Leaders of change companies prepare for a stronger future

Leaders of change Companies prepare for a stronger future A report from the Economist Intelligence Unit sponsored by Leaders of change Companies prepare for a stronger future Preface Leaders of change: Companies prepare for a stronger future is an Economist Intelligence Unit report, sponsored by Celerant Consulting The Economist Intelligence Unit conducted the survey and analysis and wrote the report The findings and views expressed in the report not necessarily reflect the views of the sponsor The report’s quantitative findings come from a survey of 288 senior executives, conducted in November 2010 The Economist Intelligence Unit’s editorial team designed the survey Paul Kielstra was the author of the report and Gilda Stahl was the editor Mike Kenny was responsible for the design To supplement the quantitative survey results, the Economist Intelligence Unit conducted in-depth interviews with relevant experts We would like to thank all interviewees for their time and insights January 2011 About the survey A total of 288 senior executives participated in the change management survey, which was conducted in November 2010 Of those who responded, 42% were C-level executives or above and the remainder © Economist Intelligence Unit Limited 2011 were in senior management Respondents hailed from North America (44%), Western Europe (40%) and Latin America (16%) Survey participants came from a wide range of industries, with just over 75% from organisations with annual revenue greater than US$1bn For more details on the survey sample and results, see the appendix of this study Leaders of change Companies prepare for a stronger future Introduction T he focus of change management has shifted, according to a survey conducted by the Economist Intelligence Unit and sponsored by Celerant Consulting Although companies remain, as always, cost conscious, they are putting much more emphasis on growing market share and preparing for the future Similarly, organisations are increasingly devoting their attention to the sales and marketing functions This further reflects the shift in emphasis towards growth and the future and away from cost cutting Apparently, executives are leaving the preoccupations of surviving the downturn behind Yet companies are still, all too often, unable to execute change The responsibility inevitably resides with their leaders © Economist Intelligence Unit Limited 2011 Leaders of change Companies prepare for a stronger future Looking to the future A lthough downside risks remain, the world’s big economies appear to have returned to growth, albeit slowly The Economist Intelligence Unit forecasts that GDP in North America will increase annually by around 2% in real terms and in Western Europe by a little less than that The engines of growth, however, will now be in the developing world: China and India should average annual real GDP growth of over 8% in the next few years, and Latin America should average around 4% per year Contraction and recovery: actual and estimated GDP growth, 2006-14 (%) North America Western Europe Latin America China India 15 12 -3 -6 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: Economist Intelligence Unit, Global Forecast Meanwhile, companies are adjusting to the new landscape, moving beyond the emphasis on survival that dominated considerations during the economic downturn This does not mean returning to strategies that worked in earlier, better times; the world has changed too much Instead, the three main goals of corporate change initiatives over the next year—according to respondents to a survey conducted by the Economist Intelligence Unit and sponsored by Celerant Consulting—are increasing revenue (cited by 55%), preparing the organisation for the future (52%) and cost reduction (50%) © Economist Intelligence Unit Limited 2011 Leaders of change Companies prepare for a stronger future What are the main forces driving change at your company? (% respondents) Consumer goods Energy & natural resources Healthcare, pharmaceuticals & biotechnology Competitive/cost pressures 56 46 63 Customer demand (eg, for better quality, service, different products) 44 34 21 Regulation 10 31 31 Desire to increase market share 26 51 33 Merger or acquisition 12 14 36 Exploiting emerging market opportunities (sourcing and sales) 24 18 Investor expectations 17 23 26 Reducing complexity within company 17 37 26 Change for the sake of change 0 Sustainability/green initiatives Reduction of headcount 13 Source: Economist Intelligence Unit survey, November 2010 The overall survey findings represent a discernable shift from the responses to this question in two previous surveys conducted by the Economist Intelligence Unit and sponsored by Celerant, where cost concerns dominated Last year, for example, 66% of respondents cited cost reduction as the primary goal of change initiatives, while preparing for the future (46%) and increasing revenue (37%) lagged behind As Rosabeth Kanter, Ernest L Arbuckle Professor of Business Administration at Harvard Business School and author of Supercorp: How vanguard companies create innovation, profit, growth and social good, remarks, “Change management activities definitely follow the economic cycle There is a great deal of interest in tightening processes in leaner times When that runs its course, companies start focusing on growth.” In this year’s