What do organizations do when business transformation, organizational structure, and employees collide?
Organizational transformation is difficult, costly, and they can be taxing for everyone involved.
Managing transformation effectively is essential for achieving positive outcomes in any project.
Below, we’ll explore business transformation in detail, including:
- How organizational transformation affects the workforce
- The challenges associated with organizational transformation and change
- The benefits of change management
To start off, though, we should clarify what we mean by “business transformation” and “organizational transformation.”
Why and How Businesses Transform
Organizational transformations are a series of interrelated change initiatives aimed at reinventing an organization.
There are a number of potential drivers that can propel such transformations.
- Organizations may choose to transform their business in order to pursue hyper-growth opportunities
- Digital disruption may require a company to adopt new technology, modernize its IT infrastructure, and transform the way it operates
- New competitors may threaten existing business models, pressuring companies to evolve
Large-scale organizational transformations such as these can affect many areas of a business, such as:
- The organization’s strategy, mission, and aim
- Its target marketplace or its market position
- The corporate culture
- Organizational structure
As one would imagine, changes such as these can have a profound impact on the workforce, particularly with organizational restructuring.
What Happens When Business Transformation, Organizational Structure, and Workers Collide
Organizational restructuring can affect the workforce in several ways:
- Job roles can be eliminated, reassigned, or transformed
- Workers may need to re-skill, upskill, and undergo further training
- Some workers may lose their positions, while new hires may alter the workplace dynamics
Naturally, such changes can have a significant impact on the workforce.
Though each transformation is unique – and each will have its own unique affect on the business – there are certain challenges common to many organizational changes.
When faced with the uncertainty of a massive organizational transformation, negative reactions are common.
- Uncertainty about the future can be stressful. Restructuring can be particularly distressing, because workers’ futures may hang in the balance. Clear communication about a change project, as we will see below, is one way to clarify the project aims and reduce uncertainty.
- Frustration and stress can lower productivity and engagement. Uncertainty, fear, stress, frustration, and other negative emotions can dramatically decrease workers’ contributions and support. This, in turn, harms the outcomes of a transformation program and decreases the chances of success.
- Negative reactions can give way to resistance. Employees’ resistance to change is a common roadblock to success. Structured change management specifically tackles obstacles such as employee resistance, through effective communication, robust employee training programs, and other employee-centered techniques.
For reasons such as these, many businesses implement a structured approach to managing organizational transformations.
How Change Management Mitigates Risk and Maximizes Positive Outcomes
Change management and organization development (OD) are business fields dedicated to streamlining organizational change.
These disciplines often focus heavily on the individual employee – enabling change, improving engagement, minimizing resistance, and so forth.
For instance, the change management agency Prosci uses a 5-step process that revolves around individual workers.
Its steps include:
- Awareness of the need for change
- Desire to support the change
- Knowledge of how to change
- Ability to demonstrate skills and behaviors
- Reinforcement to make the change stick
This model, called the ADKAR model, follows the same approach to change as many others.
McKinsey, for instance, advises following a set of four key actions:
- Role modeling the change
- Fostering understanding and conviction
- Reinforcing changes through formal mechanisms
- Developing talents and skills
Many of the key elements remain the same: enabling employees, reinforcing changes, and fostering understanding.
Structured approaches to change management such as these offer a number of benefits to any organizational change project, such as:
- Improved chances of success. Perhaps the biggest danger in any organizational transformation program is the potential for failure. If a large-scale organizational transformation fails, then the costs could very easily exceed financial costs. When the business’s survival depends on success, then failed transformations could also mean failure for the business itself.
- Decreased impacts on business processes and services. Negative impacts to services can also cause costs to increase. Customers who have bad experiences due to these impacts, for instance, may join competitors instead.
- Greater project efficiency. Organizational transformations are costly, and effective change management helps keep those costs down – while also shortening timelines.
- Less friction, frustration, and resistance from employees. Communication is one area of focus for change managers. This means clearly communicating the need for change, the transformation program’s agenda, expectations, and responsibilities.
- More cooperation and support at every level. The more support a transformation program receives, the better the outcomes will be. Change management helps to keep the organization aligned and in sync.
Generally speaking, the more sophisticated and well-structured the change management program, the more of these benefits an organization will reap.
Change management is not a magic pill, especially when it comes to business transformation and organizational restructuring. After all, these processes are trying, costly, and challenging.
However, with the right approach, formal change management can increase the chances of success and help an organization realize greater value from its transformation program.