Why is it that the vast majority of corporate transformations do not achieve their stated ambitions? Why are people in companies so cynical about change programs? Why are employees so keen on keeping things the same even when it is clear that the very survival of their company depends on changing.
Success or failure depends on your transformation philosophy. Depending on your philosophy you are likely to choose 1 of 2 ways to design a transformation. One approach, let’s call it type 1, is almost guaranteed to fail or at best deliver short term diluted results. The other approach, type 2, when successfully designed and executed will not only exceed any stated business outcomes but create a motivated, purpose driven movement within the organisation that can learn and adapt, drive future improvements, attract the world’s best talent and ultimately make the world a better place.
However most companies choose a type 1 approach as it is what is taught in business schools, recommended by consultants and expected by boards, shareholders and investors. Organisations that take this approach are destined for a long uphill battle often littered with face saving manufactured results. Employees are perceived to resist change and be “the issue”. Whereas the true resistance lies in the mindset of the leaders. The lack of intellectual humility in ego-driven leaders means that new approaches are shunned and the old type 1 approaches remain in place.
For a leader to embrace a type 2 approach requires intellectual humility, a passion for learning but most of all faith and trust in people. A belief that people always aim to do the right thing, they will be motivated by meaningful work and that the role of the leader is simply to create the conditions so that change can happen.
So what are type 1 and type 2 transformations?
Well type 1 transformations are those that treat a company as a machine and apply industrial-age management techniques to bulldoze the company into change. Business cases are written, consultants are hired not just to advise but to actually do the work, the transformation is set up as a project with a beginning and an end. People who are seen to get in the way are fired, the remainder have KPIs linked to financial reward to incentivise them to achieve results. Those results are defined in purely financial terms. There is tight governance where leaders micro manage, make top down decisions and ultimately create a culture of fear.
Leaders of type 2 transformations on the other hand consider their company as being made up of people. People with passion, skill and experience, that if unlocked can move mountains. Leaders of type 2 transformations realise that nothing changes unless the behaviour of the people changes. Type 1 leaders will focus on changing a technology or process, type 2 leaders will focus on equipping, empowering and enabling people so that they will be motivated to improve processes and technology themselves. Type 2 leaders recognise that companies exist not to make their shareholders richer, but to improve the lives of their customers, their employees, the members of the communities in which they operate and future generations. Having strong financials is of course essential to keep a company in business but it is not the primary outcome.
At DBS we ran a type 2 transformation. The transformation was named as one of the top ten transformations of the decade by Harvard Business Review alongside companies such as Microsoft, Netflix and Amazon. It took DBS from being an underperforming bank known for its poor customer service to being the first bank in history to be named as the Best Bank in the World by all three of the top financial periodicals. Many cases studies and articles have been written about DBS but none that I have seen have highlighted that simple fact that it was type 2 thinking that led to this success. While I was at DBS many companies came to see us to learn from our success. Since retiring from corporate life I have been advising companies. And I have seen that most companies are set up to drive change with type 1 thinking and are thereby destined for disappointment.
This is unsurprising. I used to by a type 1 thinker. It was what I was taught. It seemed to work for short term projects. It was almost by chance that we stumbled into a type 2 approach at DBS. But it was when we started to implement type 2 principles that we created a movement within the company and the magic started to happen. So if you are lead change in your company it may be worth while thinking which approach you are taking.
The “focus on inciting a movement” is the 5th habit required of leaders that are driving transformation. I have covered the others in previous posts.
I will be covering the fifth essential habit for leaders of transformation in my next post. If you would like to it to appear in your inbox as soon as I post, please leave your email below.
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