transformation audits

Although Transformation and Change programmes are often strategically necessary, they are always expensive.

The bitter truth is that on average change and transformation programmes generate no value for their investment. Worse, there is about a 50:50 chance that they destroy value.

While it is true that some companies see high returns from Transformation, it is dangerous to plan your own programme based on this “success bias”.  While almost exactly 50% of the companies saw some positive outcome, the other 50% destroyed the same amount of value. On average, the net effect of transformation programmes is zero.

 
half of the companies destroyed value, dataset from Beer, Nohria, and Katzenbach
based on adjusted margins, earnings, shareprice, and efficiency measures

The two obvious questions are :

          1.  How do companies get on the "value creation" side?

          2.  When a company finds itself on the "value destuction" side

               (and half of them will) what should that company do next?

Our experience suggests that value creation has little to do with successful completion of a change programme. Similarly it has little to do with the programme structure or objectives.

Generating value is mostly dependent on the underlying culture and on management personalities within the organisation. In particular, when middle management thinks that the change will be ineffective the end result is, unsurprisingly, ineffective. Likewise, when the staff does not trust management then the programme is almost certain to destroy value.

Creating value is therefore in many ways simply about getting your people to believe that the programme is worthwhile and useful, while making them enthusiastic about the value and efficiency to come.

If your company is one of the 50% inadvertently destroying value, it may be that cutting the costs or stopping the programme partway through. Living with any small gains made to date may be better than continuing with a value destroying programme.

Insight SRI’s Transformation Audit helps you to assess and manage planned or ongoing change programmes. Based on this assessment, you can then make any required improvents.