15 July 2009 • 7:00 am

Irrational Side of Change Management – Part 2 of 3

In Part One of this series of three posts, I introduced an article published recently in the McKinsey Quarterly entitled The Irrational Side of Change Management, and summarized their first three of nine lessons about why common sense hasn’t helped improve the success rate of change. If you didn’t read the first post, please start there. We continue here with the next four lessons.

Condition II: Role Modeling

Conventional wisdom says that leaders must visibly behave in ways that reinforce the change agenda, and enlist others with influence to support the cause of change.

Lesson 4: Leaders are biased when seeing themselves

McKinsey idea: Most senior executives understand the concept of role modeling, in the abstract. But they mistakenly believe that they are already exhibiting the necessary behaviors. 360 degree feedback sessions and surveys help executives see beyond their own biased and generous view of themselves as ‘being the change.’

Tenacious Tortoise comment: Some executives view the strategic management process and change programs as a burden on their time – they say, “I need to get back to my real job.” These are the ones who are most likely to miss strategy review meetings, or arrive unprepared. The moment of truth comes when the senior executive either offers leeway and forgiveness, or holds team members fully accountable for their engagement with the process. I’ve seen months of good change program effort derailed when the leader him- or herself opts out of a critical meeting, or worse, is distracted by e-mail and phone calls during the meetings. Of course, these behaviors aren’t visible to rank and file, but the message sent in the leadership team has a profound effect on their subsequent behavior in the organization. This is why the quality of the coaching relationships I am able to build with leadership team members is a good predictor of the overall success of the change program.

Lesson 5: Don’t rely excessively on ‘influencers’

McK: The value of identifying and enlisting ‘influence leaders’ in the enterprise is unquestioned, but don’t view these influencers as the critical path to success. Unexpected members of the rank and file who ‘step-up’ to the change agenda may have more impact when driving change.

TT: In practice, far more energy is invested in developing the strategy than in broadly communicating strategy and performance across the organization. Identified influencers have often achieved that status because of their superior political skills. Enlisting influencers in the cause is no substitute for an effective communication program, and may require significant political concessions to those influencers to ‘buy’ their public support.

Condition III: Reinforcing Mechanisms

Policies, processes, procedures, systems, and incentives are all artifacts of the enterprise that must be modified to reflect the desired future state of the organization. But common sense changes don’t result in common sense behavior when people aren’t rational.

Lesson 6: Money is a costly way to motivate people

McK: Linking desired outcomes to staff compensation has limited impact on motivation. Meaningful links are difficult to establish, both because of low-credibility metrics, and because compensation incentives are usually too small to make a difference. But small, unexpected, often non-monetary rewards can have a disproportionately large effect on satisfaction and motivation.

TT: Compensation is simply not a motivator, it is hygienic, according to Herzberg’s Motivator-Hygiene Theory. Incentive-based compensations are far more difficult to implement successfully than they are to imagine. Fortunately, the frenzy I saw for linking compensation to strategy over the past decade or so has subsided a bit, and given the anxiety of job losses, pay freezes, and forced furloughs, this seems like a good time to resist the urge to establish these connections. Non-monetary rewards and recognition can be a powerful motivator, but institutionalized programs of such recognition can quickly lose effect and credibility. Understanding individual employee motivations is a far better investment of management energy.

Lesson 7: Employees care about fairness

McK: Employees won’t pursue a change agenda they perceive is unfair to customers, suppliers, or other employees. Leaders should spend much more time understanding how employees understand and perceive the impact of the change program on stakeholders. Employees asked to behave in ways they see as unfair to others will ignore or thwart the change agenda.

TT: Wise advice. Extreme pressure resulting from the global economic slowdown is causing most organizations to look at costs, and the impact of cutbacks is being felt by employees and customers everywhere. These realities are inescapable, but asking employees to do things they believe are unjust in the name of company survival, even at the risk of personal job loss, will inflict damage to the organization / employee compact that may take years to repair.

Next: Two final lessons from McKinsey.

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