survey, the perennial challenge of the overall competitive and cost environment remains by far the leading external driver of change (60%) However, customer demand (36%) comes in second, followed closely by a desire to increase market share (34%) The last two findings strongly indicate a renewed focus on sales and growth, especially in certain sectors In the consumer goods industry, the drive to grow market share (51%) and customer demand (44%) are cited nearly as often as the competitive and cost environment (56%) © Economist Intelligence Unit Limited 2011 Leaders of change Companies prepare for a stronger future According to Dean Nelson, founder of KKR Capstone, “Most companies have recently focused change management on cost” To improve further, “they need to focus some of their resources on growth” Down markets, he adds, are ideally the best times to engage in growth-related change, because they experience the biggest shifts in market share Although the emphasis on market growth and the future is increasing in line with the economic cycle, it is important not to exaggerate the shift This year’s survey results suggest a different emphasis, rather than a sea change in where firms are focusing their change efforts One-half of companies surveyed still see the reduction of costs as a primary aim Ultimately, notes Robert Tartaglia, chief operating officer (COO) of Allianz Global Corporate & Specialty, a Munich-based large corporate and specialty insurer, “Change is driven by the needs of the company,” not some “initiative du jour” At the moment, for many, those needs relate increasingly to the future © Economist Intelligence Unit Limited 2011 “Down markets are ideally the best times to engage in growth-related change, because they experience the biggest shifts in market share.” Dean Nelson, founder of KKR Capstone Leaders of change Companies prepare for a stronger future Sales and marketing function is in the front line of change T he survey underscores the fact that the focus of change management programmes varies by industry For example, a leading focus for chemicals firms in the last year has been the supply chain (cited by 45% of respondents from the sector) In contrast, the supply chain was the focus of change management for only 17% of energy and natural resources companies, for which the most common focus of change programmes has been finance (31%) Overall, though, sales and marketing was the most common function to experience change in the last year (41%), coming in first in every region polled and at or near the top for every industry For manufacturers the figure hit 60% In the previous year’s survey (using a different methodology), we found that overall sales and marketing experienced significant change, but on a par with procurement, information technology (IT) and general management, and behind finance This year’s focus on change in the sales and marketing function further reflects the shift in emphasis towards growth and the future and Which areas of your organisation have been the focus of change management initiatives in the last year? (% respondents) Sales & marketing 41 Supply chain/procurement 26 IT 24 R&D/innovation 22 Finance 20 Human resources 15 Customer service 14 The company as a whole in an overarching change initiative 14 Asset optimisation 13 Legal & compliance 10 Senior management as a whole within the company None Don’t know Source: Economist Intelligence Unit survey, November 2010 © Economist Intelligence Unit Limited 2011 Leaders of change Companies prepare for a stronger future Which areas of your organisation have been the focus of change management initiatives in the last year? (% respondents) Consumer goods Energy & natural resources Healthcare, pharmaceuticals & biotechnology Sales & marketing 46 29 41 Human resources 12 20 13 IT 32 23 15 Finance 17 31 18 Legal & compliance 18 Asset optimisation 15 R&D/innovation 24 17 36 Supply chain/procurement 37 17 23 Customer service 20 Senior management as a whole within the company 10 14 The company as a whole in an overarching change initiative 17 18 None 0 Don’t know 0 Source: Economist Intelligence Unit survey, November 2010 away from cost cutting Professor Kanter says, “Marketing always leads growth You can’t manufacture more if you are not attracting new customers So, marketing expenditure goes up when aiming for topline growth.” A function that interacts with ever-shifting markets and consumer demands will inevitably attract a large number of change programmes For example, Scott Wicker, vice-president, sustainability, at UPS, an international shipping and logistics business, notes that as customers have become increasingly interested in carbon issues, the company has been training and educating its salesforce in how to use its emission-reduction record and sustainability performance as a sales draw “We realised that we had an advantage and needed to sell it,” he says “Sales and marketing is being affected the most.” Sales and marketing need to recover from deep budget cuts implemented during the economic downturn—especially in North America and Western Europe, where the declines in spending were substantial Many companies, though, have been changing the sales/marketing function rather than simply restoring previous budgets, because the markets where they are selling are now substantially © Economist Intelligence Unit Limited 2011 Leaders of change Companies prepare for a stronger