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70% of Transformation Programs Fail - McKinsey

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McKinsey experts estimate that 70% of Transformation Programs Fail - Make Your Program Succeed With Proven Strategies to Generate Momentum and Sustain Long Term Change. ...

McKinsey experts estimate that 70% of Transformation Programs Fail - Make Your Program Succeed With Proven Strategies to Generate Momentum and Sustain Long Term Change.

Transformation change programs often fail for avoidable reasons related to ownership, structure, or communication. With ever increasing complexity and competing priorities in the workplace, securing the attention and commitment of the workforce is becoming harder by the day. Why are the vital characteristics of successful change neglected? What can you do to secure commitment and gain traction in your change efforts?

In this presentation, McKinsey experts investigate the primary reasons for program failure. We will also review case studies to highlight key strategies and technologies employed to overcome these pitfalls that resulted in an engaged and energized workforce.

This discussion was sponsored by McKinsey Solutions.

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70% of Transformation Programs Fail - McKinsey 70% of Transformation Programs Fail - McKinsey Presentation Transcript

  • © AIPMM 2013 www.aipmm.com AIPMM Webinar Series www.aipmm.com
  • © AIPMM 2013 www.aipmm.com
  • © AIPMM 2013 www.aipmm.com Today we will be using the following hashtags: #AIPMM #ProdBOK You can also reach us at: McKinsey Wave: @McKinseyWave Hector Del Castillo: @hmdelcastillo AIPMM: @AIPMM Tweet!
  • © AIPMM 2013 www.aipmm.com • Two lucky winners will win one Guide to the Product Management and Marketing Body of Knowledge (ProdBOK®) Participate and Win!
  • © AIPMM 2013 www.aipmm.com Today’s Speakers Moderator: Hector Del Castillo Presenters: Edward Kitching McKinsey New York Shaibal Roy McKinsey London
  • 70% of transformation programs fail – Make your program succeed with proven strategies to generate momentum and sustain long term change Edward Kitching McKinsey New York Shaibal Roy McKinsey London September 26th 2013 CONFIDENTIAL AND PROPRIETARY Any use of this material without specific permission of McKinsey & Company is strictly prohibited
  • Contents 1 Section 1 Understanding the challenge ▪ Understanding the challenge ▪ Framing the solution ▪ Practical steps to success ▪ Case Studies – tools in action
  • McKinsey has invested in years of learning to uncover the key to successful transformation 2SOURCE: McKinsey 4 Leading academics reviewed, challenged and augmented our findings 3 Years dedicated to developing and refining our understanding of healthy organizations 20 CEOs and chairpersons shared their personal experience with change in face- to-face interviews Respondents from more than 400 organizations completed our organizational health survey providing the inputs for McKinsey’s Organizational Health Index (OHI) database 311,000 CEOs and senior executives completed surveys regarding their experience with transformational change 6,800 900 Academic journal articles and books reviewed Three worldwide surveys with senior executives who had experi- enced a significant performance transformation in the last five years: 2,314 senior executives responded in January 2010 2,994 senior executives responded in July 2008 1,536 senior executives responded in June 2006
  • Participant Poll #1: Questions about transformational change… 3SOURCE: McKinsey Quarterly Transformation Executive Survey, 2008; Next Generation PMO KIP Team Percentage of companies transforming their organizations75% Rate of success in transformations where clients do not have holistic programs 10%
  • Common failure modes in large-scale improvement programs 4 Business results Time People involved 10s 100s 1,000s 1-3 years Failure to launch ▪ Stuck in diagnostics – leaders unable to align on what to do, where to start ▪ Managers not held account- able for performance ▪ Employees resistant Failure to sustain ▪ No change in day-to-day behaviors ▪ Change agents – not the line – leading the change ▪ No capability upgrade at the site level ▪ Improvements not baked into budgets Failure to scale ▪ Multiple bottom-up efforts with competing methodologies and no overarching blueprint ▪ Limited leadership capacity ▪ Waning focus from senior teamExamples of change programs  Organization design changes  Mergers  New product launch  Lean transformation  New IT-system roll-out SOURCE: McKinsey Quarterly Transformation Executive Survey, 2008; Next Generation PMO KIP Team
  • Most change programs fail … and for predictable reasons 5 30 70 Employee resistance to change Management behavior does not support change Inadequate resources or budget Other obstacles 39 33 14 14 % of efforts failing to achieve target impact Change program failure rate Reasons for failure SOURCE: McKinsey Quarterly Transformation Executive Survey, 2008; Next Generation PMO KIP Team
  • The four levers of the Influence Model need to be pulled simultaneously to sustain a real shift in behavior 6SOURCE: McKinsey I will change the way I work if… Developing talent and skills Aligned systems and structures Role modelling Understanding and conviction …I have the knowledge and the skills to behave differently… …I see new conduct in leaders, colleagues and direct reports… …I understand the shift we’re trying to make and it makes sense to me personally… …The structure, processes and systems encourage the change in behavior expected of me…
  • Contents 7 Section 2 Framing the solution ▪ Understanding the challenge ▪ Framing the solution ▪ Practical steps to success ▪ Case Studies – tools in action
