The forgotten step in leading large-scale change

 

Here is an excerpt from an article written by Scott Keller and Bill Schaninger for the McKinsey Quarterly, published by McKinsey & Company. To read the complete article, check out others, learn more about the firm, and sign up for email alerts, please click here.

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Change programs that explicitly assess the skills and mind-sets required to fulfill their performance and health aspirations are upward of six times more likely to succeed.
In Beyond Performance 2.0: A Proven Approach to Leading Large-scale Change (John Wiley & Sons, July 2019), McKinsey senior partners Scott Keller and Bill Schaninger draw on their 40-plus years of combined experience, and on the most comprehensive research effort of its kind, to provide a practical and proven how-to guide for executives managing corporate transformations. “A better way to lead large-scale change,” the first article based on the book, provides an overview of the authors’ approach and explains why it works. This second article, based on the book’s fourth chapter, provides an in-depth look into the most often neglected stage of the change process. A future article will discuss how to create the ownership and energy needed for success.
When Charles Holliday Jr. became CEO of the chemical giant DuPont, he felt it was time for a revolution. His predecessor, John Krol, had continued a decade-long strategy of revitalizing traditional brands, trimming bureaucracy, and cutting costs. Although this evolution had gone well, Holliday embarked on a change agenda more profound than any the company had aspired to for a century.
The new CEO had a long-term vision: expanding the company’s focus far beyond its chemical offerings to become a science-based enterprise. The strategy would involve a number of midterm aspirations, such as reshaping the business portfolio, realigning the cost base to finance growth investments, improving the company’s standing on environmental issues, and creating a more knowledge-intensive value proposition—in Holliday’s words, “to get paid for what we know, not just the products we sell.”   As for organizational health, his goal was to change a company characterized by “mediocrity” and “malaise” into one imbued with personal ownership, a creative and entrepreneurial work environment, and a willingness to share knowledge.

Holliday and his senior team didn’t press ‘go’ on executing the plan to transform the company until they first assessed the skills that would be required to ensure its successful execution.

Realizing these new performance aspirations would require many bold moves, DuPont would sell its massive Conoco oil and gas unit and its pharmaceutical, textile, and nylon businesses. Acquisitions would position the company as a major biotechnology player. A new consulting unit would advise customers on safety. Lean Six Sigma would create a more efficient production system. And the company vowed to pursue environmental goals, such as reducing greenhouse emissions by 15 percent; increasing revenues, to at least $2 billion, from products that create energy efficiencies for customers; and doubling annual revenues from nondepletable resources.

Although the aspiration and the strategies to reach it were clear, Holliday and his senior team didn’t press “go” on executing the plan until they first assessed the skills that would be required to ensure its successful execution. From an industry-sector standpoint, the company required greater expertise in the automotive and human-health markets, and from a geographical standpoint, it needed a better understanding of the fast-growing markets of Asia, Eastern Europe, and South America. Improved pricing skills would be vital to capture the full value of innovation.

Holliday and his team also understood that skills were only part of what they had to assess before moving on to execution. Equally important were the mind-set shifts required to apply the skills effectively. The company’s very identity would change from chemicals to sciences. “Not invented here” mind-sets would have to go. Salespeople would need to believe that “my job is to articulate and get fair compensation for value added,” not just to sell products. And the company’s environmental aspirations would require a shift from “what’s good for the environment can be good for business” to “what’s good for business must also be good for the environment.”

More fundamentally, the organization could improve its health only by changing mind-sets about how it should be run. A deeply ingrained compliance culture had stifled risk taking of all sorts by expanding far beyond the appropriate realms of regulation and safety. To unlock the necessary entrepreneurship and creativity, DuPont would have to shift employee mind-sets from “my job is to follow the rules” to “my job is to improve what we do and how we do it.” Another issue was the way organizational silos had tightly controlled information: the traditional command-and-control structure had ingrained a “trust your leader” mind-set. Shifting to “trust one another” would help employees share knowledge more freely across DuPont. Finally, at the heart of the effort to increase personal ownership, mind-sets would have to change from “I own what I control, and others hold me accountable” to “I own the full positive impact I can have on others and on the business broadly.”

Once the skill-set and mind-set shifts required were fully understood, strategic plans were adjusted to ensure that they enabled the needed shifts and thereby paved the way for successful execution of the strategy. DuPont spent the time needed to understand the underlying skill and mind-set requirements of the large-scale change to which it aspired. We frequently see companies miss this vital step. They do so at their peril.

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Here is a direct link to the complete article.

Scott Keller is a senior partner in McKinsey’s Southern California office, and Bill Schaninger is a senior partner in the Philadelphia office.

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