future different Growth is largely occurring in less-developed economies and these require different marketing approaches With evolving communication channels, such as social networking technology, businesses would have to adjust rapidly anyway Two years of cutbacks only make the need for some companies to act more pressing Mr Nelson explains, “The sales and marketing function is a higher-return place to implement real change than management on the cost side The customer base has changed; the world has changed People realise that they need to change their sales and marketing approach.” Broad organisational retooling holds some advantages over a narrower focus on a single function, however important According to the survey findings, companies that have not engaged in change to the sales/marketing function most commonly implemented initiatives that addressed the company as a whole (24%) Professor Kanter points out that sales strength is less of an issue than an ability to innovate across the company and in product offerings “In the long run”, she says, “you need to be investing in constantly renewing products and services Innovation is the only way to have sustainable growth.” Larger companies, in particular, are addressing the problem of complexity For those businesses with over US$5bn in annual sales, simplification is the second-biggest aim of change Such change is, in Professor Kanter’s words, “an exercise that goes on periodically” Large organisations add on layers and roles—particularly in good times—and then need to shed them Mr Tartaglia of Allianz says, “I’ve yet to embark on a change initiative or project where one of the ultimate objectives is not the reduction of complexity”, because of the costs that it brings Complexity reduction can have multiple advantages A programme at P&G, a global consumer-products company, to simplify its European distribution system, notes Peter White, its director for global sustainability, decreased carbon emissions and costs © Economist Intelligence Unit Limited 2011 Leaders of change Companies prepare for a stronger future ‘A’ for effort, but ‘E’ for execution? A s companies make their strategic choices about how best to change in order to face current and future challenges, change programmes are consuming ever more corporate resources Sixty-three percent of survey respondents report that more senior executive time was devoted to change management initiatives over the past year, against just 7% noting a decline The equivalent figures for increased spending are 47% and 11% Nevertheless, most companies are still remarkably unsuccessful at implementing change Respondents say that on average only 56% of change initiatives are successful This is no surprise to Allianz’s Mr Tartaglia Surveying the corporate world as a whole, he sees “a lot more experienced people out there and a better understanding of best practice, but I can’t say I have seen any empirical evidence that companies are doing better [at change management]” On average, to what extent… (% respondents) …have the resources spent on your organisation’s most significant change initiatives altered over the past 12 months? …has the amount of senior executive time spent on your organisation’s most significant change initiatives altered over the past 12 months? Increased greatly 10 21 Increased 37 42 Stayed the same 38 27 Decreased Decreased greatly Don’t know © Economist Intelligence Unit Limited 2011 Source: Economist Intelligence Unit survey, November 2010 Leaders of change Companies prepare for a stronger future In your view, approximately what proportion of change initiatives has been successful at your organisation over the past five years? (% respondents) Few 13 Around one-quarter 10 Around half 36 Around three-quarters 11 Most or all 27 None Don’t know Source: Economist Intelligence Unit survey, November 2010 Any reassurance that the low success rate might give to executives about their own company’s failings is false KKR’s Mr Nelson says, “If you are not getting better at change management, you are probably becoming irrelevant.” If anything, the shifting focus of change is likely to make some elements of change harder—especially leadership Although change management literature often discusses the processes of change divorced from the content, what is being changed matters Mr Nelson notes, “Where people struggle is when the nature of what they are trying to change changes a fair amount They may have been very good on change related to costs, but it might be hard for them to change sales or product development.” Professor Kanter adds that such shifts present a leadership challenge: “It is very different to lead people to engage in innovation than encouraging people to find efficiencies.” 