15 minute read 22 Jan 2024
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The CEO Imperative

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

15 minute read 22 Jan 2024
Related topics Consulting Transformation realized Workforce
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Transformation programs using the power of their people to solve emerging issues are 12 times more successful at navigating turning points.

In brief

  • Critical moments will affect most transformations – 96% of programs experience turning points, according to our new research.
  • Turning points begin when a sense of progress becomes a sense of stagnation. This leads to reduced motivation and thus, discretionary effort of the workforce.
  • CEOs can successfully navigate critical moments by bringing humans to the center of the process. This is key to greater success in transformation programs.

Why do most transformations fail to deliver the value that organizations expect? And what should CEOs do when a transformation goes off track? These questions have confounded companies the world over for decades. In 2021, the University of Oxford’s Saïd Business School and EY (EYGS LLP) formed a long-term research collaboration to find out why.

We began with the hypothesis that the human factor is the secret to success in transformation programs. Our research has brought this to life. The heart of a successful transformation is an environment in which people thrive: an environment in which they can do the work needed to deliver the transformation; an environment of experimentation and learning.

Our 2022 research report identified six factors that help create this environment. Organizations that excel in addressing these six factors increase the likelihood of a successful transformation 2.6-fold – from 28% to 73%.

The CEO Imperative Series provides critical answers and actions to help leaders reframe the future of their organizations. Chief among the constant questions we faced when we talked with C-suite executives and board members about our initial research were: What do I do when things go wrong? How can I detect the problem earlier? Some CEOs with extensive transformation experience even asked: How can I use these pivotal moments to my advantage? This is the focus of phase two of our research.

Almost every transformation (96%) has at least one moment of truth, when the program goes off course and leaders intervene. We call these crucial moments “turning points.” How CEOs plan for them and respond to them can make or break the entire transformation.

Successful transformation programs are built to anticipate and navigate turning points. Through our research, we have found that they deliver multiple benefits, including:

  • Accelerating momentum as people across the transformation work together to solve challenges
  • Dramatically improving the chance to exceed outcome measures
  • Developing greater capability and setting the organization up for future transformations

All too often, however, turning points are poorly addressed. Leaders may panic and drive a flurry of uncoordinated action that causes chaos and stalls the program. Alternatively, they react too late, convening a small leadership group that imposes solutions on the wider program that tend to focus on the symptoms rather than the cause. Both reactions aggravate the situation, diminishing workers’ emotional well-being and performance, and greatly decreasing the chances that the transformation will succeed. This highlights a paradox whereby embracing tensions or issues can accelerate and amplify the impact of transformation programs.

There are a couple of deeply human reasons addressing turning points is more complex than we would like:

CEOs often subconsciously pressure the program to “get to green”

Humans have a deeply embedded aversion to “failure” – and the psychological damage that it causes. Furthermore, leaders are often achievement-oriented drivers1 – people who strive for success and are constantly driving for results. Perhaps subconsciously, the fear of failure, and their achievement orientation, often means that CEOs are signaling that the program needs to be progressing faultlessly – that they want to be presented with green dashboards, even if the underlying issues are trending red.

CEOs believe that people feel safer to speak up than they do

Senior leaders often inadvertently signal their team to be quiet. Research2 shows that senior leaders and their teams diverge widely on whether it’s safe for team members to speak up. CEOs base their belief on how safe they feel expressing their views. Teams on the other side of the power dynamic don’t share that optimism. They feel their voices are heard less. The most recent EY Workforce Reimagined Survey supports the divergent perceptions of trust. Where 81% of leaders say that employees feel trusted and empowered by their leaders, only 64% of employees feel the same way. CEOs should start by assuming their teams don’t feel safe speaking up – and then find authentic ways to hear their voice and how they are feeling.

Perception gap

81%

of leaders say their employees feel empowered by their leaders

64%

of employees feel trusted and empowered by management

Turning points are an opportunity to increase success

To overcome these challenges, organizations need to reframe transformation programs into processes that embrace experimentation and learn from “good” failure. CEOs need to create psychologically safe environments that recognize the complex and unknown territory that the organization is charting and encourage the team to speak up.

Turning points are not a problem to avoid; they provide an opportunity to increase success by accelerating progress. One implication of this research is that we need to redefine how we approach transformation programs, designing more adaptability into program discipline and changing the way they are led. Collective action among leaders and workers is key.

Using a combination of predictive modeling and in-depth case studies, we identified three key steps that harness the power of people and increase the likelihood by 12 times that a turning point will pivot the transformation program onto a trajectory that will deliver significantly greater value (from 6% to 72%).

