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The Four Building Blocks Of Change

L arge-scale organizational change has always been difficult, and there’s no shortage of research showing that a majority of transformations continue to fail. Today’s dynamic environment adds an extra level of urgency and complexity. Companies must increasingly react to sudden shifts in the marketplace, to other external shocks, and to the imperatives of new business models. The stakes are higher than ever.

So what’s to be done? In both research and practice, we find that transformations stand the best chance of success when they focus on four key actions to change mind-sets and behavior: fostering understanding and conviction, reinforcing changes through formal mechanisms, developing talent and skills, and role modeling. Collectively labeled the “influence model,” these

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The Science of Organizational Transformation

When making large-scale organizational changes, the design of a transformation’s initiatives is not
a matter of guesswork. Rather, the results from a new McKinsey Global Survey on the topic1 suggest that companies that design their initiatives to support desired shifts in mind-sets and behaviors see
the most successful transformations.2

Prior McKinsey research on transformations confirms that change efforts are hard work and that implementation is critical to overall transformation success.3 The latest findings suggest that investing time and effort up front to design a transformation’s initiatives also matters. According to the new results, the most effective initiatives involve four key actions: role modeling, fostering understanding and conviction, reinforcing changes through formal mechanisms, and developing talent and skills. These actions are critical to shifting mind-sets and behaviors. 

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Transformation with a Capital T

Imagine. You lead a large basic-resources business. For the past decade, the global commodities supercycle has fueled volume growth and higher prices, shaping your company’s processes and culture and defining its outlook. Most of the top team cannot remember a time when the business priorities were different. Then one day it dawns on you that the party is over.

Or imagine again. You run a retail bank with a solid strategy, a strong brand, a well-positioned branch network, and a loyal customer base. But a growing and fast-moving ecosystem of fintech players—microloan sites, peer-to-peer lenders, algorithm-based financial advisers—is starting to nibble at your franchise. The board feels anxious about what no longer seems to be a marginal threat. It worries that management has grown complacent. 

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The People Power of Transformation

Organizational transformations are hard work, and according to the latest McKinsey Global Survey on the topic,1 companies are no more successful at overhauling their performance and organizational health than they were ten years ago.2 A particular blind spot seems to be the failure to involve frontline employees and their managers in the effort.

Transformations have their truisms. Successful ones, for example, require visibly engaged C- suite leaders who communicate clearly about the changes at hand. A vast majority of all respondents report these characteristics at their companies, whether or not their transformations have worked. But the results suggest that while C-level support is necessary, it is not by itself sufficient. A transformation’s success also requires that people across the organization have a specific role to play and that everyone knows how to carry out his or her part. 

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