Describe either (a) an organizational change that was implemented (or attempted to be implemented) in the past, or (b) an organizational change that you are either currently implementing or plan to implement. That is, in this assignment, you have the opportunity to analyze either a past change effort or a current or planned change effort. ?(You only need do one analysis). If you described a past change effort, address the following questions.? 2. ?What were the driving forces for change? 3. What were the restraining forces, i.e., those that help maintain the status quo? 4. Using Kotter’s model below, what strategies were taken (or should have been taken) to help make sure the organizational change was effective? Address each of the eight stages below with your assessment: (a) Establishing a sense of urgency (b) Forming a powerful guiding coalition (c) Creating a vision (d) Communicating the vision (e) Empowering others to act on the vision (f) Planning for and creating short-term wins (g) Consolidating improvements and producing more change (h) Institutionalizing new approaches 5. What was your assessment of the success of the organizational change effort? If you described a current or planned change effort, address the following questions.? 2. ?What are the driving forces for change? 3. What are the restraining forces, i.e., those that help maintain the status quo? 4. Using Kotter’s model below, what strategies are being taken (or should be taken) to help make sure the organizational change is effective? Address each of the eight stages below with your assessment: (a) Establishing a sense of urgency (b) Forming a powerful guiding coalition (c) Creating a vision (d) Communicating the vision (e) Empowering others to act on the vision (f) Planning for and creating short-term wins (g) Consolidating improvements and producing more change (h) Institutionalizing new approaches 5. What

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Leading Change

Why Transformation Efforts Fail

by John P. Kotter

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Included with this full-text

Harvard Business Review

article:

The Idea in Brief—the core idea The Idea in Practice—putting the idea to work

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Article Summary

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Leading Change: Why Transformation Efforts Fail

A list of related materials, with annotations to guide further exploration of the article’s ideas and applications

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Further Reading

Leaders who successfully transform businesses do eight things right (and they do them in the right order).

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The Idea in Brief The Idea in Practice

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Most major change initiatives—whether in- tended to boost quality, improve culture, or reverse a corporate death spiral—generate only lukewarm results. Many fail miserably.

Why? Kotter maintains that too many managers don’t realize transformation is a

process,

not an event. It advances through stages that build on each other. And it takes years. Pressured to accelerate the process, managers skip stages. But short- cuts never work.

Equally troubling, even highly capable managers make critical mistakes—such as declaring victory too soon. Result? Loss of momentum, reversal of hard-won gains, and devastation of the entire transforma- tion effort.

By understanding the stages of change— and the pitfalls unique to each stage—you boost your chances of a successful transfor- mation. The payoff? Your organization flexes with tectonic shifts in competitors, markets, and technologies—leaving rivals far behind.

To give your transformation effort the best chance of succeeding, take the right actions at each stage—and avoid common pitfalls.

Stage Actions Needed Pitfalls

Establish a sense of urgency

• Examine market and competitive reali- ties for potential crises and untapped opportunities.

• Convince at least 75% of your man- agers that the status quo is more dan- gerous than the unknown.

• Underestimating the difficulty of driving people from their comfort zones

• Becoming paralyzed by risks

Form a pow- erful guiding coalition

• Assemble a group with shared commit- ment and enough power to lead the change effort.

• Encourage them to work as a team outside the normal hierarchy.

• No prior experience in teamwork at the top

• Relegating team leadership to an HR, quality, or strategic-planning executive rather than a senior line manager

Create a vision

• Create a vision to direct the change effort. • Develop strategies for realizing that vision.

• Presenting a vision that’s too complicat- ed or vague to be communicated in five minutes

Communicate the vision

• Use every vehicle possible to commu- nicate the new vision and strategies for achieving it.

• Teach new behaviors by the example of the guiding coalition.

• Undercommunicating the vision • Behaving in ways antithetical to the

vision

Empower others to act on the vision

• Remove or alter systems or structures undermining the vision.

• Encourage risk taking and nontradition- al ideas, activities, and actions.

• Failing to remove powerful individuals who resist the change effort

Plan for and create short- term wins

• Define and engineer visible perform- ance improvements.

• Recognize and reward employees con- tributing to those improvements.

• Leaving short-term successes up to chance

• Failing to score successes early enough (12-24 months into the change effort)

Consolidate improve- ments and produce more change

• Use increased credibility from early wins to change systems, structures, and policies undermining the vision.

• Hire, promote, and develop employees who can implement the vision.

• Reinvigorate the change process with new projects and change agents.

• Declaring victory too soon—with the first performance improvement

• Allowing resistors to convince “troops” that the war has been won

Institutionalize new approaches

• Articulate connections between new behaviors and corporate success.

• Create leadership development and succession plans consistent with the new approach.

