Episode Transcript
Speaker 1 00:00:11 Hi everyone this week. I wanna talk about a really huge topic. It's an old and new topic, and it's the issue of change management and what we call change agility. I don't need to tell you why it's important. We've all been going through massive changes in an unprecedented speed for the last two years, personally, professionally and in our organizations. It's a big, big topic. The reason I know it's big is our HR capability project, which has about 8,000 people in it has rated it. The number one most desired development topic for professional development of HR people, almost 30% of everybody who's been through that assessment as told as they want more help with change. And there's a legacy to this. There's been hundreds of books written. I've had people give me lectures on it. I've talked to companies about a fre, but it's changed a lot.
Speaker 1 00:01:00 The topic has changed. And the way it's changed is that the original designs and architectures and models of change management were built around the implementation of something new, a new system, a new pay structure, a new org model, a new CEO, a new industry, whatever it is, and the company does this new thing and then tells everybody of about it, teaches everybody what their role is relative to it, and then handles ongoing issues of how you learn how to behave or act or work differently in this changed environment. And it sometimes succeeds. And sometimes doesn't lots and lots of technology implementations. Even today don't go well. And they don't go well, usually because the employees either don't know why they're making the change. They don't understand the system because it's hard to use or they, for some reason, don't understand the importance of the change and they just sort of ignore it and do things the old way, which of course eventually becomes a problem cuz the old way as oftentimes no longer support it.
Speaker 1 00:02:02 So we need to build what we call change agility in the company so that the company can go through lots of changes all the time and people are ready for change. And there's a fluidity and capability to change that is not change management. In fact, I think change management as a concept or as a phrase needs to go, we're not talking about pushing a change into the company. We're talking about becoming change, ready, becoming changeable, becoming welcome and ready for change at all times. Now we did a big study at the beginning of the pandemic, which we called the business resilience study and it's available to our research members and it interviewed and surveyed 1400 companies on how well they responded to the pandemic. And we weren't really sure where we were gonna discover. And what we found was that the companies that had come back to the market and grown the most quickly after the pandemic started.
Speaker 1 00:02:56 And you remember the first 60 days of the pandemic, everybody thought they were going outta business. I mean there was furloughs and layoffs and the stock market crashed. And then all of a sudden people started to reinvent themselves. And what we found that there were, there were really three things. There were really actually 10 things, but there were three types of things that these highly changeable companies were doing. The first was they were very people focused. They were worried about employees, safety and well be and mental health and education. And they were really pouring money and time into listening to employees being open-minded about the issues they were gonna have. Not presuming to understand what everybody's problems would be giving people flexibility, giving people a lot of forgiveness for, you know, being laid or not making it to meetings or not being able to do their jobs and then responding one at a time and slowly to these people issues.
Speaker 1 00:03:44 And so the issues of forgiveness, listening, understanding what people are going through is a huge part of being change ready. The second was the business itself was in a sense designed for change. Now, you know, that's an episodic thing. When you run a company that's really, really successful. You don't design to change it. You designed to do more of it. You designed to do it faster and faster and better and better as is to make more and more money. So what you find in healthcare companies, government agencies, oil companies, some manufacturers, they were never intended to be highly dynamic and move into new business areas or redesign or reinvent the way they go to market because they didn't have to. So there were companies that were good at it and they were companies in CPG, in pharma, in tech, in other industries that had been through tumultuous changes and they learned how to adapt.
Speaker 1 00:04:39 They had great it E systems. They had great teams, they had a very strong mission and purpose and they were able to use this high level mission to reinvent their products and services without trying to convince everybody they were going into a whole new business area. Think about Starbucks, for example, which is a really a magnificent organization. Starbucks, you might think there are coffee shop company, but they're really not. They're the third place. They're, they're trying to be a place where people can go to eat, to drink coffee, to make their day better in whatever fashion they may be, either instantly or for a while, if you wanna hang. And so they can reinvent what they do around that bigger purpose or mission. If you define your as a coffee distribution company, then you would obviously be making different kinds of changes. So these companies were very good at that.
Speaker 1 00:05:28 The third category that we found in the companies that were very change ready was they had an adaptive transformation mindset. They were able to move people from job to job very, very quickly. It wasn't a big deal. They would say to people in customer service, you're gonna all work from home. We're gonna teach you how to do that. And they adapt it. They move people from city to city and they flex their performance management process. They didn't have any problems doing away with it or simplifying it radical. They were able to bring in part-time and contingent workers quickly. They had had experience with that and they did a lot of experimentation. And by the way, experimentation is not something a lot of companies do. I was on the phone with a bunch of the HR leaders at Google a few weeks ago. And we were talking about Google's culture and Google's strengths.