The three steps are:

  1. Sensing – build an early detection system to rapidly identify when issues emerge and determine if intervention is necessary. This means looking beyond traditional KPIs (which are often lagging indicators) to monitor changes in the behavior and emotions of the people involved in the transformation, which are better predictors that a program is going off course.
  2. Sense-making – once an issue is identified, bring people together across the transformation program to deeply and rapidly understand where the issues are.
  3. Acting – re-establish the program conditions that enable and encourage people to do the right work together, using the six factors we identified in phase one of the research.

All of this will require a mindset shift. Instead of fearing or disapproving of challenges or turning points, CEOs need to accept that they will always be there, and embrace the opportunity to accelerate and increase success. 

  • About the research

    In this phase of the research, EY and the University of Oxford’s Saïd Business School surveyed 846 senior leaders and 840 workforce members in June and July 2023. Respondents represented companies with over US$1b in annual revenue across 16 industry sectors and 23 countries in the Americas, Asia-Pacific and Europe, the Middle East, India and Africa (EMEIA).

    Respondents were required to have been involved in a major transformation at their current organization in the past five years. The survey focused on a single turning point – defined as “when leadership believes a transformation has gone, or will go, off-course and intervenes with the intent of improving its performance or outcomes.”

    In addition, case studies of five global companies were conducted, including interviews and focus groups with leadership, middle management and the workforce. These case studies included:

    • A supplier to semiconductor manufacturers with US$25b in revenue that undertook a robotic process automation transformation
    • An automotive brand with US$40b in revenue that sought to innovate and build a new EV heavy duty truck
    • A multinational bank with more than US$600b in total assets that pursued an HR transformation
    • A retail chain with revenues of US$8b that navigated a sustainability transformation
    • A mining group with US$55.5b in total assets that carried out a culture transformation

  • Identifying how to successfully navigate a turning point

    To understand how organizations successfully navigate a turning point, we used predictive modeling on more than 40 actions taken before and during a turning point during the survey respondents’ transformation program. Using ordered logistic regression with maximum likelihood estimates, we identified three steps – each composed of multiple actions – that increased the likelihood that the turning point would significantly improve transformation performance: sensing, sense-making, and acting.

    To estimate the impact of these steps on transformation performance, we used bootstrapping to compare the likelihood that a turning point improves performance based on how well these steps are adopted. For this comparison, we define “above” or “below” average as a one standard deviation increase or decrease, respectively, in average adoption of the actions in each step.

Portrait of young woman with arms crossed in an office
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1

Chapter 1

What are turning points and why do they matter?

Turning points are a part of any transformation. When successful, they are 1.9 times more likely to help a transformation overperform its KPIs.

The turning point is a moment of potential – where performance can be elevated and people can move into a space where they can thrive (which can be seen in their emotional experience) – or where the entire program could fail.

Successful turning points not only address underlying issues (73% vs. 33% of unsuccessful turning points); they are 2.1 times more likely to improve the speed of execution (80% vs. 39%) and 1.9 times more likely to lead to the program overperforming its target KPIs (31% vs. 17%). Moreover, they are 1.9 times more likely to improve workforce readiness and motivation for the next transformation (79% vs. 41%) – preparing the organization to embrace a state of continuous change.

Conversely, unsuccessful turning points fail to improve performance and make the situation worse. They are 1.6 times more likely to lead the entire transformation to underperform (50% vs. 31% of successful turning points) and 3.4 times more likely to leave workers grappling with negative emotions such as sadness and anxiety (41% vs. 12%), which can be detrimental to their well-being and the organization at large.

Turning points are ubiquitous – 79% of leaders agree they are an unavoidable part of any transformation.

While turning points can occur at any time during the program, three-quarters (75%) take place during the planning and early implementation phases, when management’s intent to transform needs to turn into action across the organization. Embracing these early turning points sets the transformation program on an upward trajectory – as the act of successfully navigating a turning point builds an adaptive capability into the program. At these points, the real pain of transformation has yet to be felt, so leaders often see no compelling reason to intervene. By the time the pain is being felt, it is too late; leaders need to tune into these human signals to act early enough. 

  • Open image description#Close image description

    A series of graphics showing that turning points occur in almost every transformation, that they largely unavoidable, that leaders often miss warning signs for them and often find it difficult to know when to intervene.

What’s going on here?

What causes turning points to emerge? There appear to be two meta factors. First, there are external threats such as pandemics, wars or economic shocks. These are often interconnected (pandemics beget economic shocks, for example) and occur more frequently in this age of volatility. There are also internal issues and challenges. These will surface as the act of transformation shifts the organization into misalignment. Organizations are aligned to deliver results for today. Organizations that launch a transformation program are deliberately moving to a new state of being. This tips the organization into a state of misalignment otherwise known as the liminal space, or the space in between. It creates an imbalance on both the rational (technology, operating model, incentives, capability) and emotional (ownership of the solution, power dynamics, behaviors) sides of the organization. 

This state of internal misalignment and the external volatility that all organizations face makes turning points ubiquitous.