  • The ways in which we manage change efforts can vary based on their desired goals 8SOURCE: Next Generation PMO KIP team Based on these goals, formal systems and structures must be able to: 1. Support overall program structure and accountability 2. Provide transparency and rigorous progress tracking to lock in change How much new capability is needed? How much change is desired? A lot A little A little A lot Nerve center Coordination Change engine Coordination Change Management Center of excellence Coordination Capability building Revolutionizer Coordination Change Management Capability building
  • Golden Rule #1 Formal Systems and structures must support overall program processes and accountability 9SOURCE: Next-generation PMO KIP team; McKinsey Quarterly transformational change survey, 2010 -7 -69 -68 -1 -46 -1 -26 -19 The transformation was organized into a clear structure with readily understandable sections %, N = 2,041 Not at all true Somewhat true Quite true Entirely true Degree of transformation success Extremely successful Successful Somewhat successful Not successful at all 2 2 6 10 23 46 60 13 Properly structured and well managed work plans with clear roles and responsibilities Helping to develop a bold and memorable aspiration Aligning initiatives within the themes and redefining/ eliminating those which don’t align Identifying complementarities and dependencies between initiatives Articulating both performance and health themes that are consistent with the aspiration x 6.1
  • #1 However, often organisations lack robust tools for program management 10SOURCE: McKinsey Transformations and improvement programs typically consist of a portfolio of initiatives which in turn can consist of several detailed actions plans etc Initiative 4 Improvement program Initiative 2 Initiative 3 Program management tools should provide : ▪ Defining balanced portfolio of initiatives and associated actions ▪ Tracking progress of initiatives and overall program for all incl. top management reporting ▪ Monitoring achievement of impact targets ▪ Facilitating collaboration and communication ▪ Enabling responses and adjustments by senior management Managers of individual initiatives may also need more detailed project management capabilities at the action level: ▪ Resource management (FTEs) ▪ Tracking sub levels of activities ▪ Dependency and critical path management Tools must provide integration or complementary to other specialised tools to offer managers the ability to combine program management and Action 1 Action 2 Action 3… Initiative 1
  • Golden Rule #2 Transparent information and stringent progress tracking are major characteristics of successful transformations 11SOURCE: Next-generation PMO KIP team; McKinsey Quarterly transformational change survey, 2010 67 24 3 Very true 3 44 49 5 Entirely true 0 28 56 16 x 7.3 Not at all true 17 74 8 1 Somewhat true 6 Stringent progress tracking increases likelihood of success by factor 7 Clear, unambiguous metrics and milestones were in place to ensure that progress and impact were rigorously tracked Percent, N = 2,0441 1 Unweighted data Note 1: Due to rounding, totals might not add exactly to 100% Note 2: Data weighted by proportion of world GDP, following McKinsey Quarterly weighting standards The right information was available at the right time for managers to monitor the transforma- tion’s progress and trouble-shoot where required Percent, N = 2,0381 Availability of information increases likelihood of success by factor 4 Extremely successful Somewhat successfulVery successful Not successful at all x 4.6 Not at all true 19 66 12 3 Somewhat true 5 67 26 2 Very true 2 41 50 8 Entirely true 1 31 52 16
  • #2 Change management frameworks should support a process of cascading progress reviews to enable continuous improvement 12SOURCE: McKinsey A strong performance management framework can help … Create a direct link between the front line and the CEO/top team to ensure that everyone is heading toward same set of objectives Quickly identify issues to ensure program is delivered at the right pace Maintain a ‘single version of the truth’ Build appropriate skills to ensure continued success and ensure step-change improvement Translation into corrective actions and performance management measures Program sponsor MonthlyWeekly Frontline managers Staff Bi-weekly Senior Management Bottom - Up Top - Down Long term perspective  Track progress and impact  Guidance  Identify complementari ties/dependen- cies across departments Day-to-day management  Review progress and impact  Identify issues  Consolidate up new initiatives Medium term coordination  Track progress and impact  Support  Identify issues  Prioritize initiatives  Identify complemen- tarities or dependencies Update on progress and escalation of issues
  • Best in class program management tools can help successfully plan, execute and sustain improvement programs 13SOURCE: Wave Team Plan Create a balanced portfolio of initiatives including ▪ Capture ideas for improvement initiatives and define them in a centralized location ▪ Prioritize them, assign single-point ownership, define associated actions, and timing ▪ Evaluate and assign potential impact to initiatives Execute Track and maintain all of these initiatives over time including ▪ Visualize progress, delays, and accountability ▪ Reprioritize and respond to changes ▪ Communicate clearly about status and adjustments needed across the organization Sustain Measure impact of actions over time including ▪ Show to what extent financial and opera- tional targets are being met ▪ Understand what is driving gaps (which initiatives were not completed and who is responsible)
  • Contents 14 Section 3 Practical steps to success ▪ Understanding the challenge ▪ Framing the solution ▪ Practical steps to success ▪ Case Studies – tools in action