10 © Economist Intelligence Unit Limited 2011 Leaders of change Companies prepare for a stronger future Where the buck stops: a challenge for leaders T he symptoms of leadership difficulties not always manifest themselves at the top of the company Survey respondents cite middle management (38%) as the employment level where bottlenecks occur in change initiatives, well above senior management (26%) and the C-suite (5%) Significant variations exist in individual industries: for energy and natural resources, around one-quarter of respondents cite senior management, middle management, line management and front-line workers as the most likely obstacles, while in the healthcare sector senior managers (31%) lead middle management (28%) In your view, which group of employees presents the greatest bottleneck to change management initiatives? (% respondents) Middle management 38 Senior management 26 Supervisors/line managers 19 Front-line workers/operations 13 C-suite Source: Economist Intelligence Unit survey, November 2010 This finding requires a caveat: all of the survey participants were at the senior management level or above and leaders at some companies may be reluctant to acknowledge their own shortcomings Of C-level survey respondents at companies where a change initiative has failed in the last year, 36% cited a poor plan as the single biggest cause of the problem Only 17% blamed a lack of senior management commitment, almost as many as pointed to employee resistance (15%) For less senior respondents, though, 28% blamed a poor plan, but 25% cited lack of senior management commitment, and just 10% mentioned employee resistance Moreover, at those companies where successful change initiatives are few, survey respondents indicated that senior management created the biggest bottlenecks (42%), rather than middle managers (28%) They also named lack of senior management commitment as the biggest barrier to change (40%), more than twice as often as other respondents (19%) This is consistent with a recent article in The Journal of Change Management1, which found that corporate “leaders’ ‘blindness’ to organisational systems and/or a focus on their own ego needs led them into a range of ‘traps’ that seriously damaged the success of change interventions” © Economist Intelligence Unit Limited 2011 Malcolm Higgs, Deborah Rowland, “Emperors with clothes on: The role of selfawareness in developing effective change leadership”, December 2010 11 Leaders of change Companies prepare for a stronger future Change management in practice: a focus on sustainability The requirements of successful change management are often described in broad terms The details, however, also matter, and invariably differ from field to field For example, the integration of sustainability into companies in recent years has involved substantial change efforts The experience of P&G and UPS illustrates the process of applying broad rules in particular circumstances Leadership and communication to create a sense of urgency: Successful change requires a widespread belief within the organisation that action is necessary This requires a consistent message from senior executives—otherwise employees will assume that the issue is not important within the business UPS and P&G start their sustainability efforts with an unambiguous commitment from the CEO and the Board Both also have extensive internal educational and communication efforts to explain the concept So far, this does not vary noticeably from the general template for change For companies seeking to become more sustainable, though, success does not depend so much on winning people over to individual initiatives as convincing them of the need to embrace sustainability more broadly Here developments in the outside world certainly help UPS vice-president, sustainability, Scott Wicker, says that increasing awareness of climate change has made it far easier to win hearts and minds “The emergence of climate change as a business issue is driving sustainability,” he notes Yet P&G’s Dr White points out that sustainability can be managed in terms of corporate behaviour This approach requires greater corporate change, but once employees have been won over to its logic, these flow more easily Building support for particular initiatives: A sense of urgency must be converted into a willingness for the company to provide resources to any given programme With companies carefully shepherding resources, it can be difficult to advocate sustainability 12 ventures in which the benefits are partly intangible Mr Wicker therefore stresses the need to blend environmental with financial gains clearly, as both are a part of sustainability Similarly, Dr White says, “You need a clear line of sight for sustainability to the company’s purpose.” This ideally should include social and environmental, as well as financial elements, and P&G changed its formal statement of purpose to so The strong link between sustainability and efficiency frequently helps here as well Planning: Effective change requires a good roadmap, including clear delineations of responsibility and steps, preferably with initial easy wins to boost morale and momentum This is as true in sustainability as other fields, but those working in this area face particular complications Mr Wicker notes that initiatives tend to involve multiple departments and sometimes even external stakeholders such as communities or non-governmental organisations (NGOs) Co-ordinated planning and execution are therefore typically more difficult than for initiatives relating to single departments Selecting the appropriate metrics for success may not be as straightforward as initiatives focused on money saved, or a company might not even measure them before a given initiative begins The accurate measurement of carbon emissions related to a given activity, for example, can be highly complex Yet such measurement can provide additional business opportunities: UPS, for example, finds it valuable to be able to give customers information related to the carbon produced in their shipments Focus of change: