Define the Portfolio of Initiatives

In the Aspire stage of the change journey, you identified your long-term change vision. Recall the visions from Chapter 3: GNP wanted to become “1 on 3 in 5”; Tata aspired to be a “globally diversified automotive giant”; Microsoft looked to “build best-in-class platforms and productivity services for a mobile-first, cloud-first world”; and so on. The future of these long-term visions was then rolled back to break the path down into a series of medium-term aspirations. For example, the first phase of Tata’s journey was to “stem the bleeding,” the second to “consolidate our position in India,” and the third to “expand operations internationally.”

Now it’s time to look at the near term—what is the specific work that needs to be done in the next 12–18 months to move the organization toward its aspirations (that you decided in the Aspire stage) and build the required skillsets (that you identified in the Assess stage)? There are three important considerations in doing so. First, choose a balanced portfolio of initiatives to pursue. Next, structure the program into a coherent set of themes that essentially shows how each brick (initiative) fits together to build the cathedral (the mid-term aspiration). Finally, use a bottom-up process to develop implementation plans for each initiative.

To determine what is the optimal portfolio of initiatives, we suggest leaders consider value, risk, and time frames of impact. This can be done efficiently by plotting potential initiatives on two axes, time and familiarity, and doing so by visually representing the relative impact potential of each, as shown in Exhibit 5.1. The grid they produce will reveal at a glance whether the initiatives are balanced, like the large grid in the exhibit, or unbalanced, like the six smaller grids on the right.

The time axis helps ensure that the portfolio is balanced between efforts that meet current earnings expectations, efforts that yield medium-term impact, and efforts that create long-term value. The initiatives are about what we do in the near term, but we can’t neglect that there may be things we need to be doing today if we are to achieve long lead-time impact further out. The familiarity axis ensures that the portfolio isn’t biased toward big bets on the future on the one hand, or incremental improvements that stay too close to the current state on the other. The value-creation potential of each initiative is denoted by the size of the circles plotted on the grid, and this ensures that the activity will ultimately lead to the needed impact.

Once the optimal portfolio of performance initiatives is determined, it’s vital to create a coherent overall change-program structure to house the initiatives. Without this, you’ll run the risk of the “100 lost projects” syndrome: many initiatives embarked on but few completed thanks to a lack of role clarity, coordination, and motivation. Here’s an experiment that illustrates the point. Take a look at the picture on the left in Exhibit 5.2. What does it show? Some abstract shapes? A pattern of light and dark? What if we asked you to talk about the picture for a few minutes? Could you find much to say, or summon much enthusiasm?

Now look at the picture on the right of Exhibit 5.2. If we gave you that additional information, would it make any difference to your conception of the left-hand side? Of course it would. You’d be able to describe the reflection of the house in the water and the trees in the foreground. Seeing the big picture—literally—helps us see how each piece fits in, gives each more meaning, and generates more energy in those working on it. It’s no wonder that programs are 6.1 times more likely to be successful if they are well structured.²

A simple but powerful approach to provide structure to a change program is provided in Exhibit 5.3. The mid-term aspiration is clearly stated at the top and is then broken down into a set of performance themes. These themes provide sensible groupings for specific initiatives and measures of success.

This example comes from a commercial insurance brokerage with a long-term vision of becoming a digital and data-driven risk solutions provider. It had a medium-term aspiration of increasing earnings by operating as one firm, not as a federation of acquired businesses. The initiatives were structured around three thematic focus areas: cross-sell, working together, and technology optimization.

The “cross-sell” theme had metrics related to both number of products per client and customer retention. Initiatives included customer segmentation, product bundling, key account management, and so on. The “working together” theme had metrics related to expense ratio and compliance. Initiatives to support this included putting in place a new regional office model under a single brand (retiring all pre-acquisition heritage branding), process standardization, setting up centers of excellence, and standardizing transactional activities, among others. The “technology optimization” theme had metrics such as the number of duplicate systems and risk incidents (e.g., outages, breaches). Some of the initiatives to impact these were a new data and analytics strategy, improved cybersecurity, and putting in place a technology roadmap.

We refer to this format as the “Performance Placemat.” The name comes from the idea that if you cannot explain the structure of a change program on a single page—the size of a typical placemat used at a dining table—it’s too complicated. As P&G’s Alan G. Lafley describes it, the placemat provides “a Sesame-Street-level of simplicity” to the change agenda.

Once you have your performance placemat, the next step is to plan each of the initiatives in detail. This is best done by those who will ultimately be responsible for executing against the plan. Doing so builds ownership in the spirit of the “write your own lottery ticket” effect we described at the end of Chapter 3. It also ensures the right knowledge is brought to bear so the plans are as robust as possible. Allowing staff to contribute to planning the initiatives they will be involved in is 3.4 times more likely to be considered successful.³

A detailed initiative plan typically includes a crisp description of what success looks like and how it will be achieved. Activities to deliver the desired results are itemized and timelines for their completion determined. Impact milestones along the way are noted so progress against more than just activity can be measured. Accountabilities are also assigned, including what targets and measurement mechanisms will be used to evaluate success during the journey. Furthermore, resource (money and people) requirements are specified, stakeholder involvement is clarified, and interdependencies with other work are noted. Change programs that plan their initiatives at this level of rigor are 3.5 times more likely to be successful.⁴

Programmatically Sequence Activity

Once there is a first draft of the detailed initiative plans, it’s vital to take a top-down look at whether all of the initiatives sync up such that they create a coherent program of work. Change programs that put a focused effort on effective prioritization and planning of implementation from the top down are 1.7 times more likely to be successful.⁵

There are numerous rules of thumb for sequencing initiatives that should be employed at this point. For example, ensure you have a set of “quick wins” (improvements that have visible, immediate benefit that are achieved early in the program of work) to build momentum. Also, take on some “sacred cows” (something unreasonable but that people believe is beyond criticism) early in the program to signal that this is serious and demands people’s time and attention. Furthermore, take on high-value projects first, all other things being equal. And so on.

Most change leaders would think to sequence activities in these ways. Too few, however, recognize that these sequencing principles seek to optimize from the change architect, or “sender,” point of view. It’s also vitally important to apply sequencing principles that take the “receiver” point of view. This means asking how will various internal and external stakeholders experience the program of work if implemented as planned?

