Leading Transformation
A powerful transformation story depends on the CEO’s willingness to make the transformation personal, to engage others openly and to spotlight successes as they emerge, write Carolyn B. Aiken and Scott P. Keller

In today’s business environment, companies cannot settle for incremental improvement; they must periodically undergo performance transformations to get, and stay, on top. But what exactly should the CEO be doing, and how different is this role from that of the executive team or the initiative’s sponsors?

Based on a series of interviews conducted with nearly a dozen executives, we believe there is no single model for success. But our experience with scores of major transformation efforts suggests that four key functions collectively define a successful role for the CEO in a transformation:

People will go to extraordinary lengths for causes they believe in, and a powerful transformation story will create and reinforce their commitment. The ultimate impact of the story depends on the CEO’s willingness to make the transformation personal, to engage others openly and to spotlight successes as they emerge. The role of CEOs is unique in that they stand at the top of the pyramid and all the other members of the organisation take cues from them. CEOs who give only lip service to a transformation will find everyone else doing the same.

Make it meaningful
Transformations require extraordinary energy: Employees must fundamentally rethink and reshape the business while continuing to run it day to day. Where does this energy come from? A powerful transformation story helps employees believe in the effort by answering their big questions, which can range from how the transformation will affect the company down to how it will affect them.

Adopt a personal approach
CEOs who take time to personalise the story of the transformation can unlock significantly more energy for it than those who dutifully present the PowerPoint slides that their working teams created for them. Personalising the story forces CEOs to consider and share with others the answers to such questions as “Why are we changing?”; “How will we get there?”; and “How does this relate to me?”

Some leaders include experiences and anecdotes from their own lives to underline their determination and belief – and to demonstrate that obstacles can be overcome. Klaus Zumwinkel, the chairman and CEO of Deutsche Post, talked about his passion for mountain climbing, linking the experience of that sport and the effort it requires to the company’s transformation journey. The CEO of US-based McKesson, John Hammergren, stressed the fact that every employee was or would be a patient in the health care system and that this “larger purpose” made a difference. “Had we been in the ball-bearing business, I’m not sure it would have been as easy to personalise it,” he acknowledges.

Openly engage others
When a CEO’s version of the transformation story is clear, success comes from taking it to employees, encouraging debate about it, reinforcing it, and prompting people to infuse it with their own personal meaning. Most CEOs invest great effort in visibly and vocally presenting the transformation story. Executive chairman of Telefonica de Espana, Julio Linares says that, for him, the most important and hardest part of the transformation was “to convince people of the need for the programme.” N.R. Narayana Murthy, chairman of the board and former chief executive of India’s Infosys, agrees: “The first responsibility of a leader is to create mental energy among people so that they enthusiastically embrace the transformation.”

Once the story is out, the CEO’s role becomes one of constant reinforcement. As P&G CEO Alan G. Lafley says, “Excruciating repetition and clarity are important–employees have so many things going on in the operation of their daily business that they don’t always take the time to stop, think, and internalise.”

Spotlight success
As the company’s transformation progresses, a powerful way to reinforce the story is to spotlight the successes. Sharing such stories helps crystallise the meaning of the transformation and gives people confidence that it will actually work. Murthy of Infosys describes how high-performing teams were invited to make presentations to larger audiences drawn from across the company, “to show other people that we value such behaviour.”

Ravi Kant, the managing director of the integrated Indian auto business Tata Motors, deliberately identified people who would serve as examples to others. He highlighted the achievements of one young man whose success on a risky project and subsequent promotion showed colleagues that talented and determined people can rise through the hierarchy.

The CEO also plays a critical role in ensuring an appropriate balance between near-term profit initiatives (those that deliver performance today) and organisational-health initiatives (those that build the capacity to deliver tomorrow’s results). This is a lesson applied by John Varley, CEO of Barclays: “For several years, the focus on initiatives to improve financial performance dramatically crowded out attention on franchise health, leaving us with a set of issues in some businesses that needed urgent attention. We are addressing those issues.” During the transformation, some CEOs even choose to hold separate review meetings for short- and long-term objectives in order to ensure that companies maintain a balance.

For CEOs leading a transformation, no single model guarantees success. But they can improve the odds by using the techniques we’ve discussed. Together, these can powerfully generate the energy needed to achieve a successful performance transformation.

(Carolyn Aiken is a consultant in McKinsey’s Toronto office, and Scott Keller is a principal in the Chicago office.)

From the McKinsey Quarterly c. 2007 McKinsey (Distributed by The New York Times Syndicate.)
 

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