Managing change in the era of digital transformation

The new decade promises a whole new approach for the speed of change. VUCA — or volatile, uncertain, complex and ambiguous — has gone from military jargon to an overused business acronym. Organizations are recognizing the need to exist in a state of constant readiness to respond to new information about changing customer requirements, stakeholder expectations, regulation and competition. It’s a matter of survival. The life expectancy of public companies has plummeted. It’s estimated that nearly 1 in 10 public companies fail each year, a fourfold increase since 1965, according to the BCG Henderson Institute. Managing change more effectively has shot to the top of the priority list for many organizations, with 81 percent of respondents to the 2019 Deloitte Global Human Capital Trends survey saying the 21st century will require a special focus on “leading through complexity and ambiguity.”

The goals of change management — creating confident, positive and optimistic stakeholders with the skills and commitment to ensure new initiatives succeed — aren’t new. The need for effective change management isn’t new, either — humans have had to work together to adapt to changing conditions and circumstances for millennia.

What’s New in Change Management?

The simple answer is: the context in which leaders must lead change. Once upon a time, “change” was something temporary in the workplace. Organizations toughened themselves to get through it and get back to normal. That time has passed. Today, change is the regular work, and with this shift came the concept of change fatigue.

At the same time, artificial intelligence is coming into its own. Its implementation across nearly every industry is bringing disruption and intense pressure to adapt for organizations and employees alike. The impact is predicted to be on a scale unlike anything seen before. According to research conducted in 2017 by PwC, global GDP could be up to 14 percent higher in 2030 as a result of AI — the equivalent of an additional $15.7 trillion. A 2019 survey of 5,376 full-time employees across 20 countries conducted by Dale Carnegie Training found that 72 percent say they are either already being impacted by AI in their roles or expect to be within the next five years.

Complicating the situation further, many in leadership positions are charged with managing teams made up not only of traditional full-time employees, but also contract or “gig” workers with whom leaders may not have long-standing, trusting relationships. In addition, some or all of those employees may also work remotely, making it more challenging to assess and address individual reactions and commitment to change.

And just when people who are innately adaptable are most needed to deal with this accelerated pace of change, the American workforce is getting older. The Bureau of Labor Statistics estimates that by 2024, nearly a quarter of the U.S. workforce will be 55 or older, with about a third of those workers older than 65. That’s bad news given that some research (but not all, it should be noted) suggests older workers can be more resistant to change.

Lessons for Leaders

Given all of this, there is no doubt that learning and development professionals should have change management on their radar. As you assess your organization’s current change readiness, it’s essential to recognize that success today goes beyond leaders’ capacity to guide the implementation of formal change initiatives. It’s not about simply managing change anymore. It’s about leading teams to incubate, innovate, implement and propagate change. What is needed is leadership agility, which requires courage, a genuine openness to new information and learning, and a positive attitude toward change.

Yet even leaders in organizations that get traditional project-based change management right are finding it challenging to accept that change can — and should — come from new places (think front-line employees, customers, and through partnerships with vendors and even competitors). Unfortunately, it’s often senior leaders who are an organization’s own worst enemy when it comes to true transformational change.

Take the example of a large Midwestern bearing manufacturer faced with eroding market share for a $40 million business unit, its largest. The vice president in charge launched a project to drive manufacturing efficiencies using an AI-based system to identify and address key process bottlenecks in scheduling and inventory management.

He did everything right when it came to leading the change initiative: He shared the vision for the change outcome and built trust through a process of weekly and monthly communications and meetings. He involved the employees being impacted by the AI deployment from the beginning. He gave everyone a chance to ask questions and share ideas, and he reduced uncertainty by addressing concerns and being transparent throughout the process, providing training and upskilling in parallel with each step of the deployment and reassuring his people they wouldn’t be “left out in the cold.”

In the end, the project was acclaimed as a tremendous success. It improved overall service levels and ultimately resulted in a 15 percent growth rate while increasing earnings before interest and taxes by 18 percent. It also generated excitement for deploying AI tools in other parts of the business.

But when asked about it, instead of being elated, the vice president admitted he was actually disappointed. He and his team were frustrated that despite senior management’s awareness and acknowledgement of the program’s success, none of the learnings and changes were shared with or adopted by other business units, resulting in what they see as huge missed opportunities for similar AI-driven projects across the wider organization. For the vice president, it was a serious failure from that perspective. Today’s environment rewards leadership teams that are quick to identify and ready to embrace opportunities for transformational change.