Consider you are an employee who is doing your best to manage the day-to-day running of the business. You are also aware you need to support work related to changing how the business is run. The organization restructure initiative team has planned that your area will be taking part in a de-layering workshop next week. The technology infrastructure initiative has also informed you that you’ll need to attend a day of training on the new CRM tool being rolled out. The product development initiative team requires that you notify customers personally about a new product that is being launched that week, as well. The salesforce effectiveness team has scheduled you for your negotiation skills workshop at the same time. And it just so happens that it’s the week of the annual industry conference that is vital to attend to see and be seen with your key clients. Suffice to say, were this the case, you’d be more than a little frustrated with the lack of coordination of the change program being pursued—and those leading initiatives will also no doubt be frustrated that the frontline isn’t getting on board with their efforts, unaware of the impossible position the overall program was putting you in.

Poor sequencing often doesn’t just lead to internal frustration, but to customer frustrations as well. A large medical device company, for example, found when they rolled out the initiative-by-initiative plans that they would require the frontline to spend more than 70 percent of its time on internal activities in certain periods. Changes were then made to plans so that the amount of time taken away from customer-facing activities would never be more than 30 percent in any given period. Similarly, an insurance company found that the launch of a new product was planned by one initiative to take place just before a CRM system changeover planned by another, a move that would have introduced significant risk to customer experience—prompting the order in which these efforts were implemented to be flipped.

Conducting an analysis of impact from the receiver perspective is easier than one may think. There are now a number of web-based tools and structured methodologies to draw on. McKinsey & Company’s Change Navigator is an example of one of these tools that provides a one-stop shop for applying common rules of thumb from the sender perspective in addition to quantifying the change impact and workload implications for key stakeholders—so that ultimately the work of change can be sensibly balanced from all viewpoints.

Reallocate Resources to Deliver

Once the initiative plans are finalized and sequenced appropriately, the next step is to ensure the work is properly resourced. Too often, change programs are cited as “the most important thing we can be doing,” and meanwhile, they end up staffed by lower performers so that business as usual can be run by the superstars. Furthermore, despite many organizations seeking to reduce an excess of employees, ironically their change programs are often starved when it comes to allocating resources.

Consider one company we know that prioritized expanding in China. It set an ambitious sales growth target for the country and planned to meet it by supplementing organic growth with a series of acquisitions. Yet, it identified just three people to spearhead this strategic imperative—a small fraction of the number required. This may sound irrational, but it’s often exceedingly difficult to reallocate talent. Even if a reduction in resources benefits the company as a whole, ambitious leaders are unlikely to agree to letting their top talent go without a fight. The fight is worth fighting, however, as change programs that allocate sufficient personnel to support initiatives are 3.6 times more likely to be successful,⁶ and those that report their best talent was deployed to carry out the plan report success rates 5.5 times higher than those that don’t.⁷

This same dynamic is true not just for human resources, but also capital and operating expenditures. For example, a review of the performance of more than 1,600 U.S. companies over a 15-year period shows that for one-third of businesses, the amount of capital received in a given year was almost exactly that received the year before—the mean correlation was 0.99. For the economy as a whole, the mean correlation across all industries was 0.92. In other words, there were only modest shifts in resource allocation made. Meanwhile, no doubt, enormous amount of change was being aspired to. This finding is consistent across industries as diverse as mining and consumer packaged goods.⁸

To break through this tendency, we advocate that change leaders make explicit choices as to which areas, amongst those that did not rise to the level of the performance placemat, they’ll prune (take resources away from), so that they can nurture the priority change areas.

For example, Alan G. Lafley, former CEO of Procter & Gamble, credits increasing profits by 70 percent and revenues by almost 30 percent in the first five years of his tenure as much to what he stopped as to what he started. On his performance placemat were four core businesses (fabric care, baby care, feminine care, and hair care) and 10 out of more than 100 countries. These were the businesses and geographies that would have differential investment and leadership attention. The feelings of those who didn’t make the list weren’t pandered to as they were simply told, “Just keep doing a good job where you are.” He sums up his philosophy as follows: “Be clear on what you won’t do—what needs to stop … Most human beings and most companies don’t like to make choices, and they particularly don’t like to make a few choices they really have to live with … If we caught people doing stuff we said we were not going to do, we would pull the budget and the people and we’d get them refocused on what we said we were going to do.”⁹

This philosophy is strikingly similar to that of former Apple CEO, Steve Jobs, who said, “I’m as proud of what we don’t do as I am of what we do … saying no to 1,000 things to make sure we don’t get on the wrong track or try to do too much … it’s only by saying no that you can concentrate on the things that are really important.”¹⁰ Along the same lines, management thinker Jim Collins notes that great companies create a “stop doing” list to complement their “to do” list.¹¹ Take, for example, an insurance company who put acquisitions on the “stop doing” list until they could prove the ability to grow organically, and discontinued any investment in language and/or artifacts related to previously acquired companies. Or the technology company who put any innovation projects not sponsored jointly by an external business partner on their “stop doing” list. Or the industrial company who stopped subscale acquisitions and putting product investment above services investments. All of these decisions free up time and resources to focus on the “to dos” of delivering the performance placemat.

The facts back up the philosophy. Successful change leaders are 1.8 times more likely than others to have explicitly communicated what their expectations were about what to stop, as well as what to start.¹²

Determine How to Reshape the Work Environment

Employees’ mindsets and behaviors are shaped significantly by their work environment, just like Chapter 4’s monkeys in the cage were shaped by theirs. By way of analogy, imagine that you go to the opera on Saturday and a sporting event on Sunday. At the climax of the opera—the very best part of the event—you sit silent and rapt in concentration. You and the audience then offer a genteel clap. At the climax of the sporting event—the very best part—you leap to your feet, yelling and waving and jumping up and down. You haven’t changed; you are the same person with the same feelings, values, and needs. But your context has, and so has your mindset about the behavior that’s appropriate for expressing your appreciation and enjoyment, and therefore the behaviors you choose to exhibit and practices you choose to participate in.