Speaker 1 00:06:16 And so somebody made a comment that one of the things, uh, we're really good at here is experimenting. We do a lot of AB testing. We, we build a lot of prototypes. We do a lot of MVPs. Well, that's one of the reasons Google's so successful. They don't wait until something is completely done. They put it out there fairly early in their, they have a discipline and a lot of techniques for experimenting. And those were things that characterized responses to the pandemic. Well, you know, fast forward now, two years later, and in the research, we're just publishing on change agility. This is a corporate capability. This is not something that was only needed to respond to the crisis or the day dangerous transformation from the pandemic. This is something that companies need going forward. And that's really what this story is about. And when I go back to my days and change management and learning about it at Deloitte and other places, it was usually about training, which is a big part of it.
Speaker 1 00:07:14 Every time there's a change, there's something new to learn. There was communications, storytelling, lots of emails, lots of meetings, lots of discussions. And then there was a lot of culture around what we're doing now versus what we were doing before. And I think we need to now look at this as not a discipline for taking us from point a to point D B but more a general discipline for how, how we're gonna run the company forever because transformation reinvention is, uh, part of our daily lives, certainly in the business community. So let me talk a little bit about what we came up with. So when you read the research, you'll hear all sorts of interesting stories and, and the, the book is really about the 10 disciplines and there are many things in here, but the most important it Naval is that change ready companies happen to be very human centric organizations because the fundamentals of change are people being willing to learn and do something in a different way.
Speaker 1 00:08:13 And if they're rewarded or paid or afraid to do it the new way, because they're to do it the old way and the company doesn't respect their need for time and education and training and support to do it the new way, you know what, they're gonna do it the old way, or they're not gonna be able to do it the new way very well. And let me give you a very specific example of this many years ago, one of our clients with was the CLO of one of the largest insurance companies. And this is a company that very global sells insurance all over the world through brokers. And so, uh, they have very good actuarial science, very good financial resources, very good transaction systems. And they package and sell insurance products through thousands and thousands of brokers and their margins were going down. And there were a lot of industry changes going on in different parts of the world they wanted to move into.
Speaker 1 00:09:05 And so they made a very big decision to change their sales organizations, to, to sell directly to small, medium and large businesses. And also to high wealth individuals. And the chief learning officer was very senior guy, got a call from the CEO. He was involved in this and, and the CEO said, I want you to bring everybody to New York for two weeks. And I want to train everybody on this new business model and show them what they're gonna need to do. And the CLO said, Nope, I'm not doing that. That is not the way to do this. We have to understand that in our organization, which is an old company, probably 25% of our employees simply will not get this. And we're gonna probably need to let them go. I don't know who, which 25% it is, but it's probably around that number around half or 60% of the employees will probably take six to a year to fully understand the implications of this new business model on their job.
Speaker 1 00:10:01 And clearly we're gonna need to educate them and gate them along. And then there's about 15 or 20% of the people out there. They're gonna get this immediately. And they're going to jump in with both feet and then they will teach others. And he said, what I'd like to do is I'd like to find them first. So we're gonna find the change leaders, the most adaptable people in the company, and we're gonna teach them what's going on. And then we're gonna let them teach everybody else what to do. And sure enough, that's what he did. I won't mention the name of the company. This is a very, very successful company. It happens to be the company that I do business with. And that's an example of, of learning to build an adaptable organization. Now, ideally it would've been nice if a hundred percent of the employees were able to make that change, but they weren't used to that.
Speaker 1 00:10:45 They didn't go through a lot of transformations like that in this company. And so they weren't prepared for it. So, so that's the first thing. The second thing in change readiness is the importance of rewards. I think one of the biggest things that is both good and bad about the management models we have in most companies is we do have the ability in the business community to reward people for performance and results. I was just on the phone this week with a very large company, that's having a lot of frustrations with turnover. And the real story in this particular case was the financial pressure to grow was so high that everybody feels burned out. The numbers are too demanding. The company's spending too much time talking about the numbers. And the sense I got from the management team was they need to go back to the purpose and culture.