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 the issues they flagged weren’t escalated (33%), their concerns weren’t taken seriously (32%), and leadership never asked for their input in the first place (32%).

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2

Chapter 2

How to navigate a turning point

There are three steps that organizations can take to increase the likelihood of success in navigating a turning point.

Our research has identified three steps that increase the likelihood of successfully navigating a turning point. While each step is important on its own, combining them maximizes the chances of success.

1. Sensing

The first step is sensing. Programs need to build an early detection 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 are 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.

A striking 72% of surveyed leaders admit it’s all too easy to overlook warning signals. This is understandable, as most programs are focused 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 an interview respondent explained, “I think one of the biggest cultural issues is if you are a [transformation leader], you've got so much personally invested in it that you are quite defensive when you are told, ‘this isn't working.’” 

2. Making sense of the issues

The second step is convening the right leaders and members of the workforce to make sense of the issues and co-create the way forward. Sense-making 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. For example, when the challenges mounted at one company we interviewed, a leader organized a collaboration workshop where 25 people talked through the challenges. “And the funny part was that everyone saw the same thing,” the leader said. As a result of the workshop, the leader and their team created new ways of working.

3. Taking actions that put people at the center

The third step is taking actions that put people at the center to address the unique challenges facing the transformation. The six drivers of transformation success identified in our earlier research can be used to rebuild trust in leadership, belief in the program and confidence in the capabilities needed to transform. In fact, our current research validates how important these six factors are to not only resolving turning points, but to the overall impact on transformation performance.

For organizations that anticipate turning points early, bring the whole organization together to make sense and then take actions across the six factors, the upside is profound: Successfully navigating turning points creates value. 

How EY can help

  • Case study: Bringing the anatomy of a turning point to life

    A global manufacturer of semiconductor equipment embarked on a transformation to automate 200,000 hours of work per year across the finance function using robotic process automation (RPA). To maximize impact, it aimed to complete the program in 12 months, despite similar programs taking much longer than this in other organizations.

    The effort began in the finance function, and within a few months, managers and workers became anxious due to perceived potential job losses and not knowing how they would work with RPA. The situation continued to deteriorate and there was a tangible erosion in belief in the vision for the program and in psychological safety across the team. Major milestones were at risk of being missed. People across the program felt that the approach didn’t reflect the reality of the business. Vanilla technology solutions were being applied to finance processes, of which the designers lacked a perceived level of understanding. All of this resulted in people feeling that they had too little ownership – and say – in what was being done.

    The organization anticipated and addressed the turning point following the three steps:

    1. Sensing: Leaders saw this issue coming early because they paid attention to the feelings and perspectives of people across the program. Particularly, what was not being said.
    2. Sense-making: The extended team spent considerable time in a multi-day co-located workshop to develop a deeper understanding of the issues; they built ownership and belief so they could move forward together. They created shared ownership of the problem – and reconfirmed belief in the mission of the program. This also rebuilt psychological safety. 
    3. Acting: The extended team created a wider sense of ownership for the program by co-creating a new and more tangible vision, including which processes they would work on. There was greater delegation of authority, embedding ownership of the program across the team, and a significant investment in building capability to ensure ownership of the technology. Processes were designed to enable collaboration across teams and suppliers. The team built deeper bonds by overcoming the challenge together. 

    Based on the success of its RPA finance transformation, and the overall positive sentiment from the workforce, the manufacturer is set to embark on an enterprise-wide RPA transformation.

Our research shows that organizations need to treat transformation programs as dynamic processes that will shift. These dynamics are not to be ignored or managed back into the original plan. Embracing and navigating turning points will increase the impact of transformation programs.

Organizations need to reframe their view of transformation programs and embrace the fact that they will face challenges as they progress. The transformation will not play out as planned. There will almost certainly be turning points. 

We’ve provided a preview of our latest research findings. Our full report will provide detailed insights, complete with in-depth case studies, that show how organizations can effectively sense, make sense of and act on turning points early to accelerate transformation performance. 

Read the full report

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  • Show article resources#Hide article resources

    1. Spreier, Scott, Fontaine, Mary H., and Malloy, Ruth, Leadership Run Amok: The Destructive Potential of Overachievers, Harvard Business Review, June 2006.   
    2. Reitz, Megan, Higgins, John, Speak Up: Say what needs to be said and hear what needs to be heard, Pearson Education Limited, 2019, ©Pearson Education Limited 2019 (print and electronic).

     

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.

Summary

Turning points – moments of potential where performance can be elevated or where the entire program could fail – are part of any transformation program. Organizations that can rapidly identify when an issue is emerging, bring people together to understand what the issues are, and create the right conditions to act, can increase the likelihood by 12 times that a turning point will pivot the transformation program onto a trajectory that will deliver significantly greater value.

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