To continue with the analogy, the biggest tripwire for organizations looking to improve their health is that they end up leaving employees caught somewhere between an opera house and a sports stadium—not a comfortable place to be if you’re trying to make decisions as to how to think about your situation and what to do in it. Communicating to employees that you want them to adopt sports-stadium practices and related mindsets and behaviors is no use if your evaluation systems and the leadership actions they see are that of the opera house. If you want your people to think like sports fans, you need to create a stadium environment that encourages and enables them to think and act differently.

Through years of research and practical application, we have developed what we call the “influence model.” It identifies the four levers that can directly influence employee mindsets and behaviors (Exhibit 5.4). Taken together, these levers shape the employee work environment and, as such, all are important.

I will change my mindsets and behaviors if I have…

• Understanding and conviction. Can employees say, “I know what is expected of me, I agree with it, and I want to do it”? The main vehicles for fostering understanding and conviction are a compelling, meaning-laden narrative, an interactive way of communicating (to create the “lottery ticket” effect) and embedding its message through ongoing language, rituals, and communication of what success looks like.
• Reinforcement from formal mechanisms. Do the organization’s formal mechanisms reinforce the shifts in mindsets and behaviors that employees are being asked to make? Formal mechanisms include financial and non-financial rewards, recognition, and consequences, processes, structures, and systems.
• Confidence and skills. Do employees have the skills they need and safe places to practice thinking and behaving in the new way? Confidence and skills can be developed by adopting a “field and forum” approach to skill-building; tending to each of the technical, relational, and adaptive aspects of applying new skills; and refreshing the talent pool as needed.
• Role modeling. Do employees see their leaders, opinion-leading colleagues, and staff that they respect and take their cues from thinking and behaving in the new way? Effective approaches to role modeling include having the senior team undergo a visible transformation, taking symbolic actions, and selecting and nurturing influence leaders.

To see how the four elements fit together, let’s assume you are one of the vast majority of people who believe “skydiving isn’t worth the risk.” Let’s say we want to shift your mindset to believe that it is absolutely worth the risk, so you jump out of a perfectly good airplane.

What if, in order to build understanding and conviction, we show you reliable data from a source you trust that shows the chances of being injured in skydiving are far less than the chances you’ll die in a car accident in your lifetime (which is indeed true, by the way!). We then make the jump more meaningful by telling you that your jump will be part of a skydive for charity event, during which we’ll donate US$1 million to the charity of your choice for every jump you do.

As a reinforcing formal mechanism, you’ll also personally receive a million dollars into your bank account for each jump should you be willing to receive it. On the downside, if you don’t jump you’ll owe us 50,000 dollars (sorry!). You will also have world-class safety equipment, including an automatic military grade backup chute.

Your confidence and skills will be developed through training with a world-champion skydiver who will give you in-depth lessons before you jump (including numerous simulations) and ease any underlying fears you may have. In fact, you’ll be jumping in tandem, securely attached the whole time to this elite professional who has successfully conducted more than 2,000 jumps.

Finally, you will have the role modeling of your boss, two of your colleagues, your immediate family, and your closest friends jumping with you. What’s more, they’ve already done a few jumps and absolutely loved it—and are encouraging you to do so!

At this point, would you be willing to jump out of a perfectly good airplane? The past 100 years of behavioral and cognitive psychology would say that you would be very likely to do so.

Many leaders wonder which lever of the four is most important. Evidence shows that they all matter with minor statistical variations as to what degree, and there is no particular order in which they need to be experienced—the key is to ensure they all are present. Further, change efforts not thoughtfully engineered on all four levers can cause more harm than good. Recall the previous analogy of employees being stuck somewhere between the opera house and the sports stadium.

To make this real, imagine pursuing a cost-cutting program while executives fly around in corporate jets to cushy offsite meetings to discuss who and what will be cut. Or pushing for cross-business collaboration when incentives squarely reinforce putting silos first. Or asking the frontline to take on risk-management responsibilities without giving them the training needed to enable them to do so. In these situations, the only thing meaningfully achieved is increased employee frustration, cynicism, and resistance to future change.

Having established each of the four elements of the influence model and the importance that they all work together, let’s dive into each of the four levers of the influence model in some detail.

Understanding and Conviction

The work of Stanford social psychologist Leon Festinger demonstrates the need people have to align their actions with their beliefs. Half a century ago, Festinger proposed the theory of “cognitive dissonance”: that individuals seek consistency among their thoughts, opinions, and beliefs (or cognitions) and their behaviors, and try to eliminate any inconsistencies or dissonance between them. Festinger noted, “It’s difficult to behave in a different way if the behavior is inconsistent with your view of the world.”¹⁴

The implication of this finding for a change leader is that if employees don’t believe in the overall purpose of the change, they will suffer cognitive dissonance when asked to support it. If they do believe in it, on the other hand, they will be inclined to change their behavior to serve that purpose. Therefore, it’s imperative for anyone leading a major change program to take the time to think through the “change story”—what makes it worth undertaking—and what is the role of the individual’s actions in its unfolding that makes it worthwhile to play a part.

The advantage of a story—as opposed to a report or an analysis—is that it can convey emotions as well as facts. We therefore respond to it in a different way; we don’t just process the information intellectually, we relate it to our personal experiences and beliefs. According to our survey, programs that communicate and embed an emotionally compelling narrative about the desired change are 3.8 times more likely to succeed than those that don’t.¹⁵ Further, when change leaders are asked what they would have done differently in retrospect, the number one vote-getter is “spending more time developing and communicating the change story,” cited by 44 percent of change leaders.¹⁶

In this section, we’ll focus our discussion on the content needed for a great change story, but that won’t be the whole story. We’ll expand on this when we talk later in this chapter about interactively cascading the story (and why a traditional cascade never works). We’ll then talk about how to maximize the meaning quotient of the story when we get to this chapter’s “Master Stroke.” Then, in Chapter 6, we’ll talk further about how to keep the narrative alive through on-going two-way communications. It’s simply that important!

It’s important to keep in mind that if the leader doesn’t provide a story, employees will create their own. For instance, an innocent comment from a leader about the need to be more cost-conscious can spark near-hysteria as it spreads through an organization. Before long, it can turn into a story like, “All the work in our division is going to be outsourced and we’re all about to lose our jobs.” Sounds far-fetched? It’s not—we’ve seen it happen. Had the comment been placed in the context of a robust change story, this kind of misunderstanding would never have arisen.

