A Recipe for Change

Despite the inspirational stories we read about companies such as Zappos, Innocent Drinks and Google, the truth is that most of us are using outdated management practices and failing to get the most out of our people. Not convinced? Consider this: 65 per cent of people are unhappy at work, only 14 per cent understand their company’s strategy and 75 per cent are seeking jobs as we speak. Now, what do you think that does for your bottom line?

The working population has gone through a major transformation over the past few decades. The proportion of women in the workplace increased from 29 per cent in 1950 to 47 per cent in 2011, and women now account for 17 per cent of FTSE board positions. And never before have organisations seen such a diversity of ages. With the official pension age being pushed further and further, the percentage of the workforce aged 55 and over is predicted to increase from 13 per cent in 2000 to 20 per cent in the next 30-40 years.

When most of us went to school, a solid education was considered a ticket to a job in a good company and lifelong career success. These days, the average employee changes jobs every 4.4 years, and as professionals we are not only encouraged, but expected, to continually learn, educate and reinvent ourselves. So while many of us had to decide between only a handful of traditional career paths, it’s predicted that 65 per cent of children currently in school will work in jobs not yet invented.

Accelerating rates of globalisation and rapid technological advances are also changing how we work. One billion people are now on Facebook and 500 million tweets are sent everyday. Customers don’t want to be sold to. They want to connect with your brand and play a role in the development, sales and marketing of your products – whether they are in London, Shanghai or Los Angeles.

Approximately 74 per cent of the $2.8trn mergers and acquisitions industry is in cross-border transactions, and one in eight people now lives and works in countries other than where they were born. In the old world, many of us developed, marketed and sold products and services and had bosses and colleagues all based in the same postcode. Today, we have to develop, market, sell and collaborate across time zones, organisations and cultures – often with people we hardly know.

Furthermore, globalisation is no longer a game for multinationals. A 50-person company we work with has offices in three countries, across seven time zones, and customers in Europe, the US, Middle East and Africa. Another Small and Medium-sized Enterprise (SME) client recently mentioned that they have 40 nationalities across ten countries in their R&D organisation. In our experience, some of the most successful outsourcing efforts have been done by SMEs – which have developed into global, virtual collaborations that cross geographical and organisational boundaries. The ability to collaborate with partners rather than outsource, provides these SMEs with a competitive advantage over larger organisations struggling to foster innovation and collaboration.

Meanwhile, the economic downturn is causing unprecedented challenges on a global scale. After years of continuous crisis in global labour markets there is a backlog of global unemployment of 200 million – an increase of 27 million since the start of the crisis. In addition, more than 400 million new jobs will be needed over the next decade to avoid a further increase in unemployment. Hence, to generate sustainable growth while maintaining social cohesion, the world must rise to the urgent challenge of creating 600 million productive jobs over the next decade, which would still leave 900 million workers living with their families below the US$2 a day poverty line, largely in developing countries.

In this brave new world, it is our ability to take action and adapt to a constantly changing environment that will separate the successful leaders and organisations of tomorrow from the rest. One of the most popular Harvard Business Review discussions of 2012 was “Is it rude to text during a meeting?” Why? Because it was the most insightful? No. Because the workplace is more diverse than ever before and we don’t ‘get’ each other.

After a century of trying to control people, processes and information, we have come to a point in organisational history where we need to recognise that what worked before just simply isn’t enough anymore. Traditional management is fine if you want compliance, but if you want innovation and growth, you need to engage your people on a whole new level.

Stop, start, reinvent

All of this presents a completely new challenge for how we think about and practice management. Organisations of the future are neither consensus driven nor top down. They aren’t dictatorships nor are they anarchies. They’re not merely occupied with increasing shareholder value or making their people happy. Leaders of the future know that the two go together, and that happy and productive workforces are not about teambuilding exercises or lucrative benefit packages, but about creating a working environment that offers purpose, mastery, challenge and autonomy and, in turn, creates more business value than the traditional approach.

Take for example the simple hypothesis that employees will work harder for more money. This, of course, is the reason why most companies have cascaded their corporate strategy down throughout their organisation in the form of Key Performance Indicators (KPIs) linked to bonuses. However, in research conducted by London Business School, respondents ranked financial remuneration as seventh most important, after factors such as “Working with good colleagues” and “Independence” in the answer to: “When thinking about a job, how important is each of the following factors to you, as something you value?”

Organisations of the future need to operate as living systems that are interconnected and interdependent, and capable of responding to constantly changing environments. The role of the leader is to inspire greatness, not control or manage through KPIs. Likewise, the approach to strategic innovation and problem solving is participatory, not top down. Co-creation, dealing with ambiguity and uncertainty, and non-hierarchical networks are all key to making this work.

