Report review: Preparing for change

February 9, 2022


Looking to next year, uncertainty will continue to dominate the business landscape as countries react to the Omicron variant. The United States announced a free-to-travel pass for fully inoculated incoming visitors in mid-December. They have also kept the economy mostly open. On the flip side, the Netherlands is in economic lockdown until mid-January, leaving only supermarkets and essential shops open.

The U.K. and E.U. countries are in partial lockdowns, preventing some travelers from entering and closing some entertainment facilities. The U.K. also is threatening to impose movement restrictions if Omicron infections persist. On the other hand, China is fully open, but has shown on several occasions it is ready to isolate entire cities. So far, Egypt and other MENA countries are imposing precautionary measures, but leaving their economies and borders open with almost no hint of impending closures.

Those contrasting approaches invariably affect businesses and their supply and distribution chains. “The last year and a half have certainly been a time of change,” said Francis Rose, of the McKinsey on Government podcast, in the December report titled Organizing for Change: Knowing How to Effect Change Is Just as Important as Knowing What to Change. “The next 18 months will include even more.”

How to effect change is not a new topic in C-suite circles. In his 1959 book “Landmarks of Tomorrow,” renowned management guru Peter Drucker wrote, “The greatest danger in times of turbulence is not the turbulence, it is to act with yesterday’s logic,” But today’s unpredictable environment makes it even more pressing. Building a corporate culture that accepts altering strategies, business models and policies without warning will likely become a prerequisite for success in 2022.

A difficult sell

Kirk Rieckhoff, a senior partner at McKinsey’s Washington office, acknowledged in the December report that almost any organizational change is challenging. “When I hear the question today, ‘Why is change so hard?’ I would almost turn it on its head and say, ‘Well, it shouldn’t be easy,'” he said.

That difficulty arises from the basic concept that companies are systems with people operating them. Rieckhoff said systems represent the status quo in any organization: “Imagine a ball between two hills. It [can roll, but will always stay in the middle.”

To make change more acceptable to the organization, Rieckhoff recommends managers carefully consider what needs changing. “The question is … ‘What matters to the people in this system?’ and working within that, not against it.”

Making change stick

Once the manager decides on the nature of the change and how it would benefit the team and the organization, the other challenge is to make it permanent. Or at least stable, noted Rieckhoff.

To make changes permanent, a manager has several options. The first is to convince the entire team to align and comply with those new policies. The other option is to change the system to force implementation of those new procedures. “One common way of doing it is to ‘burn the boat’ … make it so we can’t go backward,” said Rieckhoff. The third way is to hire a third party to supervise and ensure implementation.

Rieckhoff believes any of those options can be effective, depending on the nature of the business and what is changing. “That’s where we have to start the discussion,” he said, stressing that once managers select a path, they could alter it midway.

Regardless of the path chosen, the first step is not to change the entire system. The key is to correctly identify a small part in the system that, if altered, would ensure the new procedures would be implemented. For example, the change advocate could put digitally filed resource requests ahead of paper submissions to encourage employees to use the electronic system.

However, employees might revert to the abandoned ways (comfort zone) from time to time. But, ultimately, when seeing the benefits of the new policy, which is getting their resources on time, employees will adopt that new system sooner rather than later.

Rieckhoff acknowledges the importance of team members’ attitudes and commitment, especially in complicated scenarios. “The team around you is the most important factor for your success,” he stressed. “It is that team … really believing in the change you are doing that is going to make the difference.”

The other realization when making change permanent is that it is most challenging to implement it at the top of an organization. “This idea that you’re controlling [subordinates] or telling them what to do is ludicrous,” said Rieckhoff. That is particularly so in upper management. “No senior leaders are interested in someone else directing them on what to do. They became senior leaders because they like to make things happen.”

Change advocates overcome that barrier by persuading others that change is the right thing to do. Rieckhoff identifies several routes to appeal to senior executives and managers. The first is to show how the new policies or procedures would serve the organization’s mission. The second is to highlight how that change would benefit executives’ stature or help advance their careers. The third option is to highlight the benefits to customers and the organization. “These are the deep ‘whys’ that really get people going,” noted Rieckhoff.

However, sometimes change advocates tend to paint a rosy picture of how those new policies and procedures would make everything great. “You also have to equally describe what reality is today and get common agreement there,” said Rieckhoff.

Introducing the plan

The other challenge change advocates face when talking about new policies and procedures is that company executives could change their minds. To avoid that, the change advocate must have a plan. “I think a good leader is somebody who has the rough outlines of where we’re going and lets everyone figure it out from there,” said Rieckhoff.

Components of such a plan are milestones and who is responsible for achieving what after how long. Otherwise, the organization will remain stuck in planning mode, he noted.

Change advocates should also initially give direction about the path changes will take. Rieckhoff warns against starting the process with “quick wins,” as they are an “illusion. Most organizations will have accomplished those already … What you’re really looking for is quick progress.”

