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Why Change Fails in Performance Improvement…

January 3rd, 2013

Be the Change

Whether it is a new year, the passing of another birthday or a lecture from your doctor at your annual physical, you have made yourself a new set of promises to change.  You check the many yellow sticky pad slips around your desk and see many of the same items on prior lists.  Why didn’t they happen last time and why will they happen this time? Frankly, having a list and the motivation isn’t enough.  You need a path.

Organizations aren’t that different.  Change is difficult and it’s nearly impossible without a proven way to change.  And most companies don’t have it.  In fact, in a 2006 McKinsey study of companies which had embarked on major initiatives over the prior ten years ranging from Operational Excellence to acquisitions, McKinsey found the majority proved to have a negative return on investment.  McKinsey pointed to the following top three deficiencies in companies that failed to successfully drive a positive ROI on an initiative;

  1. Lack of Commitment and Follow Through by Top Executives
  2. Defective Project Management Skills Among Middle Managers
  3. Lack of Training and Confusion Among Frontline Employees

Before accepting these conclusions, I took a look further back in available literature for similar studies.  Part of my reason was to validate the McKinsey findings but part was also to see if there had been a change in causes.  My search yielded a 1996 study by Coopers & Lybrand, now PricewaterhouseCoopers, which cited the following top three causes of failure and evidence of success;


Needless to say, the Coopers’ study, done ten years earlier, seems to point to the same causes – committed leadership and skilled, involved middle managers and frontline employees.  Presumably commitment means a willingness to take on the politics of functional boundaries.  The saddest part of my finding these studies is that the failings from the time period leading up to the Coopers’ study don’t seem to have caused any sort of change in behavior over the next ten years – but  that is an issue to discuss at another time.

The interesting point in the McKinsey study is that success is defined and the reason for failure is refined.  And that starts to lead the thinking for a solution.  Specifically, the McKinsey study defines success as a positive ROI.  Frankly, this is a pretty low hurdle since it doesn’t get into any weighted cost of capital hurdle rates.  Imagine college with a simple pass/fail. But I have to admit that if 80% of the students were failing, starting with a P/F system is a step forward.

Obviously, an ROI calculation is mathematical so while you can argue things like whether soft costs should be included and how they should be valued, you at least have a framework for discussion.  You can begin to theorize whether the implementation costs are too high, the results too low or the time to achieve too long.  And depending on the cause, you can begin to implement some solutions.

At this point, I admit I’m leaving actual research and relying on some common sense and experience for the final part of the discussion where we look to a solution.  First, I posit that the decision to move forward and the execution of a project are often two separate events.  If an initiative fails to meet anticipated gains, the error is often in the original assumptions supporting the decision.  That is quite different from the costs and time where some of the most significant problems arise in the execution.

What does this mean?  Well assuming Operational Excellence program are producing negative returns like other corporate initiatives, how do we construct Change Management models that better address causes of failure such as the lack of a committed leadership and skilled, involved managers and front-line personnel? And keep in mind, the commitment, skills and involvement we are discussing here aren’t process improvement skills (i.e. belt training).  We are talking about change skills.  Interestingly, Deming spoke of the importance of these issues well before today’s Operational Excellence programs.

If you wish to discuss Change Management models that address the aforementioned challenges, feel free to contact me.

  1. Sarah Logan
    January 4th, 2013 at 10:12 | #1

    You say, “At this point, I admit I’m leaving actual research and relying on some common sense and experience for the final part of the discussion where we look to a solution.” I think that’s a good thing. In trying to move from too much reliance on anecdotal evidence, organizations often under-rate the usefulness of common sense and experience. It seems to me that a workable balance might be the best way to move improvements forward.

  2. January 4th, 2013 at 10:53 | #2

    wonderful article . it is truly reflects the difficulties we are facing every day in our daily work , and the obstacles towards any kind of change .

  3. January 6th, 2013 at 11:42 | #3


    Thanks for the encouragement. I think there is a tremendous amount of experience in every workplace with failed initiatives. And there is tremendous consensus about the causes. Negative ROI’s aren’t due to poor analysis leading up to the decision. Primarily that is because there is normally so much that can be improved that the assumptions have plenty of room. Mathematically, the primary cause for failure is that it takes too long to make the chance or the change fails altogether. And we now the behavioral reason for the failure. As the two studies cite, we experience a lack of commitment to the change and knowledge how to drive change. It is amazing to me that over the twenty years of the two studies, we continue to expect a different result. But I’m not pointing fingers as much as looking in the mirror. Change starts with each of us.

  4. January 6th, 2013 at 11:49 | #4

    Thanks Hanan. As I’ve read the thoughtful comments to the post, I have thought more about how to approach the problem. I urge everyone involved in a change initiative to always ask “how will we drive this change?”. There are many models that address the causes. And certainly, SSQ offers one too. But at this stage, more important than debating the best model, I urge people to at least have one. To many initiatives, have none that address the underlying causes of failure.

  5. Shobha
    January 11th, 2013 at 04:08 | #5

    Thanks Hanan.

    Totally agree that these are the main parameters for any project / change in the Organization.

    But can you suggest any ways of ensuring that we do not face these issues ? please advice. Thanks

Comments are closed.

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