditional management structure (Thomas & Creary, 2009, p. 56). As witnessed in phase one, urgency clearly communicated may launch the transformation effort and bring a change coalition together, however someone is also needed in assisting this group to come together in order to “develop a shared assessment of their company’s problems and opportunities, and create a minimum level of trust and communication” (Kotter, 2006, p. 152). Kotter (2006) emphasizes that change efforts fail in phase two due to the absence of a “powerful guiding coalition” supporting change initiatives through “teamwork” (p. 152). In the event that such a powerful guiding coalition is not energetically sponsoring change efforts, gradually “the opposition gathers itself together and stops the change” (Kotter, 2006, p. 152).

Vision

Change efforts also fail when organizations embark on the transformational process with “plenty of plans, directives, and programs but no vision” (Kotter, 2006, p. 152). On the other hand, in a change effort that is effective, “the guiding coalition develops a picture of the future that is relatively easy to communicate and appeals to customers, stockholders, and employees” (Kotter, 2006, p. 152). Vision statements must go “beyond the numbers” (Kotter, 2006, p. 152), be “sensible” (p. 152) and “clarify the direction in which an organization needs to move” (p. 152) often drawn pursuant to “tough analytical thinking and a little dreaming” (p. 152). Kotter (2006) observes that in the absence of a level-headed/realistic vision, “a transformation effort can easily dissolve into a list of confusing and incompatible projects that can take the organization in the wrong direction or nowhere at all” (p. 152). Vision statements must also be “sound” (Kotter, 2006, p. 152), “clear…compelling” (p. 152) and not “too complicated or blurry to be useful” (p. 152). Kotter (2006) emphasizes that unless it is possible to “communicate the vision to someone in five minutes or less and get a reaction that signifies both understanding and interest… [one is] not yet done with this phase of the transformation process” (p. 153). In order to fulfil the vision, organizations must also create a strategy that will be intended to address change priorities such as “What new skills and abilities will employees need…How will employees learn them…What is the plan for communicating with employees and other stakeholders about the change…How will you measure success…What is needed to make transformation stick” (Bangasser, March 1, 2014, SHRM, Five Ways to Engage Employees in Change, Develop a strategy).

The Challenge of Communicating the Vision

One of the most important reasons why change efforts fail is rooted in what Kotter (2006) labels as “under-communicating the vision” (p. 153). Kotter (2006) has found three types of ineffective communication practices with respect to change efforts. In the first deficient communication approach, a coherent and well-designed vision is created however this instrument

Why Change Efforts Fail Within Organizations and Strategies for Success

is given publicity via a “single meeting or sending out a single communication” (Kotter, 2006, p. 153). In the second insufficient communication practice “the head of the organization spends a considerable amount of time making speeches to employee groups” (Kotter, 2006, p. 153), however “people still don’t get it” (p. 153). In the third under-performing communication effort, all modes of organizational communication such as “newspapers and speeches” (Kotter, 2006, p. 153) are utilized, although “some very visible senior executives still behave in ways that are antithetical to the vision” (p. 153). All these ineffectual communication efforts lead to “cynicism…while belief in the communication goes down” (Kotter, 2006, p. 153). Kotter (2006) explains that “transformation is impossible unless hundreds or thousands of people are willing to help, often to the point of making short-term sacrifices” (p. 153). Organizational actors are unwilling to make sacrifices “even if they are unhappy with status quo, unless they believe that useful change is possible” (Kotter, 2006, p. 153). This requires frequent “credible communication” (Kotter, 2006, p. 153) delivered together with disseminating information regarding “new growth possibilities and the commitment to treat fairly anyone who is laid off” (p. 153) in the transformational effort. One of the most important ingredients of this strategy is to utilize every available opportunity to communicate the change agenda in addition to placing every single organizational task, endeavor, process and system within the context of organizational transformation. An example in this area is to carry out “one-on-one conversations [in order to] help individual team members analyze how the change will affect them” (Bliss, 2012, Management’s role) by addressing questions such as “What is changing…Why is it changing…How will it affect your area…How will it affect each individual” (Management’s role).

In one of the “most effective” (Bliss, 2012, Communication breakdown) communication strategies which is labeled as “underscore and explore” (Communication breakdown), managers “develop a few core messages clearly linked to organizational success, and employees explore implications in a disciplined way…managers listen for potential misunderstanding and obstacles” (Communication breakdown). Specifically, in such a scenario, managers “should explain the change and why it is needed, be truthful about the benefits and challenges of the change, listen and respond to employees’ reactions and implications, and then ask and work for individuals’ commitment to the change” (Mizra, August 20, 2008, SHRM, Organizational Change starts with Individual Employees, How businesses can change successfully). In the case of PepsiCo’s change efforts in regards to diversity, “senior executives learned that poor communication and lack of affiliation played major roles in many employees’ exit decisions” (Thomas & Creary, 2009, p. 60) and “decided to educate managers on ways to have authentic conversations with employees” (p. 60). Here, within the communication oriented tasks associated with the change strategy, the Human Resources department plays an important role by “providing initial employee communications about change” (Bliss, 2012, HR’s role) and “preparing other informational documents” (HR’s role). Alex Jung, senior vice president of Health Initiatives Strategic Solutions at Walgreens states, “Two way communications must exist in transformation…A lack of communication, coupled with a lack of HR presence, is a problem” (as cited in Wright, November 1, 2011, SHRM, HR can improve employee buy-in for organizational change, Changing mind-sets). All in all, the most formidable and competent communication strategy is when organizational leaders “become a living symbol of the new corporate culture” (Kotter, 2006, p. 153). Kotter (2006) emphasizes that communication is practiced through “both words and deeds, and the latter are often the most powerful form” (p.