So let’s get to the content needed. Good change stories use concrete, evocative, and immediate language to answer employees’ fundamental questions: Where are we today? Why do we have to change? What are we changing to? By when? How will we measure success? How do we get there? What does it mean for me and my team? How will we be supported? What won’t change? Why does this matter? Exhibit 5.5 further illustrates the core architecture of a great change story.

As you can see, in answering these questions you are drawing on all of the work you’ve done to date in the Five Frames and putting it into a single, unified change narrative. The work done in the Aspire stage answers many of the where, why, what, and when questions. A large retailer, for example, could tell the story about how much their company had to be proud of in expanding its physical footprint, but the industry was changing in ways where a physical presence wasn’t enough, and their position at the top was not secure. As such, the goal was to become the most admired omnichannel retailer in five years’ time. On the health front, the goal was to be top quartile on three management practices: competitive insights, operational discipline, and challenging leadership. Progress toward the performance and health aspirations would be measured against shareholder return, access differentiation (as measured by customer research), and OHI targets.

Answers to the rest of the questions come from the work done in the Assess and Architect stages. The retailer in question could articulate clearly that getting there involved delivering against a portfolio of initiatives that included growing in three specific categories (food, general merchandise, and apparel), becoming a serial acquirer of relevant start-ups, doubling down on winning in two major geographies, shifting the value proposition to value-oriented customers, and building skillsets in market optimization, analytics, and supply chain. They could also name and reframe a set of underlying mindsets needed to enable and accelerate progress (“smooth talk” to “straight talk,” “listen/respond” to “anticipate/shape,” and “retail is detail” to “retail requires results”). Not only that, but they could specify how the work environment would be reshaped to support the shifts (actions related to reinforcing mechanisms, building confidence and skills, role modeling, and fostering understanding and conviction). Finally, they could articulate a deeper sense of why making the change happen would matter—using techniques we’ll discuss further in the “Master Stroke” section at the end of this chapter.

We emphasize that what we are talking about here is not a PowerPoint presentation. Often, it’s a text narrative with an accompanying video that tells the story in an emotive, authentic (not “salesy”) format. The company story is typically followed by the leader putting their own personal overlay on it, saying “what it means to me is …” As Corrado Passera, the former CEO of Italian bank Banca Intesa, notes, a good story is “not like an analyst’s presentation, with figures and graphs,” but is rather “a book written in human language telling people where we are, where we want to go, and how we are going to get there.”¹⁷

Reinforcement Mechanisms

When it comes to reinforcement mechanisms to influence desired mindsets and behavior shifts, change leaders should consider how to alter rewards and consequences, formal structures, business and management processes, and enabling systems and tools.

It’s hardly news that rewards and consequences have a big effect on our thoughts and behaviors. B.F. Skinner and other behavioral scientists have argued that human behavior is a reaction to stimuli such as praise, rewards, punishments, and so on. When these stimuli change, so does the behavior. According to Skinner, our environment sends us signals that make us more likely to behave in certain ways.¹⁸ Combine this with the assertion from academics Richard Pascale, Jerry Sternin, and Monica Sternin that, “It’s easier to act your way into a new way of thinking, than think your way into a new way of acting,”¹⁹ and the power of rewards and consequences on shaping mindsets is clear. Paul Allaire, former CEO of Xerox, sums it up: “If you talk about change but don’t change the recognition and reward system, nothing changes.”²⁰

Our advice for leaders is to link rewards and consequences both to the “what” and the “how” of the desired change. The former relates to contributions to achieving performance objectives and the latter to health objectives. A simple but effective matrix can be used to show employees where they stand and what the related consequences are, as shown in Exhibit 5.6. Change programs that hardwire change-related targets into individual employees’ incentives are 4.2 times more likely to be successful.²¹

The hardest employee profile to deal with on this matrix is s/he who is delivering performance but detrimental to health. Successful leaders don’t shy away from this challenge. Cisco’s former CEO and chairman John Chambers, for example, was known for withholding managers’ bonuses if their behaviors weren’t in line with expectations, even if they delivered results. Former CEO of EMC, Joseph M. Tucci, simply says, “You have to get rid of them.”²² Dismissing employees is never easy, but as GE’s former CEO Jack Welch reflects, “Anyone who enjoys doing it shouldn’t be in the job, but nor should someone who can’t do it.”²³ Successful change leaders don’t wait for formal reviews to reward desired mindsets and behaviors, however. For example, when Continental Airlines made it to the top five for punctuality, CEO Gordon M. Bethune sent a US$65 check to every employee in the company. Nor do they rely exclusively on financial rewards. At ANZ Bank, John McFarlane gave every employee involved in the change program a bottle of champagne for Christmas with a card thanking them for their work on changing the company. Indra Nooyi, former CEO of PepsiCo, went as far as sending the spouses of her top team handwritten thank-you letters. After seeing the impact of her success on her mother during a visit to India, she began sending letters to the parents of her top team, as well. We’ll speak more about how to maximize the impact of non-financial rewards during a change program in Chapter 6’s “Master Stroke.”

Beyond incentives, an organization’s structure, processes, and systems can have a profound influence on employees’ mindsets and behaviors. Let’s start with structure. If customer focus is an important management practice, changing the primary axis of organization from being a product structure organizing around customer segments may have a significant impact on related mindsets and behaviors. Adjusting the annual strategic planning process to include as much information required on customer experience impact as well as financial impacts would also influence employees. Changing talent development processes to include rotations into customer-facing positions as part of management development programs also sends a signal. Further, implementing a customer relationship management (CRM) system to help them have better information with which to engage with customers will also have real impact. It’s easy to see how these changes, in particular if taken together, can make a big difference.

Even seemingly innocuous processes and systems can have a surprisingly powerful effect on mindsets and behaviors. When PricewaterhouseCoopers was making the transition to a more entrepreneurial culture, one partner complained that although he liked what was happening, he felt he was not treated like a partner but like a salaried employee. If he wanted to give his assistant flowers for working until midnight, he needed three signatures for the expenses system. If he wanted to meet a client in another city, that was another three signatures. He felt he wasn’t trusted. As a result, he didn’t feel empowered to proactively take initiatives to build the firm. It had never occurred to anyone that the expenses system was transmitting powerful mindset and behavior cues that were incompatible with an entrepreneurial culture.