  • Setup & Launch User adoption ▪ Kick-off Define use cases, gather requirements and set parameters ▪ Configuration Agile design and deployment of a relevant and sustainable tool ▪ Expertise – PMO – Sector specific – Technical  Upload Existing or new data, in a consistent/appropriate way  Launch Phased spread through the program and stakeholder groups ▪ Communication Strategies to raise awareness, understanding and acceptance ▪ Tailored in person training – CST / Super User – End user – C-level Repeated on a regular basis through the adoption cycle ▪ Integration Alignment with existing business process, business rules, structures and systems ▪ Sponsorship Building senor awareness, understanding and buy-in There is a two stage process to a successful deployment and adoption of a technology platform to improve program management 15SOURCE: Wave Team
  • Successful adoption of your program tool – what is required when applying the influence model SOURCE: Wave Team ▪ Adequate, tailored and appropriate training ▪ Repeated regularly as required ▪ Reinforce and integrate ▪ Use carrot and stick ▪ Recognize and reward ▪ Part of current workload ▪ Senior leaders and PMO should be regularly use ▪ Identify ‘influencers’ across the program ▪ Build a story ▪ Tailor the benefits across the program ▪ Use stories to convince 16 I will change the way I work if… Developing talent and skills Aligned systems and structures Role modelling Understanding and conviction …I have the knowledge and the skills to behave differently… …I see new conduct in leaders, colleagues and direct reports… …I understand the shift we’re trying to make and it makes sense to me personally… …The structure, processes and systems encourage the change in behavior expected of me…
  • Following a successful launch, the challenge is to maintain the momentum through the course of the program SOURCE: Wave Team 17  Push notifications  Competitions  Idea capture  Excellent content  The ‘new way’ of managing things
  • Contents 18 Section 4 Case studies ▪ Understanding the challenge ▪ Framing the solution ▪ Practical steps to success ▪ Case Studies – tools in action
  • UK Healthcare provider improvement 19 ▪ A large UK healthcare provider launched a multi-year cost improvement and operational effectiveness program across all units within the organisation ▪ Because of the highly decentralized structure, communication flow between units and central PMO was poor and data currency almost impossible to achieve ▪ Platform was the key communication channel for 40+ users within the organisation, enabling tight monitoring of 450 initiatives and 900 sub-tasks, and aggregation of budget information from numerous units “This tool gives us the single version of the truth needed to interpret the numbers” “Tool made it easy to track progress without a monster xls file that would have taken days and days to keep updated” Program tool to track multi-year healthcare transformation SOURCE: Wave team 450 INITIATIVES 900 SUB-TASKS 43 USERS
  • ▪ McKinsey assisted with the Repositioning of an Australian Platform transformation process ▪ Covering all Australian mines and central business units ▪ CI team and site team came up with initiatives to realize AUD >300 million in cost reductions over the next year Situation and study context ▪ Detailed initiatives, action plans and financial targets tracking ▪ One Source of Truth for all management to utilize (Mine GM and employees to Charles) in cascaded performance conversations ▪ Follow up of the initiatives and action plans by the PMO ▪ Comparison between targets and achieved results What the platform was used for ▪ 1100+ initiatives identified, for implementation, delivering the Australian target of $273m cost reduction by 2014 run-rate ▪ Tool created great momentum throughout the organization and real “transformation” aspiration ▪ Empowered the client team members to take over the PMO and transformation process within just 5 months! Results achieved and the role the platform played Mining transformation in Australia 20SOURCE: Wave team 87 USERS 1192 INITIATIVES 894 MILESTONES
  • The quick and easy way to develop a community 21 Private Members Club: Make it strictly private for a closed community with no impression of what is inside Content free-for-all Make it as easy as possible to gather as much user generated content as possible
  • The harder, more sustainable way to develop an online community Dotted = open, single line = private, double line = secret 22 TOPIC A SECRET CONTENT PRIVATE CONTENT TOPIC B TOPIC C OPEN CONTENT Open it up: Invite an open community with content previews, but enable privacy and secrecy Content containers: Make it much easier to organise and navigate content
  • 23 TOPIC A SECRET CONTENT PRIVATE CONTENT TOPIC B TOPIC C OPEN CONTENT The harder, more sustainable way to develop an online community Dotted = open, single line = private, double line = secret
  • In summary: There is a holistic desired endpoint & key success factors to get there 24 Mindsets, behaviors & capabilities Implementation readiness Infrastructure “The way individuals and organization think, feel, and act at workplace to ceaselessly pursue customer satisfaction” Systematic management structure and process to maintain and mange operating system and achieve continuous improvement” Organize and use assets in a way to minimize waste and variance and maximize flexibility on value chain”
  • Q&A Presenters: Edward Kitching (edward_kitching@mckinsey.com) McKinsey New York Shaibal Roy (shaibal_roy@mckinsey.com) McKinsey London CONFIDENTIAL AND PROPRIETARY Any use of this material without specific permission of McKinsey & Company is strictly prohibited
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