Although in parts of the business the focus of changes has varied with the economic cycle, sustainability provides an example of one that has not It certainly could have fluctuated between concentrating on efficiency initiatives that reduce cost and those that focus on preparation for the future Yet Dr White says that the downturn and recovery brought “no real change” to the balance between these two Similarly, Lynnette McIntire, who heads sustainability communication at UPS, says that recently, “We’ve not been shifting efforts from cost cutting to opportunity; it is more of everything.” © Economist Intelligence Unit Limited 2011 Leaders of change Companies prepare for a stronger future For the change initiatives in your organisation that did not succeed in the past 12 months, what was the single most important factor in determining their failure? (% respondents) C-suite non-C-suite Lack of clearly defined and/or achievable milestones & objectives to measure progress 28 36 Lack of commitment by senior management 17 25 Poor communication 14 Rosabeth Kanter, Harvard Business School 16 Employee resistance 10 “Powerlessness corrupts People who are powerless and hemmed in by rules become excessively territorial.” 15 Insufficient funding Other 7 Don’t know Source: Economist Intelligence Unit survey, November 2010 That said, middle management’s reputation is not purely accidental Professor Kanter believes that the finding “definitely rings true” The reluctance of middle management to embrace change initiatives is understandable Programmes imposed from above can radically shift middle managers’ job descriptions— even their job security Middle managers also frequently face multiple demands—including for increased profits—while being told to find ways to give practical effect to visions of change ordered from above Mr Tartaglia acknowledges the problem, but lays much of the blame for this behaviour elsewhere: “Middle managers are critical, but it has to start from the top.” Professor Kanter adds that resistance to imposed change is predictable, especially where it is threatening “Powerlessness corrupts,” she says “People who are powerless and hemmed in by rules become excessively territorial.” Poor communication is a particular problem Mr Nelson explains that senior executives can forget that, whereas they have been involved in 30 to 40 conversations relating to an initiative before launching it, middle managers may be ill-prepared “If senior people say that managers need to be, for example, more innovative and think that this is enough to get people to act differently, then they are wrong,” he says © Economist Intelligence Unit Limited 2011 13 Leaders of change Companies prepare for a stronger future Conclusion T he global economy is always evolving and companies need in turn to adjust Businesses, however, are simply not that good at change—failing nearly half the time, according to the Economist Intelligence Unit survey As this study shows, getting the most out of change initiatives requires going beyond the basics of leadership commitment, good planning and communication The following principles emerge l Treat change programmes as a key, but limited strategic resource In practice there are limits to how much change a company can absorb—on average survey companies make just 3.6 change initiatives annually Competitors will be looking at other areas than just cost cutting, including trying to grab some of your market share Aligning the focus of change with the most pressing strategic priorities has therefore become more important than before l In preparing for the future, consider whether your sales function needs an overhaul or you need to address an overarching company-wide issue The most popular area for change programmes over the past year has been sales/marketing Other businesses, meanwhile, are making a strategic choice to look at company-wide change such as complexity reduction The key consideration is where change will best prepare the firm for the new competitive environment being shaped by the multispeed global recovery l Sweat the details The broad principles of change management may vary little, but the details vary in ways that matter As executives opt for new goals and locations for change programmes, they will need to understand the resulting specific requirements of success These will likely differ from the requirements of changes in the depths of the downturn Cutting costs, encouraging growth and promoting sustainability need distinct playbooks l Treat bottlenecks as a symptom not a disease If middle management is a difficult bottleneck to change, then leadership needs to improve Bring middle managers into the change process earlier, have them work on the planning, and use them as champions of change Leadership is not about telling people what to do, but getting them to it If more senior employees are the problem, then leadership is dysfunctional and needs to address its conflicts quickly “Change management”, says Professor Kanter, “is a very broad term for a lot of different activities that are all a part of leadership” Such leadership will, as ever, be essential as business prepares itself for the future 14 © Economist Intelligence Unit Limited 2011 Leaders of change Companies prepare for a stronger future Appendix Survey results Appendix: Survey results Percentages may not add to 100% owing to rounding or the ability of respondents to choose