Speaker 1 00:11:37 You have to remember that financial results are not the goal of a company. They are the outcome of a company. The goal is to solve a problem. The goal is to deliver a solution to the market or to an individual or to a consumer group or to a business community and financial results are the results of that goal. They are the outcome of that goal. If you run the company purely focused on the financial numbers, you might end up with a very high performing workforce, but you won't be changeable because people will be mostly worried about the numbers. So the thing that gets in the way of many change is, is reward systems. And so you need to carefully think about how people are going to be rewarded in the context of the changes that you expect to be making. The second thing that comes out of the research is the really important need of education and training and reinvention.
Speaker 1 00:12:28 I've written about this many, many times. I do believe that education and in training is one of the most interesting and exciting reasons. We work in the private sector. We like to do the job we're doing. Hopefully we have a job we enjoy, and we like to learn more about it. And we like to learn more about things adjacent. And those are psychic benefits. We get from work in addition to the people and the pay and the customer interactions and creativity thing, things that we get to do well. It turned out that when you looked at the pandemic response study and several others we've done, the companies have spent more money on learning and development and better overall implementation of the various dozens of things that you need to do. And learning were much more responsive. I was just on the phone yesterday with the C H R O of one of the largest and most interesting pharmaceutical companies in the world.
Speaker 1 00:13:17 This is a company that's growing at an inordinately fast rate. And she said, you know, we've been hiring and hiring and hiring and working on culture and leadership. She said, but I realized I'm, I'm really behind on learning. We really suffer from a lot of operational gaps and learning. And so that has to come next. And I think in this day and age, if you haven't been talking about learning and focused on learning and maturing your learning strategies, your changeability will be limited. And I can't predict what any particular change will be for any company, but every company is going through change all the time. In fact, probably at an unprecedented rate. So learning is number two. The third thing that I'll mention really highlight is leadership. And, you know, leaders have a different role today than they did. Three, four years ago. We used to think of a leader as a manager, a supervisor, a director of people who took care of the operational needs, a group set the direction of that group, maybe created the business metrics, motivated the people with the goals and hired and fired people in that group.
Speaker 1 00:14:25 And of course, in most cases they were domain expert in that function also. Well, all of that's still true, but now leaders have to be in a sense caretakers listeners to people to facilitate the changes that are taking place. If you look for example, at the leadership model of Ford motor company, it's not built around electric vehicles or technology or engineering excellence or quality, which I'm sure is all in there, it's a built about care, taking care of people, listening to people. And what that does is it gives people a sense of psychological safety to make the changes that the company needs. You know, as Kathy Andras talks about in the article, she wrote today about change management. We need to evolve, change management from a sibling of project management, to a design discipline that nudges people to adopt due behaviors and transform. And that's really what this is all about while we certainly want people to do the jobs they're in now, as well as they possibly can.
Speaker 1 00:15:27 We also need to make them ready and learning to do new things all the time so that when a big change comes along, they say, okay, fine. We'll just do it that way. I mean, I remember years ago when I was at IBM in the eighties and in the eighties, IBM was the Google of today. It was in the seventies and eighties. It was a really, really successful high growth company. Every year, we used to have a reorg and I was in the sales organization. One year, we were organized around products. Then we were organized around geographies. Then we were organized around industries. Then we got organized around new products. Then we got organized around. I don't even remember what the next one was, but for the 10 years I was there. I think there were 10 massive reorgs of the whole field organization. And I went to my boss one day who was a very senior guy and kind of a, an old time, true blue IBM type.
Speaker 1 00:16:17 And I said, how come we keep having all these reorgs? He said, because it's good for you. And I said, what do you mean by that? He said, well, what they're basically teaching us in the reorg is that we need to be adaptable. And that IBM is a company needs to adapt to the needs of the market. And I'll tell you, at that point in time, this was in the late seventies and early eighties. We were a very adaptable company. Of course, many other things happened to IBM since then that were very disruptive that I don't know that the company adapted to as well. But, but that idea that change for its own sake sometimes is good. Is another part of this discipline. I guess the way I'd conclude is this change. Agility is a very fundamental discipline of any successful company, any successful team, any successful organization.
Speaker 1 00:17:05 And it isn't just about training and communications and typical change management techniques. It's a problem of care development, culture, listening and teaching people that their reward system from their personal standpoint, their professional standpoint will benefit from this change. And going back to the purpose and mission of your company, it isn't simply a problem of rolling out a new program or system teaching people their job and telling them how much money gonna make as a result of the new system. Please read our research on this. It's very carefully put together. It's based on all of the research that we did the last two years, studying 1400 companies and their response to the pandemic and reach out to us. If you'd like to talk about change in your company. Thank you.
