New executives are usually hired to catalyze change in their organizations, often early in their transition. Whether it is getting projects that are off of the rails back on track, or upgrading talent, structure, systems and processes, successfully implementing change can be both difficult and risky. That is why it is important for leaders to understand the issues that they must be able to address to deliver successful change initiatives.
Based on numerous CFO Transition Lab™ sessions, we have identified 12 risk factors we call the “Wheel of Woe” execution issues. Thoughtful consideration of and response to these execution risk factors can help improve the odds of success.
Generally, the issues in the “Wheel of Woe” (see Figure 1) come from three underlying drivers of execution risk: availability of critical resources; stakeholder commitment and alignment; and emotional, cognitive and social resistance. The risks in these categories are outlined as follows:
Resources:
- Budgets:
An inadequate budget is a key challenge for change initiatives, as it can lead to stress, reduction in change elements delivered, and the project falling short of stakeholders’ expectations. It is crucial for budgets and expectations to be aligned at the outset to avoid initiatives that will fail by definition.
- Workloads:
One of the issues we often hear in our labs is that many change efforts add to existing work demands, and those driving or executing change have little or no excess capacity to undertake additional projects. It is important to ask what work can be stopped to free up time to successfully execute these initiatives.
Another workload concern that invites resistance is one where the outcome of a change process creates more work and no payoffs. For example, imagine your company operates high-end restaurants. The CFO implements a new system where chefs now must type their orders into an online system rather than faxing their written ingredients to a procurement organization. It is likely that this initiative will win little support from chefs, as there are virtually no payoffs for them, and it requires a new level of effort.
Avoiding these forms of resistance requires leaders to identify how the change effort or new process impacts the work requirements of different stakeholders.
- Talent
Hiring people with the specific skills and experiences needed to execute and maintain such initiatives is critical for successful change. But oftentimes, recruiting and onboarding efforts for specialized, high-quality talent can take time and require a budget.
An especially important type of talent is leadership talent for the change initiative. Organizations should ask themselves, are the people we employ able to energize those involved in the initiative? Are they able to break the project down and bring it together again? Do they have the right level of authority to make key change decisions? A leader without these skills for a complex initiative is likely to fail.
- Data and systems
We have found supporting information and data to be a critical constraint to change in many organizations. Core legacy systems may not be able to provide timely and accurate information for business decision making, and critical systems and data sets may not be integrated to give real-time insights on business issues. Thus, core data and IT infrastructure must be improved before changes can be delivered in the company.
Alignment:
- Stakeholder commitment
Change initiatives without the right level of commitment can be delayed or fail, and become difficult to execute. Misalignments do not always occur due to major disagreements or conflicts among stakeholders. Instead, it could be because different stakeholders may prioritize their work differently. It is imperative to have a sponsor with the authority to align incentives across critical stakeholders, and ensure commitment of the right resources.
- Governance
An effective governance mechanism is key in sustaining stakeholder commitment and realigning it to a change initiative. A governance structure and process, which may be multilayered, will bring together the critical stakeholders on a regular cadence to keep them informed and committed, seek their counsel and inputs, and gain their support for future directions. All too often, we find ineffective governance structures and processes undermining success.
- Ambiguity and uncertainty
When companies are unclear about their key strategic choices, such as the purpose of change, new process and system specifications, and desired outcomes, their strategies may not effectively translate into value-creating execution.
Ambiguity can be especially costly in change projects that require information systems. Consider the case of creating an app to connect your company to clients. Is its purpose to create added convenience for your clients? To inform clients about your new products? For targeted marketing? All of the above? Clarity of purpose is a good starting point from which to drive the design of processes and systems.
Ambiguity can also arise from the unknown. In the example above, we may not know how customers will react to the new app. It may be necessary to build a preliminary app, test it with users, and change the features with ongoing user inputs to arrive at a product that meets business objectives. This process can help resolve the uncertainties of specifying all needs at the outset.
Emotional, cognitive and social risks:
- Habits
Executives in our CFO Transition Lab sessions often say, “This is the way we have always done it,” as an impediment to change. Habits delay change because staff simply may not want to adopt a new way of working or a new system. Changing habits can be hard and removing enablers of old habits may be critical to enabling positive change.
- Fear
A powerful emotion that can be paralyzing and inhibit change is the fear of loss or the unknown. Take cloud computing, for instance. Many management teams were initially reluctant to consider the cloud as a resource out of fear of cybersecurity risks and loss of private data. But over time, as users gained more confidence in the security of cloud service providers, more applications and data are being moved to the cloud.
- Diminished Autonomy and Power
Certain change efforts may impact power relationships, influence, and autonomy of individuals in an organization. For example, when the group-level CFO seeks greater transparency into the business units and their work-in-process inventories, it may reveal information that alters the power between the center and business units. The information that the CFO gathers may reveal shortcomings of the business unit CEO. In order to overcome resistance to changes in power, the CFO will likely have to accumulate his or her own power, or have the power of the group CEO as a sponsor behind changes.
- Social Dissatisfaction
When work roles are transformed, this can often lead to less work satisfaction or a change in worker status. Many CxOs try to improve operations and realize savings by implementing shared services solutions, which can promise better specialization and definition of career paths. However, while moving staff from multiple locations to a shared services center may appear to reduce costs, the real outcome could be reduced client satisfaction and increased turnover.
To manage change, CxOs should have leaders anticipate social satisfaction impacts of work redefinition and plan to mitigate them.
- Culture
The final hurdle leaders must overcome arises from the prevailing culture in the organization. In many cases, specific groups are unwilling to change due to the belief that they are “special and different from other groups in the company.” It may be necessary to disaffirm the prevailing beliefs before the culture is altered.
For incoming executives, the pathway to improving company performance can entail significant change initiatives. Yet, many of these can get crushed by the 12 “Wheel of Woe” execution risks. A starting point for leaders is to systematically anticipate and prioritize the risks that are most likely to impede the realization. Then, the odds of success can be improved by ensuring enough resources, aligning governance to execution, and helping individuals overcome resistance to change.
Ajit Kambil is Global CFO Program Research Director of Deloitte LLP.