Rethinking management is not about promoting the latest fad, repackaging an old concept or ignoring all the great work that has been done in this field up until now. It is about asking why we still use outdated management practices and taking a good, honest look at the needs of today’s and tomorrow’s diverse set of employees, customers and other stakeholders, and strategically choosing what to stop, what to start and what to reinvent. Here are some small and big examples of what you should start and stop doing:

Adapt or die

As human beings, we don’t like to stray very far from our comfort zones. So we stay in situations that aren’t working out simply because they feel comfortable. In business, we cling to what we think is true about our customers and markets, even when those ‘facts’ are changing in front of our eyes. We continue to believe that what made us successful in the past will make us successful in the future. But with an attitude like that we will not only become replaceable, but our organisations will soon turn into dinosaurs. The past ten years have witnessed the rise and fall of many once innovative companies including Dell, Blockbuster, Motorola, Sony and Woolworths, who failed to adapt to their business environment and evolve their products or practises. Collaboration, innovation and agility are critical to staying alive, and the approach to strategic innovation and problem solving is participatory, not top down. Leaders now need to be smarter than ever before. They need to create environments that foster co-creation and non-hierarchical networks and equip employees to manage ambiguity, complexity and uncertainty.

So many articles talk about what’s wrong with business. But few actually provide specific advice for how to create change. I will share the inner workings of an adaptive and participatory approach to organisational change calledUnleashing. It is rooted in a mixture of research and experiences working with organisations and executives in organisational development, transformation and strategy projects over the past decade, and is specifically aimed at unlocking organisations to solve their own problems, innovate and grow.

A recipe for change

A word of warning: successful organisational change requires that you use all of the ingredients listed below, inject lots of care and passion, and don’t take any short cuts.

Ingredient No. 1

A real, pressing and complex problem

 Change happens when a team goes through a transformational process that requires personal engagement, group interdependency, collaboration and intense learning. This can only be achieved in the context of solving a real, pressing and complex business problem that has no clear solution at the outset. No nice-to-have projects. Rather, choose problems that are critical to achieving strategic success.

Furthermore, the team must be given the mandate to solve the problem. This does not necessarily mean that the team should be given free rein, but rather that it is given freedom to innovate and create within agreed boundaries (eg budget, resources, timelines, ROI etc).

Ingredient No. 2

A diverse team with the right mix of skills and influence

Diversity is no longer about simply sitting on cross-functional teams. Change requires diversity of thought. A good starting point is selecting a subset of all the potential subgroups that are involved in the creation and use of the solution. The objective of the team is twofold:

• Come up with new insights and breakthrough solutions through the process of co-creation
• Develop into individual change agents that influence and carry the change over to their departments and the wider organisation.

It is important to select a team with the right mix of skills, expertise and influence. In my experience, change is most successful when you choose members who:

• Have been part of any strategic work to date
• Represent different relevant technical expertise
• Have influence and respect among their colleagues
• Represent different political and strategic views
• Are dedicated to improving the organisation and creating value for its customers and partners – not just personal career progression.

Ingredient No. 3

Learning through action

Many academic institutions and consulting organisations claim to be using action learning, but are actually not. To keep it simple, they have adapted the experiential learning process to be a test on an actual problem-solving exercise, rather than giving the participants the mandate to actually solve a problem or innovate in real time. For learning to take place, an individual must go through an explorative journey, where they learn through real life action, making personal adjustments to the learned material, developing ownership and internalising new knowledge and behaviours. In this act-reflect-adapt model, planning is minimised and action through piloting, prototyping and other mechanisms of testing out new processes, products or services are given priority.

Ingredient No. 4

Going through a battle

As the team tackles the complex and pressing problem through exploration and action, it will go through conflict and turbulence, or what I like to call the battle. This is a crucial part of the change process and needs to be managed by an experienced coach. If not managed well, or if dismissed entirely, this conflict will significantly affect productivity, morale and results. However, when going through it successfully, the team will have a better understanding of each other’s strengths and weaknesses form a closer bond and produce significantly better outcomes. This model can be scaled up depending on the size of your organisation. The key is to involve approximately 15-33 per cent of your employees and develop them into change agents. That way, the desired change can more successfully ripple through the entire organisation.

Ingredient No. 5

Synergistic co-creation

Research suggests that teams often perform less well than the sum of their members’ contributions, or 1+1< 2. This is due to flaws such as groupthink, social loafing, conformity, intragroup conflict, group polarisation, the illusion of unanimity and prioritising consensus over innovation. To avoid these common traps, it’s important to understand the difference between traditional teamwork and 1+1=3: synergistic co-creation. In traditional teamwork your ability to influence, communicate and sell your ideas are common success factors. In 1+1=3 however, team members are required to have an open mind, receive other’s thoughts and input and build on and challenge their ideas. This poses a tough challenge on the team as it has to break down old ways of working and create a culture of cohesion and collaboration.

Ingredient No. 6

The coach

Just like in professional sports, managing the battle and ensuring the team is practicing 1+1=3, requires a superb coach. The coach should be hand-picked and trained to empower teams to work through issues and create solutions. They should work side-by-side with the team, managing the change journey, challenging thinking, providing external perspective and ensuring the team creates breakthrough solutions and innovations that they believe in.

Whether you’re motivated by making a difference or financial returns, rethinking management simply makes good business sense. Businesses with higher employee engagement rates show on average 12 per cent higher customer advocacy, 18 per cent higher productivity and 12 per cent higher profitability. Isn’t it time you moved your organisation into the 21st century?

London Business School - Strategy Review