by Brad Power | 10:00 AM August 30, 2012 http://blogs.hbr.org/cs/2012/08/cure_your_companys_allergy_to_change.html
Many organizations suffer from a tragic pattern: The chief executive officer launches a new change program with great fanfare and intentions, only to shelve it a few years later with little to show for great expenditures of time and consulting fees. How can you break this cycle?
Consider a health insurance company that has been struggling with change programs gone haywire for quite some time. A few years ago, the chief operating officer launched a customer quality initiative to improve six core processes and assigned executives to “own” each process. But in the budgeting process, the initiative got little funding. Only a few of the six processes were assigned staff, and each claimed credit for the work of colleagues. The initiative fizzled.
But this wasn’t the only improvement initiative to peter out in the company. The CEO recently drove a cultural change program, and did so earnestly. He appointed vice presidents to run teams to recommend process changes. At several off-sites, they talked about culture, and people spoke their minds. After four months of meetings, the VPs surfaced even more issues. For example, employees wanted more transparency and say in project prioritization. But the CEO and his deputies heard things they didn’t want to hear, so they pulled the plug. None of the recommendations were implemented, and there were no results for the significant time invested.
This company has demonstrated a repeated pattern of 3- to 5-year cycles where it launches a change program, takes awhile for managers to get behind it, and then more time to get it funded. A program gets funded for a year but then everyone loses interest, and it gets defunded and dies. Recently they’re failing faster; the three- to five-year cycle is moving to two to three years. But they’re not failing fast to learn. They’re just failing more. It’s definitely not a learning organization.
How do companies get trapped in such tragic change cycles? The health insurer’s bugaboos speak volumes.
Just about everyone in the company agrees the culture is dysfunctional, with various layers to the problems. Some point to politics in the C-Suite, especially to competition between the COO and CFO. They blocked each other’s progress. If the COO launched a large, cross-functional improvement program, the CFO would underfund it. Another problem lay with the CEO, who had a way of questioning and stress-testing people that discouraged risk-taking. The result: a “play it safe” mentality.
The company has very polite and gracious people who like to follow rules, value process over results and contracts over trust. They often depend on consultants to take the lead in proposing major process change. Executives also want quick wins, so they scope projects to be done in a year. Most change programs at the company need multiple years to complete. As a consequence, by the time a program extends beyond the first year, executives move onto the “new initiative.”
A fourth problem was narrow scope for a change program: Anything outside a department or function required the CEO’s seal of approval; otherwise it couldn’t get anyone else’s attention. In such a hard-siloed organization, no one has an end-to-end view of any process.
Lack of ambition was a fifth problem. When confronted by problems, directors say, “I need to protect my department. I don’t want to do extra work.” Finally, they liked to report rosy numbers. For example, customers reported that the website performance was poor, but the internal department was using numbers that showed everything was okay.
Are there some countermeasures that can break a tragic change cycle like this?
Several lessons on how to achieve meaningful cultural change and associated operating performance improvements run through successful efforts at health insurance companies Aetna andBlue Cross Blue Shield of Michigan:
- Organizational realignment — The structure of an organization determines the incentives that drive identity, behavior, and employee understanding of roles and responsibilities and priorities, as well as a sense of ownership and accountability. Blue Cross Blue Shield of Michigan’s organization had been structured around health insurance products. It then tried a more traditional functional management structure but then found it lost customer focus. So it appointed leaders to run market segments with profit and loss responsibility, and put pressure on them to change the product mix and improve profitability. By organizing by customer, cross-functional changes became much easier to implement, and there was a dramatic turnaround in business results.
- Improvement methods — Irrespective of whether an organization is focused on growth or cost reduction, it must have a platform for doing work nimbly and at low cost. Adopting improvement methods such as “agile” or “lean” can change the culture as employees are empowered to make changes in their work and results and trust are prized over process and contracts. At Blue Cross Blue Shield of Michigan, tactics such as daily huddles drove immediate wins and helped entrench a culture of empowerment.
- Employee engagement — Employees fundamentally want themselves and the company to be successful, so successful change agents listen to their needs and help them transition. At Aetna, a recent article describes how new CEO John Rowe and other members of the senior team “sought out employees at all levels — those who were well connected, sensitive to the company culture, and widely respected — to get their input on the strategy as well as their views on both the design and execution of intended process changes.” Executives at Blue Cross Blue Shield of Michigan went into the field to gather input and communicate their commitment to change. And employees were trained in improvement methods (“Lean”), with every employee going through two sessions in accountability training.
Have you seen organizations break a tragic change cycle?