It’s worth bearing in mind that formal processes can affect mindsets and behaviors by their absence as well as their presence. Netflix, an online movie and TV streaming service, has no formal policy on vacations, for instance. Former chief talent officer Patty McCord wryly observed, “There is also no clothing policy at Netflix, but no one has come to work naked lately.”

Confidence and Skill-Building

The third lever that leaders can use to shape mindsets and behaviors relates to increasing employees’ confidence in their ability to think and behave in the desired ways. Change efforts that invest in doing so are 2.4 times more likely to succeed.²⁴

As individuals, we like to do things we feel competent at, especially when others are watching. Scott, for example, is a guitarist outside of work and is quick to take any stage he can find to play for an audience. At the same time, he has no natural ability to dance. Therefore, anytime there’s an event where dancing is involved he conveniently has other commitments to tend to!

To illustrate how skills and confidence are intertwined, consider the adult learning cycle: we start unconsciously incompetent (“I didn’t know this was important”), then become consciously incompetent (“I realize this is important and that I’m not very good at it”), then move to being consciously competent (“I can do it if I concentrate on it”), and finally we get to a point where we are unconsciously competent (“It comes naturally to me”). Think about driving, for example. At some point as teenagers it dawns on us that having to rely on our parents to act as taxi drivers is holding back our social life. Our first time behind the wheel, however, we realize what looks effortless is actually quite hard—we are not confident, and we are not competent. After some practice we can do it, though it takes our full attention: checking the mirrors, remembering to signal before turning, working out who has priority at a junction. As we gain more experience, we get to the point where we can multitask while driving, arriving at point B from point A without having given the journey significant thought and having been fully confident in our ability to get there.

So how do we move employees through this process in relation to the mindsets and behaviors we desire to see? Studies have confirmed that only roughly 10 percent of what is shared in speech-based training sessions such as lectures, presentations, demonstrations, and discussions, is retained after three months. When learning by doing—through role plays, simulations, or case studies—65 percent is retained. And when classroom learning is immediately put into practice for a few weeks at work, almost everything is retained.²⁵ This finding resonates with the human experience, as the Chinese proverb that says: “Tell me and I’ll forget; show me and I may remember; involve me and I’ll understand.”

In practice, the “learning by doing” method is referred to as field and forum , which brings classroom learning, coaching, on-the-job training, and special projects together into a coherent program. A large-scale change program is an ideal situation in which to deploy such an approach. Every initiative on the performance placemat represents a rotational assignment for those involved. Each initiative has a clear beginning, middle, and end, and thus lends itself to periodic in-person classroom style learning in “forums.” Each requires accelerated delivery of impact, which creates an ideal crucible for the application of learnings in the day-to-day (“fieldwork”). The transparency of results enables multiple cycles of action and reflection that maximize learning. Successful change programs are 3.2 times more likely to report that they explicitly used performance initiatives as a vehicle to build change-related skills and confidence than unsuccessful ones. ²⁶

In applying a field and forum approach to building skills and confidence, three types of competencies should be incorporated: technical, relational, and adaptive. The vast majority of leaders tell us that it’s the latter two of these that are most lacking in change programs and are the hardest to build.²⁷ As such, we’ll talk in depth about relational and adaptive skills both in Chapter 6 (when we talk about making the change personal for leaders) and Chapter 9 (when we talk about your role as a change leader). For now, however, let’s bring the combination to life in the context of a large-scale change in an industrial company.

The company needed to build skills and confidence to support its lean manufacturing initiative. Examples of the mindset shifts desired included from “success is about what we do” to “success is about both what we do and how we do it”; “problems mean failure” to “problems mean opportunities”; “cost, quality, and service are inversely related” to “quality, cost, and service are directly related”; and “time with managers equals trouble” to “time with managers helps me/us get things done.”

To influence these shifts, skills and confidence were built in each plan that the initiative rolled out to over the course of three forums with fieldwork in-between. The first forum educated those involved in the technical skills of leading change (performance and health approach) and lean (e.g., 5S, Kanban, eight kinds of waste), relational skills (e.g., self-awareness and awareness of others, empathy, creating trust), and adaptive skills (e.g., telescope and microscope perspectives, productive tension, resilience). The fieldwork that followed involved applying the tools learned during the forum to the work of meeting targets for cost, quality, and service. Between forums, activities such as getting peer feedback and completing a series of e-learning modules were also incorporated to help them reflect on their experience and further build on forum learnings. Anyone who completed the coursework and hit their performance targets was awarded a “green belt” in lean.

The next forum sought to develop deeper skills in designing technical systems and leading projects and teams. The fieldwork included redesigning areas of the plant floor and overseeing teams dedicated to specific improvements. Quantitative targets were set in terms of financial results and people and project leadership. Those who achieved these targets became “brown belts” in lean. The final forum built advanced skills such as shaping plant-wide improvement programs to address strategic issues, applying improvement concepts to complex operations, and coaching and mentoring. As before, fieldwork was used to put these lessons into practice. Those who met the quantitative improvement goals emerged from the program as “black belts.” These black belts then served as faculty for future skills and confidence-building programs during the roll out.

The academic underpinnings for the field and forum method of building confidence and skills are strong. Those interested should consult the work of David Kolb and Chris Argyris related to experiential and action learning. Also, Victor Vroom’s “expectancy theory” is very relevant, as he puts building skills on an equal footing with other influence levers when it comes to motivating behavior.²⁸ For more on relational skills, look into Daniel Goleman’s work on the learnability of emotional intelligence that builds on the multiple intelligences research of Howard Gardner. For adaptive leadership, see the directly related work of Ron Heifitz, situational leadership work from Hersey and Blanchard, shared leadership approach of Henry Mintzberg, and more distributed leadership of James Spillane.