Why Change Efforts Fail Within Organizations and Strategies for Success

153). Here change efforts are substantially hampered and compromised when “behavior by important individuals…is inconsistent with their words” (Kotter, 2006, p. 153).

Obstacles

Many organizational change efforts fail due to “not removing obstacles to the new vision” (Kotter, 2006, p. 153). Transformational campaigns in order to be successful must involve “large numbers of people” (Kotter, 2006, p. 153) and every available dimension of the organization. Del Rosario (Week Five Lecture Notes, 2014) observes, “there are four sets of behaviors that can stop the launch of needed change” (p. 10) namely “Complacency--driven by false pride or arrogance…Immobilization--self-protection, a sort of hiding in the closet, driven by fear and panic…Deviance driven by anger—you can’t make me move…Pessimistic attitude—leads to constant hesitation” (p. 10). Here, communication, in and by itself is not sufficient to implement a change strategy; rather it must be combined in the fifth stage by the “removal of obstacles” (Kotter, 2006, p. 154). At times, obstacles are in the form of “narrow job categories” (Kotter, 2006, p. 154) that “undermine efforts to increase productivity or make it very difficult even to think about customers” (Kotter, 2006, p. 154). In other situations, “compensation or performance-appraisal systems make people choose between the new vision and their own self-interest” (Kotter, 2006, p. 154). An example of the elimination of such an organizational obstacle would be the evolution of PepsiCo’s performance appraisal system during the second segment of its diversity strategy from one being singularly concerned with “business results” (Thomas & Creary, 2009. P. 61) to one giving equal weight to “people results” (p. 61) and “people development and inclusive practices” (p. 61). By far, the most serious obstacle to change is “bosses who refuse to change and who make demands that are inconsistent with the overall effort” (Kotter, 2006, p. 154). These recalcitrant managers may “pay lip service to the process” (Kotter, 2006, p. 154) but do not modify their own behavior or mandate that their direct reports alter their conduct. The motivation for this posture may be ingrained in feeling “personally threatened by all the change” (Kotter, 2006, p. 154), not believing in the change or being genuinely unable to implement change and perform ones duties simultaneously. A further element in this phase is ensuring “all managers are equipped to coach their direct reports toward commitment” (Bliss, 2012, Management’s role). A 2006 PricewaterhouseCoopers study “of top executives found that 83 percent believed a lack of change management skills among managers made change initiatives difficult or extremely difficult to achieve…research shows that managers often feel overburdened and worry that the change they are facing may cause them to lose power or control, and they often do not feel included in the process” (as cited in Bliss, 2012, Management’s role). In the final analysis, successful change efforts require that all obstacles eventually be “confronted and removed” (Kotter, 2006, p. 154). Kotter (2006) holds, in the event the obstacle in question is an employee, “it is important that he or she be treated fairly and in a way that is consistent with the new vision” (p. 154).

Short Term Wins

As has already been mentioned, change efforts take a long time to implement and in the interim it is crucial to sustain the credibility and the resiliency of the transformational process. This is why it is imperative to engage in “systematically planning for, and creating, short term wins” (Kotter, 2006, p. 154). In order to sustain the energy of transformational campaigns “compelling evidence in 12 to 24 months” (Kotter, 2006, p. 154) must be secured so that employees do not “give up or actively join the ranks of those people who have been resisting change” (p. 154). In

Why Change Efforts Fail Within Organizations and Strategies for Success

successful change efforts, one will observe improvements in “quality…productivity…market share…customer satisfaction” (Kotter, 2006, p. 154) in addition to “new product introductions” (p. 154). A short-term wins strategy requires to “actively look for performance improvements, establish goals in the yearly planning system, achieve the objective, and reward the people involved with recognition, promotions, and even money” (Kotter, 2006, p. 154). Due to the long duration of a change effort, short term wins “help keep the urgency level up and force detailed analytical thinking that can clarify or revise visions” (Kotter, 2006, p. 155).