multiple responses How many change management initiatives you believe your organisation will launch over the next 12 months? What will be the main motivations for your organisation’s change management initiatives over the next 12 months? Select up to three (% respondents) (% respondents) One 15 Increasing revenue 55 Two 24 Preparing the organisation for future challenges Three 52 18 Reducing costs Four 50 Increasing market share Five or more 27 24 Better engagement of people (eg, improved communication & involvement) None 26 New organisation structure with new roles Don’t know 22 Acquisition/divestiture/merger 19 Cultural change 11 In your view, what proportion of change initiatives has been successful at your organisation over the past five years? Other (% respondents) Few How many change management initiatives you estimate your organisation has launched in the last 12 months? 13 Around one-quarter (% respondents) 10 Around half 36 One Around three-quarters 13 11 Two 24 Most or all 27 Three None 23 Four Don’t know Five or more 24 None Don’t know © Economist Intelligence Unit Limited 2011 15 Appendix Survey results Leaders of change Companies prepare for a stronger future For the change initiatives in your organisation that did not succeed in the past 12 months, what was the single most important factor in determining their failure? On average, to what extent have the resources spent on your organisation’s most significant change initiatives altered over the past 12 months? (% respondents) (% respondents) Lack of clearly defined and/or achievable milestones & objectives to measure progress Increased greatly 10 31 Increased Lack of commitment by senior management 37 21 Stayed the same Poor communication 38 15 Decreased Employee resistance 12 Decreased greatly Insufficient funding Don’t know Other Don’t know On average, to what extent has the amount of senior executive time spent on your organisation’s most significant change initiatives altered over the past 12 months? What is the most important measure in determining whether a change programme has been successful in your organisation? (% respondents) Increased greatly 21 (% respondents) Increased 42 Behaviour change in the organisation 35 27 Increased profitability 29 Customer satisfaction 10 Savings delivered Increased market share Stayed the same Decreased Decreased greatly Don’t know Employee satisfaction / employee turnover Other Don’t know In your view, which group of employees presents the greatest bottleneck to change management initiatives? (% respondents) Middle management 38 Senior management 26 Supervisors/line managers 19 Front-line workers/operations 13 C-suite 16 © Economist Intelligence Unit Limited 2011 Leaders of change Companies prepare for a stronger future Which areas of your organisation have been the focus of change management initiatives in the last year? Select up to three In which country are you personally located? (% respondents) US Sales & marketing UK, Germany Appendix Survey results (% respondents) 39 41 Belgium, Canada, Brazil Supply chain/procurement 26 Italy, Mexico IT 24 Switzerland, Netherlands, Portugal R&D/innovation 22 Colombia Finance 20 Chile, France Sweden, Ireland, Turkey, Denmark, Finland, Norway, Peru, Poland Human resources 15 Customer service 14 The company as a whole in an overarching change initiative 14 What is your primary industry? Asset optimisation (% respondents) 13 Legal & compliance 10 Manufacturing Senior management as a whole within the company 15 Consumer goods None 14 Healthcare, pharmaceuticals & biotechnology Don’t know 14 Energy & natural resources 12 Chemicals 11 What are the main forces driving change at your company? Select up to three Financial services (% respondents) Professional services Competitive/cost pressures Retailing 60 Customer demand (eg, for better quality, service, different products) Automotive 36 Desire to increase market share Construction & real estate 34 Reducing complexity within company Education 27 Investor expectations IT & technology 22 Merger or acquisition Telecommunications 20 Regulation Transportation, travel & tourism 19 Exploiting emerging market opportunities (sourcing & sales) Agriculture & agribusiness 19 Reduction of headcount 11 Sustainability/green initiatives Change for the sake of change © Economist Intelligence Unit Limited 2011 Entertainment, media & publishing Government/Public sector Aerospace/Defence 17 Appendix Survey results Leaders of change Companies prepare for a stronger future What is your company’s annual global revenue in US dollars? What are your main functional roles? Choose up to three (% respondents) (% respondents) Finance $250m to $500m 37 Strategy & business development $500m to $1bn 22 $1bn to $5bn 33 General management $5bn to $10bn 14 Marketing & sales $10bn or more 28 32 28 16 Risk 12 IT 11 Operations & production R&D Supply-chain management Which of the following best describes your title? (% respondents) Customer service Board member Procurement Human resources CEO/President/Managing director Legal CFO/Treasurer/Comptroller 20 Information & research CIO/Technology director Other Other C-level executive SVP/VP/Director 58 In which region are you personally based? (% respondents) 18 North America 44 Western Europe 42 Latin America 14 © Economist Intelligence Unit Limited 2011 Cover: Shutterstock Whilst every effort has been taken to verify the accuracy of this information, neither The Economist Intelligence Unit Ltd nor the sponsors of this report can accept any responsibility or liability for reliance by any person on this white paper or any of the information, opinions or conclusions set out in the white paper LONDON 26 Red Lion Square London WC1R 4HQ United Kingdom Tel: (44.20) 7576 8000 Fax: (44.20) 7576 8476 E-mail: london@eiu.com NEW YORK 750 Third Avenue 5th Floor New York, NY 10017 United States Tel: (1.212) 554 0600 Fax: (1.212) 586 0248 E-mail: newyork@eiu.com HONG KONG 6001, Central Plaza 18 Harbour Road Wanchai Hong Kong Tel: (852) 2585 3888 Fax: (852) 2802 7638 E-mail: hongkong@eiu.com GENEVA Boulevard des Tranchées 16 1206 Geneva Switzerland Tel: (41) 22 566 2470 Fax: (41) 22 346 93 47 E-mail: geneva@eiu.com [...]