Role Modeling

The final lever that leaders can use to influence mindsets and behaviors is role modeling. Employees need to see the people they admire and take their cues from behaving in new ways. Niall FitzGerald, former CEO of Unilever, underscores the importance of role modeling: “One of the things that leaders don’t fully recognize is that when they speak or act, they are speaking into an extraordinary amplification system. The slightest thing you say, the slightest gesture you make, is picked up on by everybody in that system and, by and large, acted upon.”²⁹

Academics in the field of social psychology agree. Stanford professor emeritus Albert Bandura argues that social behavior is primarily learned by observing and modeling the behavior of relevant others.³⁰ Similarly, Konrad Lorenz, a professor of psychology and Nobel Prize winner, concludes from his work on imprinting that people take their cues from those they consider as “significant” and model their behavior accordingly.³¹ Our research into transformation programs also bears out the importance of role modeling. Programs in which leaders model the desired changes are 5.3 times more likely to be successful.³² Two particular groups have disproportionate impact on others’ thoughts, behaviors, and practices in change programs: senior leaders and influence leaders.

There are many examples that bring to life the power of senior leader role modeling. Take, for example, when McDonald’s founder Ray Kroc noticed litter in the parking lot at one of his restaurants: he called the manager and his driver over, and the three of them picked it up together. As word of the incident spread, so did the realization that cleanliness and order really mattered. In a similar vein, the founder of IT company Hewlett-Packard, Bill Hewlett, once took a bolt-cutter to a lock on a supply-room door to signify that management and frontline staff could trust one another. When N.R. Narayana Murthy, former chairman of Infosys, takes his wife on business trips, he pays the difference between a single and a double hotel room out of his own pocket, so setting a symbolic example of integrity—a value highly prized in his company’s leadership model. As he puts it, “Credibility comes from eating one’s own food before recommending it to others.”³³

We’ll be spending more time discussing the role of the most senior leader in successful change programs in Chapter 8—yes, it’s so important that we dedicate an entire chapter to it! Why? When asked to rank the groups and people based on how important they are to the success of change programs, 70 percent of respondents put the most senior leader as number one.³⁴ Further, those programs where the most senior leader is strongly involved in role modeling are 2.6 times more likely to succeed.³⁵

Individual senior leaders aren’t the only role modeling leverage point, however. The way senior teams work together has a powerful role modeling effect, as well. In the survey mentioned, senior teams rank number two on the list of groups and people who are important to change program success.³⁶ It’s worth noting that when change leaders are asked what they would have done differently in retrospect, 41 percent report that they would have spent more time aligning the senior team.³⁷ As such, rest assured we will also spend more time talking about creating high performing senior leadership teams in Chapter 8.

Also vitally important are the influence leaders deep in the organization; any change leader should find out who they are and work with them explicitly. We define influence leaders as those who, regardless of their official title or status, have a wide circle of personal contacts who respect and emulate them. When they are engaged in helping motivate employees to change, efforts are 3.8 times more likely to be successful.³⁸ These leaders play a vital role in generating ownership and energy during the Act stage, and because of this we’ll be talking extensively about how to identify and mobilize influence leaders in Chapter 6.

Finally, it’s important to consider that everyone in an organization has the power to role model, and when large groups of people do so together it can have a profound effect on the organization more broadly. Robert Cialdini, a well-respected professor of psychology and marketing, examined the power of “social proof”—a mental shortcut people use to judge what is correct by determining what others think is correct.³⁹ No wonder TV shows have been using canned laughter for decades; believing that other people find a show funny makes us more likely to find it funny, too. We’ll also discuss how to leverage this phenomenon further in Chapter 6, when we cover how to make the change personal for a critical mass of leaders.

Finally, we’d be remiss not to mention how the increasingly connected digital world of today provides more opportunities than ever to share information about how others think and behave. Have you ever found yourself swayed by the number of positive reviews on Yelp? Or perceiving a Twitter user with a million followers as more reputable than one with only a dozen? The impact is real, and can and should be taken advantage of in leading change. Use of these methods is in its relative infancy, and we encourage leaders to experiment. No doubt that in the third edition of Beyond Performance, we’ll be filling many pages with your examples!

Hardwire Health into Performance Initiatives

Some leaders learn of the influence model and are quick to design a host of interventions on each of the four levers to drive desired changes in mindsets and behaviors. After all, the goal is to clearly indicate whether employees are in an opera house or a sports stadium, not to leave them somewhere in the middle. This inclination, however, is typically not constructive in practice. It leads to a laundry list of health-related initiatives that are separate from, and additional to, the initiatives on the performance placemat. Not only does this create an initiative overload, but also means that employees experience two separate programs of work, one for performance and one for health, which is not the path to successful change—health is meant to be a means to performance.

We advocate as a rule of thumb that 80 percent of the work on improving an organization’s health should be done by the performance initiatives—not because of what those initiatives do, but because of how they are executed. In fact, every performance initiative that touches employees—be it a customer-service enhancement, a salesforce effectiveness drive, an IT upgrade, or a cost-cutting effort—creates an opportunity to influence mindsets and behaviors. By carefully hardwiring health interventions into performance initiatives like these, the work of health becomes less about doing new things and more about doing things that need to be done differently, in healthier ways that lead to more significant and sustainable performance impact. In the Architect stage, then, efforts on performance and health become integrated into a singular change effort.

The process of hardwiring health into performance initiatives is surprisingly straightforward, though too seldom done in practice. It involves applying a simple analytic tool to the performance initiative plans that we discussed earlier in this chapter, as shown in Exhibit 5.7. Target health shifts are the columns, and the four levers of the influence model are the rows. The cells of the resulting matrix are then completed so that the work done in implementing the performance initiative is done in a way that improves as many of the health priorities using as many influence levers as possible and practical. Typically, when an initiative leader and team consider their initial performance plan against the matrix, there is a lot of white space. Sometimes there are even contemplated actions that, if taken, would have otherwise run counter to health aspirations (sending sports stadium signals into the opera house!). The work isn’t done until each cell of the matrix contains at least one powerful idea to ensure the initiative will have positive impacts on both performance and health.

Let’s make this concept real by way of an example. Consider the U.S. financial services provider who had a performance initiative (one among many initiatives) to apply lean manufacturing techniques to their processing functions. The company also had a set of health goals, including improving openness and trust. In order to apply lean principles to operations improvement, a standard practice was to hold regular kaizen events. These were short-duration, frontline-driven improvement efforts to address specific operational issues. Using the matrix above to brainstorm how to hardwire health into the lean initiative, they decided to focus every other kaizen event on improving trust in the team and with management.