• Not creating new social norms and shared values consistent with changes

• Promoting people into leadership posi- tions who don’t personify the new approach

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Leaders who successfully transform businesses do eight things right (and they do them in the right order).

Editor’s Note:

Guiding change may be the ulti- mate test of a leader—no business survives over the long term if it can’t reinvent itself. But, human nature being what it is, fundamental change is often resisted mightily by the people it most affects: those in the trenches of the busi- ness. Thus, leading change is both absolutely es- sential and incredibly difficult.

Perhaps nobody understands the anatomy of organizational change better than retired Harvard Business School professor John P. Kotter. This article, originally published in the spring of 1995, previewed Kotter’s 1996 book

Leading Change

. It outlines eight critical suc- cess factors—from establishing a sense of ex- traordinary urgency, to creating short-term wins, to changing the culture (“the way we do things around here”). It will feel familiar when you read it, in part because Kotter’s vocabulary has entered the lexicon and in part because it contains the kind of home truths that we recog- nize, immediately, as if we’d always known them. A decade later, his work on leading change remains definitive.

Over the past decade, I have watched more than 100 companies try to remake themselves into significantly better competitors. They have included large organizations (Ford) and small ones (Landmark Communications), companies based in the United States (Gen- eral Motors) and elsewhere (British Airways), corporations that were on their knees (Eastern Airlines), and companies that were earning good money (Bristol-Myers Squibb). These ef- forts have gone under many banners: total quality management, reengineering, rightsiz- ing, restructuring, cultural change, and turn- around. But, in almost every case, the basic goal has been the same: to make fundamental changes in how business is conducted in order to help cope with a new, more challenging market environment.

A few of these corporate change efforts have been very successful. A few have been utter failures. Most fall somewhere in between, with a distinct tilt toward the lower end of the scale. The lessons that can be drawn are interesting and will probably be relevant to even more or-

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ganizations in the increasingly competitive business environment of the coming decade.

The most general lesson to be learned from the more successful cases is that the change process goes through a series of phases that, in total, usually require a considerable length of time. Skipping steps creates only the illusion of speed and never produces a satisfying result. A second very general lesson is that critical mis- takes in any of the phases can have a devastat- ing impact, slowing momentum and negating hard-won gains. Perhaps because we have rela- tively little experience in renewing organiza- tions, even very capable people often make at least one big error.

Error 1: Not Establishing a Great Enough Sense of Urgency

Most successful change efforts begin when some individuals or some groups start to look hard at a company’s competitive situation, market position, technological trends, and fi- nancial performance. They focus on the po- tential revenue drop when an important patent expires, the five-year trend in declining margins in a core business, or an emerging market that everyone seems to be ignoring. They then find ways to communicate this in- formation broadly and dramatically, especially with respect to crises, potential crises, or great opportunities that are very timely. This first step is essential because just getting a transfor- mation program started requires the aggres- sive cooperation of many individuals. Without motivation, people won’t help, and the effort goes nowhere.

Compared with other steps in the change process, phase one can sound easy. It is not. Well over 50% of the companies I have watched fail in this first phase. What are the reasons for that failure? Sometimes executives underestimate how hard it can be to drive peo- ple out of their comfort zones. Sometimes they grossly overestimate how successful they have already been in increasing urgency. Sometimes they lack patience: “Enough with the prelimi- naries; let’s get on with it.” In many cases, exec- utives become paralyzed by the downside pos- sibilities. They worry that employees with seniority will become defensive, that morale will drop, that events will spin out of control, that short-term business results will be jeopar- dized, that the stock will sink, and that they will be blamed for creating a crisis.

A paralyzed senior management often comes from having too many managers and not enough leaders. Management’s mandate is to minimize risk and to keep the current system operating. Change, by definition, requires cre- ating a new system, which in turn always de- mands leadership. Phase one in a renewal process typically goes nowhere until enough real leaders are promoted or hired into senior- level jobs.

Transformations often begin, and begin well, when an organization has a new head who is a good leader and who sees the need for a major change. If the renewal target is the en- tire company, the CEO is key. If change is needed in a division, the division general man- ager is key. When these individuals are not new leaders, great leaders, or change champions, phase one can be a huge challenge.

Bad business results are both a blessing and a curse in the first phase. On the positive side, losing money does catch people’s attention. But it also gives less maneuvering room. With good business results, the opposite is true: Con- vincing people of the need for change is much harder, but you have more resources to help make changes.

But whether the starting point is good per- formance or bad, in the more successful cases I have witnessed, an individual or a group al- ways facilitates a frank discussion of poten- tially unpleasant facts about new competition, shrinking margins, decreasing market share, flat earnings, a lack of revenue growth, or other relevant indices of a declining competi- tive position. Because there seems to be an al- most universal human tendency to shoot the bearer of bad news, especially if the head of the organization is not a change champion, ex- ecutives in these companies often rely on out- siders to bring unwanted information. Wall Street analysts, customers, and consultants can all be helpful in this regard. The purpose of all this activity, in the words of one former CEO of a large European company, is “to make the sta- tus quo seem more dangerous than launching into the unknown.”