This early guidance gives managers and employees a fresh perspective on what can and should change versus allowing them to fall into their comfort zone. “It is … showing people who have been in this system, oftentimes where they’ve been trying to make a change … that change is possible,” said Rieckhoff.

In those early phases, change advocates should have the authority to move existing resources to different departments, hire more people and ask employees to assume different roles. “It’s those kinds of things where people begin saying … ‘their actions are following their words, so I’m going to follow and do it as well,’” explained Rieckhoff.

Overcoming barriers

Rieckhoff notes that as change advocates start implementing their plans, they face incumbent barriers that stalled previous attempts at change. “The first one is around the ‘frozen middle’ that we commonly hear people talk about,” he said.

That barrier occurs when the change advocate, be it the top executive or owner, has a vision for the organization, but the changes stall as the idea moves toward middle management. At that point, top managers and owners have the option to force change.

Before taking that step, Rieckhoff advises those instigating changes need to consider the unique insights that middle managers have. “The people in the middle have the most expertise because they can see the front lines,” he explained.

They also can see the top of the organization and pressures that would eventually reach junior managers and front-line employees. “If nothing’s happening, it’s probably because [middle managers] are quite smart and understand this doesn’t work,” noted Rieckhoff.

At that point, change advocates need to step back to ask: Why isn’t it working? Rieckhoff stressed that any new policy could work in any organization. But if it doesn’t, there is an incumbent reason and middle managers are the key to understanding and resolving it. That would most likely only happen by molding those new procedures and policies to work on the ground. “We can spend a lot of time trying to get senior leaders on board,” he said, “when actually what you want to do is just make it make sense for middle management.”

Rieckhoff also stressed that middle managers must attend all top-level meetings that discuss the new processes and procedures from day one to get the smoothest and most effective transitions.

The other challenge when implementing a new policy or procedure is resistance from departments that facilitate that change but are not part of it. A case in point is convincing the finance department to allocate funds for employees’ home internet, as hybrid work becomes the norm. Change advocates “are going to need other parts of the organization to help them … because of the way the [company] is set up,” noted Rieckhoff.

However, he stresses this shouldn’t be a problem the change advocate must solve. “‘You go figure out what to do’ is a great leadership maxim,” said Rieckhoff. “[Employees] need to go figure that out, but [change advocates] have to help them and support them as they do it. It can’t be just a fire-and-forget … weapon.”

Scaling up

Top executives or owners have an array of options to start implmenting their new policies or procedures. Yet, in most cases, they only see one solution to enacting change. “Typically, it’s, ‘Hey, I want to make a change happen, so I’m going to pick this person.’ And you go get a team, and you make it happen,” explained Rieckhoff.

However, he noted that three approaches stand out when the top executive or owner wants to implement change. One is the “incubator model,” suitable for testing new ideas never implemented in the organization. Rieckhoff explained the owner or top executive would create a mini-company with enough authority to implement the new processes or policies. “And you let it run,” he said.

The pros of that approach are that it allows the change advocate to see how the new policies and procedures would work in the organization’s ecosystem. However, the top executive or owner must protect it from the larger company. “That’s important, especially when you’re trying to do self-disruptive things or things that the organization … wouldn’t naturally do,” said Rieckhoff.

The second strategy to implement change is the “pathfinder” approach. “It is the most common one that I see,” said Rieckhoff. It is when the company decides to do a pilot project that runs parallel to the currently used policy or procedure to compare outcomes.

However, Rieckhoff warns those “pathfinder” projects should not be too big or small. If they are too large and fail, it might drag down the entire company. On the other hand, if it is too small, it might not “require changes to happen,” he explained. They must also be “something that the top of the house cares about.”

Implementation of new processes and policies is up to “agile teams,” whose members must include high-rank employees who have the authority and expertise to make the changes necessary to fulfill the owner or top manager’s vision.

The third approach is the fastest, but also the riskiest. The “transformation office” approach is when the entire company implements the new policies and procedures simultaneously. “The transformation office inherently is trying to make change happen within the existing organizational model … which is great, as long as that’s the organizational model that will work,” explained Rieckhoff.

Measuring results

Before deciding to scale up new policies and procedures across the organization, Rieckhoff stressed the need for a “performance management” apparatus. Its first job is to ensure that outcomes from the change align with the mission statement. That would ensure briefings don’t become a “pony and horse show where whoever’s the best briefer wins,” noted Rieckhoff. That is how the top executive or owner keeps change “alive.”

Another vital factor in measuring performance is selection of data that reflects the change. Rieckhoff said that top-line revenue and bottom-line cost would be the straightforward metrics for any change advocate. However, organizations also need to consider more qualitative metrics, including employee satisfaction with the new processes and policies. “That is where performance management comes into play,” said Rieckhoff.

He stressed that the people measuring those qualitative results must be “independent from the organization that’s doing the change.” They also must command respect from the organization’s employees under review.

However, Rieckoff stressed that the top executive or owner must not focus solely on results: “You use them as a tool to dig in to understand more. It just tells you where to look, not what the answer is.”