Managing Organizational Headwinds in Digital Transformation
August 19th, 2019 by Maureen Metcalf
This blog is provided by Tony Saldanha, extracted and exclusively adapted from his book “Why Digital Transformations Fail,” as a companion to his interview on Innovating Leadership, Co-creating Our Future. This interview aired on 8/20/19.
Organizational change management is treated as an afterthought for digital transformation as opposed to being proactively planned for. That’s troubling because based on my research, more digital transformations fail due to organizational change related reasons than technology. Most reliable process systems, such as say aircraft flights, plan for headwinds. Digital transformation can learn from them. Unfortunately, organizational headwinds are often dismissed in simplistic terms like change resistance or the frozen middle. That’s a mistake when planning for success in digital transformation.
The Science of Immune System Management
A corporate immune system is not necessarily a bad thing. Like its counterpart in the human body, it plays a vital role. In our bodies, the immune system protects us from disease and keeps us healthy. It is true that immune system disorders can be problematic (i.e., an immune system deficiency leaves the body susceptible to constant infections, while an overactive immune system will fight healthy tissues). However, on balance, a healthy immune system is desirable.
If that’s true, then why do so many change leaders blame the corporate immune system when things go south? Shouldn’t disciplined change leaders understand the strength of the immune system within their own organizations and prepare for appropriate handling?
At Procter & Gamble, when leading the industry disruption ecosystem, which included the biggest five IT companies and startups from the top ten venture capitalist firms, we took a different approach. For each of the twenty-five experiments (projects) that the ecosystem, called Next Generation Services (NGS) executed during my three years, there was always a proactive immune system conversation and plan. It made a huge difference versus historical trends on disruptive change acceptance.
There were three key truths that drove our approach:
– The immune system is not necessarily a bad thing. Anticipate and prepare for immune system responses.
– Immune system responses can originate at all levels in the organization, but the toughest ones occur at middle management.
– The bigger the change, the harder the immune system response (i.e., digital transformation will be tough).
Having covered the first item, let’s zero in on the issue of middle management reaction. In most organizations, it is easy to get senior executive leadership excited about change. Similarly, the younger generation gets quickly on board. It is the middle management layer that’s on the critical path and has the potential to slow down or even block change. The term “frozen middle” has been associated with this phenomenon. This concept was published in a Harvard Business Review article in 2005 by Jonathan Bynes.[i] Bynes’s point was that the most important thing a CEO could do to boost company performance was to build the capabilities of middle management.
For corporate immune system disorders at the middle management level, the term “frozen middle” is accurate, but it comes with the risk of being pejorative for seeming to blame middle management for recalcitrance and inertia. In reality, the responsibility to bring middle management along on the journey resides with the change leaders and their sponsors. Consider this—the so-called frozen middle protects the enterprise from unnecessary distractions and change, just like the human immune system protects the body from harmful change. Middle managers are rewarded mostly for running stable operations. Is it fair to criticize them as a whole for doing what their reward system dictates? We must separate immune system disorders from normal immune system responses.
At NGS, we paid special attention to identifying, by name, the middle management leader for each affected project. We identified the middle management leaders affected by each project, involved them in the initial “fun” of designing the disruption, and jointly designed the risky roll-out of disruptive projects that could destabilize ongoing operations.
In the worst case, where despite the enrolling of the leadership the change resistance continued to be high, the project was quickly killed. That idea of selectively killing a few projects worked well because of the portfolio effect of having several other projects available in the pipeline.
Though the concept of a frozen middle is applicable broadly, overcoming it has never been as critical as it is with digital disruption. The amount of change necessitated by a systemic and sustainable digital transformation is massive. This isn’t just a technology or product or process change but also an organizational culture change. The middle management will need to lead the rest of the organization in learning new capabilities (i.e., digital) as well as new ways of working in the digital era, including encouraging agility, taking risk, and re-creating entire new business models and internal processes. Retraining middle management on digital possibilities is not sufficient. Entirely new reward systems and organizational processes will be called for.
Planning for headwinds during digital transformation isn’t just prudent, it’s a necessity given the high stakes of digital disruption. Emphasizing on “transformation”, more than on “digital” is a strategic imperative for success. For this, understanding and acting on the three truths of immune system management is critical i.e. it isn’t willful bad behavior but a rewards issue, it can happen at all levels in the organization but is toughest in the middle layers, and digital transformation by nature needs solving the toughest immune system challenges.
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About the Author
Tony Saldanha is a globally recognized expert in Global Business Services (GBS) and Information Technology. He ran Procter & Gamble’s famed multi-billion dollar GBS and IT operations in every region across the world during a 27 year career there. Tony has over three decades of international business expertise in the US, Europe, and Asia. He was named on Computerworld’s Premier 100 IT Professionals list in 2013. Tony’s experiences include GBS design and operations, CIO positions, acquisitions and divestitures, outsourcing, disruptive innovation, and creation of new business models. Tony is currently President of Transformant, a consulting organization that advises top companies around the world in digital transformation and global business services. He is also a founder of two blockchain and AI companies, and an adviser to venture capital companies.
[i] Jonathan L. S. Byrnes, “Middle Management Excellence,” jlbyrnes.com, December 5, 2005, http://jlbyrnes.com/uploads/Main/Middle Management Excellence HBSWK 12-05.pdf [accessed December 19, 2018].