In a few of the most successful cases, a group has manufactured a crisis. One CEO deliber- ately engineered the largest accounting loss in the company’s history, creating huge pressures from Wall Street in the process. One division president commissioned first-ever customer satisfaction surveys, knowing full well that the

Now retired,

John P. Kotter

was the Konosuke Matsushita Professor of Leadership at Harvard Business School in Boston.

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results would be terrible. He then made these findings public. On the surface, such moves can look unduly risky. But there is also risk in play- ing it too safe: When the urgency rate is not pumped up enough, the transformation pro- cess cannot succeed, and the long-term future of the organization is put in jeopardy.

When is the urgency rate high enough? From what I have seen, the answer is when about 75% of a company’s management is hon- estly convinced that business as usual is totally unacceptable. Anything less can produce very serious problems later on in the process.

Error 2: Not Creating a Powerful Enough Guiding Coalition

Major renewal programs often start with just one or two people. In cases of successful trans-

formation efforts, the leadership coalition grows and grows over time. But whenever some minimum mass is not achieved early in the effort, nothing much worthwhile happens.

It is often said that major change is impos- sible unless the head of the organization is an active supporter. What I am talking about goes far beyond that. In successful transfor- mations, the chairman or president or divi- sion general manager, plus another five or 15 or 50 people, come together and develop a shared commitment to excellent perfor- mance through renewal. In my experience, this group never includes all of the company’s most senior executives because some people just won’t buy in, at least not at first. But in the most successful cases, the coalition is always pretty powerful—in terms of titles,

EIGHT STEPS TO TRANSFORMING YOUR ORGANIZATION

Establishing a Sense of Urgency • Examining market and competitive realities • Identifying and discussing crises, potential crises, or major opportunities

Forming a Powerful Guiding Coalition • Assembling a group with enough power to lead the change effort • Encouraging the group to work together as a team

Creating a Vision • Creating a vision to help direct the change effort • Developing strategies for achieving that vision

Communicating the Vision • Using every vehicle possible to communicate the new vision and strategies • Teaching new behaviors by the example of the guiding coalition

Empowering Others to Act on the Vision • Getting rid of obstacles to change • Changing systems or structures that seriously undermine the vision • Encouraging risk taking and nontraditional ideas, activities, and actions

Planning for and Creating Short-Term Wins • Planning for visible performance improvements • Creating those improvements • Recognizing and rewarding employees involved in the improvements

Consolidating Improvements and Producing Still More Change • Using increased credibility to change systems, structures, and policies that don’t fit the vision

• Hiring, promoting, and developing employees who can implement the vision • Reinvigorating the process with new projects, themes, and change agents

Institutionalizing New Approaches • Articulating the connections between the new behaviors and corporate success

• Developing the means to ensure leadership development and succession

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information and expertise, reputations, and relationships.

In both small and large organizations, a suc- cessful guiding team may consist of only three to five people during the first year of a renewal effort. But in big companies, the coalition needs to grow to the 20 to 50 range before much progress can be made in phase three and beyond. Senior managers always form the core of the group. But sometimes you find board members, a representative from a key customer, or even a powerful union leader.

Because the guiding coalition includes mem- bers who are not part of senior management, it tends to operate outside of the normal hier- archy by definition. This can be awkward, but it is clearly necessary. If the existing hierarchy were working well, there would be no need for a major transformation. But since the current system is not working, reform generally de- mands activity outside of formal boundaries, expectations, and protocol.

A high sense of urgency within the manage- rial ranks helps enormously in putting a guid- ing coalition together. But more is usually re- quired. Someone needs to get these people together, help them develop a shared assess- ment of their company’s problems and oppor- tunities, and create a minimum level of trust and communication. Off-site retreats, for two or three days, are one popular vehicle for ac- complishing this task. I have seen many groups of five to 35 executives attend a series of these retreats over a period of months.

Companies that fail in phase two usually un- derestimate the difficulties of producing change and thus the importance of a powerful guiding coalition. Sometimes they have no history of teamwork at the top and therefore undervalue the importance of this type of coalition. Some- times they expect the team to be led by a staff executive from human resources, quality, or strategic planning instead of a key line man- ager. No matter how capable or dedicated the staff head, groups without strong line leader- ship never achieve the power that is required.

Efforts that don’t have a powerful enough guiding coalition can make apparent progress for a while. But, sooner or later, the opposition gathers itself together and stops the change.

