How can the moments that threaten your transformation define its success?

Decoding the root cause of turning points

What causes turning points to emerge? There appear to be three factors:

1. External shocks, especially in times of disruption: in our data, we can see almost half (48%) of turning points involve at least one major external issue. These impact people working on the transformation on both a rational and an emotional level. 
2. Operating model issues, caused by misalignment of the organization: our deep dive case studies suggest this is often a result of faulty assumptions and/or an inaccurate understanding of the current reality of the organization. Most (71%) turning points in our data involve at least one operating model issue.
3. Human dynamics, which need to be shifted: as we’ve already seen, most (75%) turning points occur early in a program, either during planning or early implementation. Our in-depth case studies show that this stage requires a series of shifts. These shifts create friction and are commonly where issues emerge.

Individually, not all issues escalate to a point that requires intervention. However, when multiple issues arise at the same time, things begin to falter. The noise around the transformation escalates and the emotional energy within key groups shifts.

As issues hit the transformation program, they undermine people’s belief in the vision and the leaders of the transformation. They also reduce the level of psychological safety, as people don’t feel heard. This can be seen clearly in our data: employees felt that their concerns weren’t taken seriously (33%), the issues they flagged weren’t escalated (32%), and leadership never asked for their input in the first place (32%).

Our research has identified three steps that increase the likelihood of successfully navigating a turning point will significantly improve transformation performance by 12 times – from 6% to 72%.

Step 1: Sensing

Programs need to build an early warning system to rapidly identify when issues arise and decide when to intervene. Our research shows that leaders need to pay attention to signals around how their people are feeling and how they’re behaving. Programs need to pivot from looking at only lagging indicators in their KPIs to also looking at leading indicators – people. Our research shows that the earliest signals a significant issue has emerged come from changes in workers’ emotions and behavior, rather than traditional signals, such as missed KPIs or exceeded budgets. This requires knowing what signals to look for, creating conditions where people can speak up freely, and putting mechanisms in place to listen – ideally before the program begins.

Yet a striking 72% of surveyed leaders admit it’s all too easy to overlook warning signals. This is understandable, as most programs focus on successful delivery of the plan that so many people are invested in. Furthermore, a substantial 61% of leaders say it’s hard to know when to intervene or when it’s best to stay the course. As a senior manager at financial institution summed up: “One of the biggest cultural issues is if you are [the transformation leader] you've got so much personally invested in it that you are quite defensive when you are told, ‘this isn't working.’ I think we should have probably spent more time working out and recognizing defensive behavior because defensiveness then leads to someone's opinion being disregarded or just creates a challenging team environment.”

Step 2: Sense-making

Sense-making is about convening the right leaders and members of the workforce to make sense of the issues and co-create the way forward. This means bringing people from across the organization together, often in a physical location, to create a shared understanding of the issues and a sense of ownership over the outcome. They then explore the issue – to look at root cause rather than symptom.

Dominant lag indicators, such as KPIs that populate common dashboards, seem to offer clarity. While their apparent objectivity makes it tempting to use them in decision-making, their retrospective nature makes them less useful to guide future action. By contrast, key behavioral indicators (KBIs) and emotional cues are much more subjective, diffuse and hard to understand. If the signal is a shift in emotional energy, the next step is to get to the root cause.

Leaders should try to discern what they need to work on to get the program on track. Successfully navigating a turning point requires more than spotting the signal amid the noise; it requires leaders to decode what the signals are saying.

One company we interviewed established a series of small-scale projects to test and improve ways of working. “The [small-scale projects] were a testing ground for the imperfect but that was as good as we could get it,” the transformation leader noted. “When people used them, they had lots of ideas on how to improve them. So, we captured the ideas on those defining best practices from each of the [projects] and then we went from 60% to 80%. Then we deployed it to a few more and then went from 80% to 95%. So, it was continuous improvement.”

Step 3: Acting

Once program leaders sense the issues and understand what they mean – or are in the process of trying to understand them – they need to take action. Importantly, these actions must put humans at the center if they are to address the unique challenges facing the transformation.

Acting involves re-establishing the program environment that allows and encourages people to work together, using the six drivers of transformation success we identified in our initial research. Acting often occurs concurrently with sense-making, as leaders continually decide the best course of action. As one senior manager explained: “We escalated that we needed a change to top management, and that meant basically the ones reporting to the CEO. We had an event where we gathered all these leaders to present what the problems were. Because when you’re presenting what the problems are, you’re also presenting the solution. And I think we did that. We changed a lot of things related to the second [phase of the transformation] – more than we thought was possible, to be honest.”

While the idea of steps seems linear, these three steps are dynamic and interdependent. There needs to be a constant flow among them to maximize their success.

Six key takeaways

Turning points are a natural part of how we navigate into the future. When leaders navigate turning points successfully, they can do more than bring things back on track, they can actually accelerate the program and increase the value created by the whole transformation.

Here are six takeaways from our research and data:

1. Anticipate challenges. Leaders need to effectively plan for the transformation but be ready to anticipate and embrace turning points as a natural part of the process and change the plan where needed. This requires an early warning system that uses KBIs to understand in near real time the state of emotional energy of the people involved.
2. Listen to the organization. Across large organizations, leaders need data from multiple sources to understand what’s happening. However, data alone doesn’t tell the whole story. Our evidence suggests leaders need to be physically and emotionally present. This means spending time with the team on the frontline of the transformation, as well as those impacted by the program. It also requires leaders to proactively engage with the workforce by listening to what’s said and not said.
3. Don’t be the reason issues aren’t raised. Subconsciously, most leaders suppress the free flow of communication about challenges or issues. Leaders who are present – emotionally and physically – know how to listen to what is and isn’t said and recognize that they’re in service to the middle managers and workforce who are trying to achieve the transformation vision. 
4. Constantly shape the environment so people can thrive. Several of the case studies experience a “social movement” where the position of power and control for future transformation moves from a few at the top of the hierarchy, to many at the base. This is a profound shift in how the roles of leaders and the workforce are understood and shows how leaders can release a high level of energy and motivation.
5. Co-create and jointly solve problems. Get the team and anyone involved in the whole system together in the same room. Empower them to address the problems at the heart of the turning point. Then stay with them to test and learn together, with fast feedback loops. This means designing and using experiments to understand how the envisioned transformed state will work in practice.
6. Embrace people and their full selves. At the heart of a successful transformation are people working together to do something that hasn’t been done before. People – their ability to experience things and have emotional responses – is what differentiates humans from technologies like Generative AI (GenAI). Emotional responses hold the key to unlock deeper learnings and the potential for huge accelerations in progress. This is what leaders need to tune into.

Michael Wheelock, Associate Director, EY Knowledge, Ernst & Young LLP; AnnMarie Pino, Associate Director, EY Knowledge, Ernst & Young LLP; Paul Meijer, Partner, Ernst & Young LLP; Ron Rubinstein, Director, EY Brand Marketing and Communications, Ernst & Young LLP; Ryan Gavin, Supervising Associate, EY Knowledge, Ernst & Young LLP; and Bhavnik Mittal, Senior, EY Knowledge, Ernst & Young LLP, contributed to this article.