One such session resulted in increasing frontline involvement in determining how targets were set, a process that previously felt ad hoc and “from on high.” Another resulted in changing the performance review process to start with a self-assessment, which turned the review into more of a conversation. Yet another resulted in the adoption of a monthly “ask me anything” session with management to increase the communications flow. Still another prompted kaizen boards (used for the visual management of the area’s KPIs) to be updated to include the team’s view on six trust measures: communication, support, respect, fairness, predictability, and competence. Not only did the health-infused performance initiative ultimately deliver a 20 percent reduction in costs and raise service and quality standards, but it also increased OHI scores on the open and trusting management practice by over 50 percent—ultimately delivering a top-quartile result.

Now consider an automotive company who had one of its performance initiatives focused on safety, and one of its health objectives was to increase its external orientation. By brainstorming ideas against the matrix for hardwiring external orientation into the safety initiative, the company decided to staff the working team not just with their own employees, but also with a safety expert from a mining company who was focused on improving safety practices. The idea was a win for the performance and health of the automotive company and a win for the mining company, which gained a development opportunity for its employees and benefited from the flow of new and different safety ideas back to their organization.

Ensuring there is at least one good idea in each block of the matrix (i.e., the intersection of each influence model lever and each health priority) for every initiative on the performance placemat (typically anywhere from 10 to 25 initiatives), has an extraordinary cumulative power. Consider the math: if your change program is comprised of 20 performance initiatives and you have 3 health objectives, there will be 240 high-impact health interventions (3 health objectives × 4 levers of the influence model × 20 initiatives) that employees will experience in a manner that is fully integrated with the implementation of performance initiatives.

This same approach can be used to hardwire health into business as usual processes such as recruiting, onboarding, training, performance management, and strategic planning. It takes the idea of “doing what we’d do anyway, but differently” further—and one can imagine even with just this list of processes, another 60 health interventions would be experienced by employees (3 health priorities × 4 levers of the influence model × 5 processes). It’s easy to see how this can play a significant role in reshaping the work environment.

This doesn’t mean there aren’t any health actions taken outside of those hardwired into performance initiatives and other business processes. As we’ll see more in the next section and chapter, we advocate that there is a set of broad-based, predominantly health-related actions to take (to do the other 20 percent of the work!). These typically involve interactively cascading the change story, maintaining a high impact two-way communications program, and making health objectives personal to a critical mass of leaders.

Interactively Cascade the Change Story

The transition between the Architect and Act stages of a change program is typically marked by the broad-based sharing of the change narrative deep into the organization. We talked about the content of a great story earlier in this chapter when we discussed the influence model lever of fostering understanding and conviction. A great story is only great, however, to the extent others are aware of, understand, and believe in it!

Getting the change story out and embedded into the minds and hearts of employees at this point in the change process enables everything that happens in the Act stage to be contextualized by “what it all means.” A key characteristic of a good process for sharing the story is that it encourages employees to feel a sense of authorship, like the lottery-ticket writers in Chapter 3. That’s the thinking behind the “interactive cascade” approach that we recommend, as illustrated in Exhibit 5.8. This process turns writing and telling a relevant change story into something in which everyone in the organization participates.

Before we dive into the specifics of the approach, let’s first establish why it works. While every organization’s OHI is different, one finding is true across virtually every organization of the thousands who have employed the tool: strategic and role clarity diminish the further down you go. Why? The company story stops resonating at some point, largely because it feels high-level and not relevant to the day-to-day work that needs to get done. An interactive cascade, however, ensures the narrative is tailored to each area and includes group and individual reflection as to “what does it mean for us/me.” Programs are 5.5 times more likely to be successful when everyone in the organization understands how their work relates to the overall change aspiration.⁴⁰

In their seminal work, Canadian organizational psychologists Natalie Allen and John Meyer propose that there are three types of commitment simultaneously at play in the workforce: continuance (just enough commitment to ensure they keep their jobs); normative (coming from a feeling of obligation to the organization rooted in the norms of reciprocity), and affective (based on emotional ties one develops with organizations primarily via positive work experiences).⁴¹ Viewed through this lens, the interactive story cascade’s power comes from addressing multiple types of commitment simultaneously, far more so than more traditional cascade approaches.

So how exactly does it work in practice? The company change story (that includes all of the integrated performance and health elements described earlier in this chapter) acts as a common and consistent foundation for everything that happens. It is often written in prose and shared as a pre-read for the first meeting of the interactive cascade. The process then begins with the senior leader personalizing the company narrative in their words. What does the company’s change story mean to her/him? Why is the change necessary? Why is s/he committed to it? What does s/he need to change in their own thinking and behavior to make it happen? What changes is s/he expecting of their team? The senior leader’s direct reports are free to ask questions, and then discuss what the change program means for the team. Then time is given for them to think through what the change means for their specific area of responsibility. At the end of the session, having fully understood the story and its implications, each participant shares their individual commitments to the change.

After the session, each of the participants prepares to host a similar session with their teams. They begin by telling the story in their words, both overall and specifically as they see it relating to their area of responsibility. They then answer questions, and the team members who have just heard the story discuss what it means for the team and for them as individuals. The session then closes with their individual commitments. Level by level, the process cascades throughout the whole organization. Being involved in writing the narrative builds conviction among the “authors,” as well as ensures that the story is applicable to every part of the organization and every person in it.

By way of example, consider how Symantec (the manufacturer of Norton antivirus software and a global leader in IT security, storage, and systems management) used this approach. After a broad coalition of senior managers had spent several months defining a change story drawing on input from the organization, they held a series of four-day events to communicate it to the company’s 14 divisions. During the first two days of each event, managers were exposed to the new performance and health aspiration, the core initiatives, and the mindset and behavior shifts needed to make it happen. The managers also grappled with the question, “What does it mean for us in our division?”

In the last two days of each event, everyone in the division right down to the frontline came together to translate the company’s direction into job-level objectives for all employees. The entire process was completed in 13 weeks, and then the content from the cascades was built into the company’s orientation program for new hires.⁴² The impact was felt almost immediately. Symantec went on to gain the number one spot in the worldwide security market and increase its market share by 6 percent within a year.⁴³

Cascading the story in such an interactive way undoubtedly takes longer than pushing it directly through the organization. However, savvy leaders realize that even if it takes twice as long, it’s likely to have far more impact in building people’s commitment to the outcome. Indeed, recall that the lottery ticket experiment from Chapter 3 indicates the impact is likely five times higher—which makes the interactive cascade approach a solid return on investment by any standard.