The Declaration of Victory Before it’s Time

Kotter (2006) maintains that the tendency to “declare victory with the first clear performance improvement” (p. 155) must be resisted so that “changes sink deeply into a company’s culture, a process that can take 5 to ten years” (p. 155). He emphasizes that even when the “urgency level is not intense enough, the guiding coalition not powerful enough and the vision not clear enough” (Kotter, 2006, p. 155), it is actually the declaration of “premature victory…that kills momentum” (p. 155) of the change process. Interestingly, at this juncture, “a combination of change initiators and change resistors” (Kotter, 2006, p. 155) launches the “premature victory celebration” (p. 155). A proper strategy must be to utilize short term wins “to gain credibility…to tackle even bigger problems” (Kotter, 2006, p. 155) and “go after systems and structures that are not consistent with the transformation vision and have not been confronted before” (p. 155).

Incorporating Change into the Culture of the Organization

In the end and the final phase, the intended change becomes the status quo and behavior is permanently modified when it becomes “rooted in social norms and shared values” (Kotter, 2006, p. 155) of the organization. When it comes to corporate culture, first, there must always be a consistent and perpetual “conscious attempt to show people how the new approaches, behaviors, and attitudes have helped improve performance” (Kotter, 2006, p. 155). Secondly, it is paramount that the “next generation of top management really does personify the new approach” (Kotter, 2006, pp. 155-156) and the “requirements for promotion” (p. 156) are altered. Kotter (2006) asserts that “one bad decision at the top of the organization can undermine a decade of hard work” (p. 156). In addition, Kotter (2006) recommends that the board of directors become “an integral part of the change process” (p. 156) so that the individuals selected to be at the helm of the organization are always “champions of change” (p. 156).

Conclusion

The practices, processes, habits and systems of organizations are created and reinforced over time. At a particular juncture these characteristics may potentially no longer be able to protect the interests of the entity by their failure to empower the organization to take advantage of outside opportunities or by their inability to organize defensive measures in the face of external threats. Regardless of these challenges, the introduction and effective implementation of change in organizations is also a formidable exercise requiring specific actions that must be adopted and applied with discipline and diligence. Indeed organizational change is an extremely difficult endeavor that may witness the passage of many years. In this light, successful implementation of change must involve creating a sense of urgency, forming a powerful guiding coalition, creating a vision, communicating effectively, removing obstacles, producing short term wins, not declaring victory too soon and integrating change into the culture of the organization (Kotter, 2006, pp. 149-156). Here, the most crucial aspect of a transformational effort is the

Why Change Efforts Fail Within Organizations and Strategies for Success

sheer recognition that effective and endurable change requires the adoption and competent exercise of all the aforementioned steps.

References

Why Change Efforts Fail Within Organizations and Strategies for Success

Bangasser, R. (March 1, 2014). Five ways to engage employees in change, Change Management, Organizational and Employee Development, HR Topics and Strategy, Society For Human Resource Management. Retrieved March 23, 2014 from http://www.shrm.org/Publications/hrmagazine/EditorialContent/2014/0314/Pages/0314-tools.aspx .

Bliss, W. (July 20, 2012). Managing organizational change, Change Management, Organizational and Employee Development, HR Topics and Strategy, Society For Human Resource Management. Retrieved March 23, 2014 from http://www.shrm.org/TemplatesTools/Toolkits/Pages/ManagingOrganizationalChange.aspx .

Del Rosario, M. (2014). Week 5: Managing Constant Change [PDF document]. HRM 6045—Change, Challenge, and Competence, Winter 2014, Second Half Session, College of Professional Studies, Northeastern University. Retrieved form Lecture Notes Online Web site: https://nuonline.neu.edu/bbcswebdav/pid-7087414-dt-content-rid-8157545_1/courses/HRM6045.20269.201425/HRM6045.80352.201235_ImportedContent_20120422045612/HRM%206045%20week5slides%20and%20notes%281%29.pdf .

Kotter, J. P. (2006). Leading change: Why transformation efforts fail. Best of HBR, Harvard Business Review OnPoint Article (pp. 1-10). Boston, MA: Harvard Business School Publishing Corporation, Harvard Business School, HRM 6045 Coursepack (pp. 147-157), Professor M. Del Rosario, College of Professional Studies, Northeastern University, Winter 2014.

Mizra, B. (August 20, 2008). Organizational change starts with individual employees, Articles, Business Leadership, HR Topics & Strategy, Society For Human Resources Management. Retrieved March 23, 2014 from http://www.shrm.org/hrdisciplines/businessleadership/articles/Pages/StartwithIndividualEmployees.aspx .

Thomas, D. A., & Creary, S. J. (August 17, 2009). Meeting the diversity challenge at PepsiCo: The Steve Reinemund era. Boston, MA: Harvard Business School Publishing (pp. 1-24), Harvard Business School, HRM 6045 Coursepack (51-64), Professor Del Rosario, College of Professional Studies, Northeastern University, Winter 2014.

Wright, G. (November 1, 2011). HR can improve employee buy-in for organizational change, Change Management, Organizational and Employee Development, HR Topics and Strategy, Society For Human Resource Management. Retrieved March 23, 2014 from http://www.shrm.org/hrdisciplines/orgempdev/articles/Pages/ImproveBuyIn.aspx .