Error 3: Lacking a Vision

In every successful transformation effort that I have seen, the guiding coalition develops a

picture of the future that is relatively easy to communicate and appeals to customers, stock- holders, and employees. A vision always goes beyond the numbers that are typically found in five-year plans. A vision says something that helps clarify the direction in which an organi- zation needs to move. Sometimes the first draft comes mostly from a single individual. It is usually a bit blurry, at least initially. But after the coalition works at it for three or five or even 12 months, something much better emerges through their tough analytical think- ing and a little dreaming. Eventually, a strat- egy for achieving that vision is also developed.

In one midsize European company, the first pass at a vision contained two-thirds of the basic ideas that were in the final product. The concept of global reach was in the initial ver- sion from the beginning. So was the idea of be- coming preeminent in certain businesses. But one central idea in the final version—getting out of low value-added activities—came only after a series of discussions over a period of several months.

Without a sensible vision, a transformation effort can easily dissolve into a list of confus- ing and incompatible projects that can take the organization in the wrong direction or nowhere at all. Without a sound vision, the reengineering project in the accounting de- partment, the new 360-degree performance appraisal from the human resources depart- ment, the plant’s quality program, the cul- tural change project in the sales force will not add up in a meaningful way.

In failed transformations, you often find plenty of plans, directives, and programs but no vision. In one case, a company gave out four-inch-thick notebooks describing its change effort. In mind-numbing detail, the books spelled out procedures, goals, methods, and deadlines. But nowhere was there a clear and compelling statement of where all this was leading. Not surprisingly, most of the employ- ees with whom I talked were either confused or alienated. The big, thick books did not rally them together or inspire change. In fact, they probably had just the opposite effect.

In a few of the less successful cases that I have seen, management had a sense of direc- tion, but it was too complicated or blurry to be useful. Recently, I asked an executive in a midsize company to describe his vision and re- ceived in return a barely comprehensible 30-

If you can’t communicate the vision to someone in five minutes or less and get a reaction that signifies both understanding and interest, you are not done.

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minute lecture. Buried in his answer were the basic elements of a sound vision. But they were buried—deeply.

A useful rule of thumb: If you can’t commu- nicate the vision to someone in five minutes or less and get a reaction that signifies both un- derstanding and interest, you are not yet done with this phase of the transformation process.

Error 4: Undercommunicating the Vision by a Factor of Ten

I’ve seen three patterns with respect to com- munication, all very common. In the first, a group actually does develop a pretty good transformation vision and then proceeds to communicate it by holding a single meeting or sending out a single communication. Having used about 0.0001% of the yearly intracom- pany communication, the group is startled when few people seem to understand the new approach. In the second pattern, the head of the organization spends a considerable amount of time making speeches to employee groups, but most people still don’t get it (not surpris- ing, since vision captures only 0.0005% of the total yearly communication). In the third pat- tern, much more effort goes into newsletters and speeches, but some very visible senior ex- ecutives still behave in ways that are antitheti- cal to the vision. The net result is that cynicism among the troops goes up, while belief in the communication goes down.

Transformation is impossible unless hun- dreds or thousands of people are willing to help, often to the point of making short-term sacrifices. Employees will not make sacrifices, even if they are unhappy with the status quo, unless they believe that useful change is possi- ble. Without credible communication, and a lot of it, the hearts and minds of the troops are never captured.

This fourth phase is particularly challenging if the short-term sacrifices include job losses. Gaining understanding and support is tough when downsizing is a part of the vision. For this reason, successful visions usually include new growth possibilities and the commitment to treat fairly anyone who is laid off.

Executives who communicate well incorpo- rate messages into their hour-by-hour activi- ties. In a routine discussion about a business problem, they talk about how proposed solu- tions fit (or don’t fit) into the bigger picture. In a regular performance appraisal, they talk

about how the employee’s behavior helps or undermines the vision. In a review of a divi- sion’s quarterly performance, they talk not only about the numbers but also about how the division’s executives are contributing to the transformation. In a routine Q&A with em- ployees at a company facility, they tie their an- swers back to renewal goals.

In more successful transformation efforts, executives use all existing communication channels to broadcast the vision. They turn boring, unread company newsletters into lively articles about the vision. They take ritualistic, tedious quarterly management meetings and turn them into exciting discussions of the transformation. They throw out much of the company’s generic management education and replace it with courses that focus on busi- ness problems and the new vision. The guiding principle is simple: Use every possible channel, especially those that are being wasted on non- essential information.

Perhaps even more important, most of the executives I have known in successful cases of major change learn to “walk the talk.” They consciously attempt to become a living symbol of the new corporate culture. This is often not easy. A 60-year-old plant manager who has spent precious little time over 40 years think- ing about customers will not suddenly behave in a customer-oriented way. But I have wit- nessed just such a person change, and change a great deal. In that case, a high level of ur

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