... effective change leadership”, December 2010 11 Leaders of change Companies prepare for a stronger future Change management in practice: a focus on sustainability The requirements of successful change management are often described in broad terms The details, however, also matter, and invariably differ from field to field For example, the integration of sustainability into companies in recent years has involved... that are all a part of leadership” Such leadership will, as ever, be essential as business prepares itself for the future 14 © Economist Intelligence Unit Limited 2011 Leaders of change Companies prepare for a stronger future Appendix Survey results Appendix: Survey results Percentages may not add to 100% owing to rounding or the ability of respondents to choose multiple responses How many change management... group of employees presents the greatest bottleneck to change management initiatives? (% respondents) 2 Middle management 38 Senior management 26 Supervisors/line managers 19 Front-line workers/operations 13 C-suite 5 16 © Economist Intelligence Unit Limited 2011 Leaders of change Companies prepare for a stronger future Which areas of your organisation have been the focus of change management initiatives... making a strategic choice to look at company-wide change such as complexity reduction The key consideration is where change will best prepare the firm for the new competitive environment being shaped by the multispeed global recovery l Sweat the details The broad principles of change management may vary little, but the details vary in ways that matter As executives opt for new goals and locations for change. .. can be difficult to advocate sustainability 12 ventures in which the benefits are partly intangible Mr Wicker therefore stresses the need to blend environmental with financial gains clearly, as both are a part of sustainability Similarly, Dr White says, “You need a clear line of sight for sustainability to the company’s purpose.” This ideally should include social and environmental, as well as financial... basics of leadership commitment, good planning and communication The following principles emerge l Treat change programmes as a key, but limited strategic resource In practice there are limits to how much change a company can absorb—on average survey companies make just 3.6 change initiatives annually Competitors will be looking at other areas than just cost cutting, including trying to grab some of. .. the low success rate might give to executives about their own company’s failings is false KKR’s Mr Nelson says, “If you are not getting better at change management, you are probably becoming irrelevant.” If anything, the shifting focus of change is likely to make some elements of change harder—especially leadership Although change management literature often discusses the processes of change divorced.. .Leaders of change Companies prepare for a stronger future In your view, approximately what proportion of change initiatives has been successful at your organisation over the past five years? (% respondents) Few 13 Around one-quarter 10 Around half 36 Around three-quarters 11 Most or all 27 None 0 Don’t know 3 Source: Economist Intelligence Unit survey, November 2010 Any reassurance that the... market share Aligning the focus of change with the most pressing strategic priorities has therefore become more important than before l In preparing for the future, consider whether your sales function needs an overhaul or you need to address an overarching company-wide issue The most popular area for change programmes over the past year has been sales/marketing Other businesses, meanwhile, are making... middle managers into the change process earlier, have them work on the planning, and use them as champions of change Leadership is not about telling people what to do, but getting them to do it If more senior employees are the problem, then leadership is dysfunctional and needs to address its conflicts quickly Change management”, says Professor Kanter, “is a very broad term for a lot of different activities .. .Leaders of change Companies prepare for a stronger future Preface Leaders of change: Companies prepare for a stronger future is an Economist Intelligence Unit report, sponsored by Celerant... Leaders of change Companies prepare for a stronger future Change management in practice: a focus on sustainability The requirements of successful change management are often described in broad... Unit Limited 2011 Leaders of change Companies prepare for a stronger future Which areas of your organisation have been the focus of change management initiatives in the last year? (% respondents)