Pitfalls Of Corporate Transformations And 3 Ways To Maximize Success

Seventy percent of corporate transformations fail due to the inability to create the right conditions and develop the right capabilities. All of the potential is there, on paper at least, yet the attempt turns into a painful liability instead of synergy despite the company spending a fortune on seemingly cutting-edge solutions.

Something does not add up, so what might be the reason? Whose fault is it? To be honest, it does not matter as it is everybody’s responsibility to make it work.

Why Transformations Fail

Let’s use an everyday example: cooking. Choosing the right ingredients for a dish is vital, but that does not guarantee an optimal outcome unless we also know how much of each ingredient is needed, when they must be added, which ones complement each other and which have to be handled with care or separately. It is also necessary to know what methods of cooking to apply for how long and in which order.

In corporate transformations, often the members of individual teams are extremely smart, with good intentions and common sense, yet under pressure, they tend to break into silos of people who think similarly. Once within these silos, derailing behaviors can overtake constructive behaviors while biases can distort objective thinking due to a lack of psychological safety.

Understanding individuals’ strengths, personality types, etc. is important, but just like when combining different ingredients in cooking, it is even more crucial to understand team dynamics and find out if your teams have the right environment and the right capabilities.

Two Key Mistakes

Before deep diving into what those are, let’s address the two main mistakes companies make when it comes to transformation.

First, most of the currently used, popular management and leadership solutions were created before 1975, when most company value (83%) came from physical assets rather than from intangible assets like human capital (17%). In 2018, in contrast, 84% of company value was created by human capital, with only 16% coming from tangible assets. This makes it pretty clear why spending money to try the same old ideas in different packaging does not deliver the results clients are hoping and paying for.

The second weak point is that the financial cost of disconnected frameworks is much more than the sum of their prices. What I mean by that is that large organizations tend to use a lot of different psychometric, cultural and leadership or management models, all of which use different terminology and measure different aspects of personalities, behaviors and collaboration.

Just imagine a workshop where participants introduce themselves based on their favorite personality framework:

“Hello, I’m an ENTJ.” “Hi, I am Cool Blue.” “Greetings, I am an S type.” “Nice to meet you all, I’m an eight.”

It’s like speaking different languages while expecting others to know what we are talking about.

3 Ways To Increase The Chance Of Success

Based on my experience working with global companies for more than 10 years, there are three things that need to happen in order to maximize the chance of successful transformation.

1. Developing The Right Conditions

The highest level of team performance happens in a psychologically safe, motivating and cognitively diverse environment. These invisible forces are not optional. Countless research and case studies have proven that scoring high on those dimensions is a prerequisite for sustainable growth and transformation. There is no guarantee of success even with these elements, but failure is extremely likely for projects that score low in these areas.

2. Developing The Right Capabilities

The famous Marshmallow Challenge (subscription required) has demonstrated hundreds of times that the smarter people are individually, the worse they tend to perform as a team due to clashes of values, beliefs, egos and fears. The ability to understand and manage our own cognitive biases, derailers and blind spots allows us to become more confident, efficient and competent in leading ourselves while also interacting with others.

3. Developing A Common Ground Based On Simplicity And Clarity

Replacing complexity with simplicity sounds like a “New Age” piece of advice as it goes against our biases that often suggest the more complicated something is, the more scientific and efficient it is. But this is misleading for two reasons. First of all, if something is too difficult, most people won’t be able or willing to use it; therefore there is no positive impact. Secondly, the more unfamiliar a solution is, the more resistance people tend to feel.

The most popular solutions may be extremely complex within, but they are easy to use by the end users. Think of the iPhone, Tesla, etc. The same principle applies to team coaching and organizational development. It has to be data-driven, rooted in science and uncomplicated. It is even better if you can introduce it by using the language your teams already speak, building on what they already know in order to reduce friction and maximize the chance of adoption.

Final Thoughts

Choosing a cost-based transformation instead of a value-driven one is a knee-jerk reaction by even the most experienced companies, as the existing cost is visible, while the future benefits of investment and the consequences of low-quality decisions are not. The idea is to “trim the fat” while in reality, they are cutting into the muscle and bone of the organization, which will lead to even more issues in the future.

The clarity of vision for a transformation must match the company values and purpose; otherwise, employees and clients will notice the disconnect between words and actions, the discrepancy between what is said publicly and what is done internally.

The original article was written by Csaba Toth and it was published on Forbes here.

Csaba Toth
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Csaba Toth

Founder at ICQ Global
Author of Uncommon Sense in Unusual Times, developer of the multi award-winning Global DISC model
Csaba Toth
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