His business unit had to change — the status quo (losing money and market share) wasn’t working. And they did change. But for organizations to survive and thrive today, they need forward-thinking leadership that will act on opportunities for continuous improvement before they are forced to.

How to Boost Leadership Agility

What can CLOs and L&D professionals do to help boost leadership agility in their organizations? Consider these four strategies to strengthen leaders’ mindsets, skills and behaviors when it comes to change.

First, help leadership teams take an honest look at themselves. It’s not easy. People have different innate orientations toward change. Where are each of your organization’s leaders on the change acceptance continuum? What does that mean for the leadership team as a unit? Are some leaders behaving in ways that prevent successful change from happening or moving across the organization? When change initiatives fail, as they often do, is your leadership team still playing the blame game?

If there are issues, it’s imperative to understand why. Are they worried about losing influence? Uncomfortable with technology? Having a hard time handling the stress and worry that comes with change fatigue? There are strategies for dealing with all of these issues, but they require skilled communication to uncover root causes and a commitment of time and resources to mitigate them.

Second, develop leaders’ ability to create an environment of psychological safety that encourages learning and risk-taking. Research is pointing to psychological safety as among the most critical elements of a culture that supports team effectiveness and innovation. And since employees find themselves working on teams more than ever, that importance can’t be overemphasized. Companies are finding a competitive advantage in using new technologies to derive insights from the abundance of data now available — but the value lies in learning from the data and acting quickly in response to it.

Yet many of today’s leaders did not grow up in a business environment that encouraged psychological safety and risk-taking. No more than a few years ago, top-down objective-setting, management by exception and forced-distribution performance ratings were standard practice. They still are in many companies. And just as grown children typically adopt parenting techniques they learned in their own formative years, otherwise good leaders may not know how to create psychological safety without coaching. Learning leaders can help.

A third strategy is to assist leaders in skillfully communicating change and recognizing natural change advocates. It’s important to recognize that while people’s initial reaction to change varies, reaction is different from commitment. No matter what their initial reaction is, an individual’s commitment to change can be developed. It begins with skillful, transparent communication of the vision for the change in a way that connects it to the organization’s purpose, appeals to employees’ motives and makes the change objective clear.

For teams that include remote workers, the lack of face time can make it harder to identify those needing extra help getting through change. With fewer live opportunities to communicate with remote employees, leaders need to be especially skilled and deliberate.

It’s a leader’s responsibility to calm fears, address concerns and help each person see the importance of their role in the change and the personal benefit that will result. It requires the ability to see the change from others’ points of view. It can also be greatly facilitated by peers. At the same time, having remote teams makes it easy to overlook change advocates — positive “disruptors” who see the big picture and are comfortable challenging the current state — who could be accelerating the change process. Social media has proven the power of networks and smart leaders need to be prepared to use those networks to their advantage in driving change.

Finally, teach leaders to deputize, not just delegate. Long ago, management theory recognized that simply distributing work efficiently left productivity on the table. Employees could contribute even more when managers delegated effectively. But to support transformational change at the fastest possible pace, even that isn’t enough anymore. The time has come for leaders to work toward deputizing their best people. Like a sheriff in the Wild West of 150 ago, deputizing confers true power. It means handing over real responsibility and the authority to make decisions.

This kind of empowerment drives engagement and speeds up decision-making, putting it in the hands of the people closest to work involved. It helps build confidence as employees learn by doing and from their own mistakes. Deputizing fast-tracks professional growth, which has become among the most significant factors in the retention of younger workers. As their confidence, experience and skills grow through meaningful leadership opportunities, it also feeds an organization’s succession planning pipeline.

The New Decade Brings New Requirements

If this decade requires something different of companies to survive — and it seems the consensus is that it will — it certainly requires something different of leadership teams. Attitudes toward change can be shaped, skills can be developed and behaviors can be changed, but the race is on. It’s time to stop hiding behind the notion that “change is hard” because, while it may be true, it won’t help organizations navigate the increasingly VUCA world.

The coming years promise to swiftly separate the winners from the losers — those who see change as an obstacle from those who see it as an opportunity. How well are your organization’s leaders prepared with the right mindset, skills and behaviors to guide transformational change in the new decade?