It’s notable, however, that it’s not just the lottery ticket effect that accounts for the interactive cascade’s power. In the words of organizational psychologist Noel Tichy, whose theory of leadership recommends having a teachable point of view, a story for your organization, and a well-defined teaching methodology (all of which are wrapped into the interactive story cascade approach), “The very act of creating a Teachable Point of View makes people better leaders … Leaders come to understand their underlying assumptions about themselves, their organization, and business in general.”⁴⁴ Indeed, the mental work of figuring out one’s point of view, and then the creative work of putting it into a format that is accessible and of interest to others makes better leaders in the process.

Master Stroke: Appeal to Multiple Sources of Meaning

A disproportionate amount of this chapter has been dedicated to the change narrative—to its content and how it can be interactively cascaded through the organization. This is because these are the things that will provide coherence and give meaning to everything that employees will experience in the Act stage of the change program. Without these, change efforts are likely to end up in Joel Barker’s “action without vision that merely passes the time” mode. Done with mastery, “vision with action that changes the world” is in reach.

But is there more to achieving mastery than we’ve discussed? Indeed, there is, and it comes from appreciating yet another learning from the field of predictable irrationality. Consider that most company change stories tend to fall into one of two classic narratives. One of these narratives is “good to great,” which goes something like this: “Our historic advantage is being eroded by intense competition and changing customer needs. If we change, we can regain our leadership position, dominate the industry for the foreseeable future, and leave our competitors in the dust.”

The other narrative is “the turnaround,” which goes something like this: “We’re performing below the industry standard, so we need to transform ourselves to survive. Incremental change won’t be enough; investors won’t keep pouring money into an underperforming company. Given our assets, market position, size, skills, and staff, we can do much more. We can become a top-quartile performer in our industry by exploiting our current assets and earning the right to grow.”

Most executives read these stories and feel that they are compelling. The truth is that they are not. In fact, these stories fall flat with the vast majority of the workforce. Research by a number of leading social scientists such as Danah Zohar, Chris Cowen, Don Beck, and Richard Barrett helps us understand why.⁴⁵ These classic narratives revolve around the company—beating the competition, leading the industry, attracting investors. This is but one source of meaning that motivates people to change, and there are at least four others. People also want to hear about the impact changes will make on society (improving people’s lives, building a community, stewarding resources), the customer (providing superior service, better products, closer relationships), their working team (creating a sense of belonging, a caring environment, harmonious working conditions), and me personally (better development opportunities, increased pay and bonuses, more empowerment to act).

In surveys of hundreds of thousands of employees to discover which of these five sources of meaning motivates them most, the surprising result is a roughly consistent 20 percent split between dimensions. Regardless of level (senior management to frontline), industry (health care to manufacturing), and geography (developed or developing economies), the split stays broadly the same.⁴⁶

The implication for leaders is profound. It suggests that the company-focused story, which is the one most have been trained to tell—will tap into only about 20 percent of what motivates their workforce. To get people truly on board, change leaders need to be able to add that missing 80 percent and draw on all of the sources of meaning that their employees care about. In other words, they need to be able to tell five stories at once. If they can pull that off, they’ll unleash tremendous amounts of change energy in the organization. If they can’t, it will remain latent.

When a large U.S. mortgage company embarked on a program to increase its efficiency by reducing overheads and reengineering processes, it devised a story that ticked all the boxes according to conventional wisdom on change management. Costs were up and revenues were down, so the burning platform seemed obvious, and so did the message: if we don’t get leaner, we won’t survive. Three months into the effort, though, the story didn’t seem to be working and the change program was stalled. Employee resistance was strong—hardly anyone was submitting improvement ideas and people were still keeping performance information to themselves.

Desperate to break through the barrier, and with the benefit of having been exposed to the five stories at once approach, the team recast the narrative. Instead of focusing on the company’s need to stem the unsustainable growth in expenses, they broadened the story out to include elements on the missing four sources of meaning. The new story touched on the benefits change would bring for individuals, emphasizing this was a once-in-a-career opportunity to turn around a company and create bigger, more attractive jobs. It touched on a better life for working teams, with less duplication of effort, greater delegation of responsibility, and a stronger sense of accountability. It touched on the improvements that customers would experience in the form of greater simplicity, fewer errors, and more competitive prices. And it touched on the benefit for society: enabling more people to achieve their dreams of home ownership.

This relatively simple and easy-to-achieve shift in approach had a dramatic impact. Within a month, employee motivation levels had soared from 35 percent to 57 percent. What’s more, the program went on to achieve efficiency improvements of 10 percent in the first year—far surpassing the company’s initial expectations.

We should make it clear that “telling five stories at once” is not about spin or somehow being disingenuous. The message that a leader communicates must be true to the actions being taken (nowhere in the mortgage company’s narrative did it shy away from the change program being about reducing costs, but it gave five reasons why doing so would lead to a more exciting future). It must be sincere—the leader needs to fully believe in what they are saying. John Mackey, CEO of Whole Foods Market, notes that any “lack of honest, authentic communication and transparency usually boomerangs … and undermines trust and creates cynicism.”⁴⁷

■ ■ ■

At the end of this, the Architect stage of your change program, you can answer the question, “What do we need to do to get there?” On the performance side, you have constructed, structured, sequenced, and resourced a balanced portfolio of performance improvement initiatives. On the health side, you have used the four influence levers available to you to hardwire health improvements into how the portfolio of performance initiatives will be implemented, you have written a compelling change story laden with five sources of meaning, and you are in the process of cascading the story interactively throughout the organization.

At this point, the distinction between what is performance and what is health has faded into the background as a single, integrated change program that addresses both equally in an integrated manner has been developed. From here, in the words of P&G’s Alan G. Lafley, “It’s about executing with excellence”⁴⁸ in the Act stage. As such, we now move on to the central question of: “How do we manage the journey?” (Exhibit 5.9).