Why Most Change Initiatives Go Thud

Companies are launching business transformation initiatives at an ever-increasing rate, and, not surprisingly in the current climate, many of them are cost-control moves. But a large percentage of these projects are destined to flop, according to a survey of more than 600 senior executives across Europe and the United States conducted by the Economist Intelligence Unit. Fifty-eight percent of respondents said that half or less of their initiatives over the past five years have been successful. Among U.S. companies the proportion is even higher, an astounding 75 percent.

Or, looked at another way: Only 39 percent of initiatives in U.S. organizations, on average, were regarded as successful.

Change management methodologies have been around since the '40s, the study points out, so why are companies still floundering when it comes to executing on their plans?

"Primarily it's because of the way they structure those programs," says Bill Hendrickson, executive vice president with Celerant Consulting, which sponsored the research. "They don't have a lot of clarity. Sometimes these initiatives are launched because companies feel they have to do 'something'; they have to make changes. But they don't lay out clearly the deliverables, they don't have a good project management rigor and structure in place to track progress with milestones, and there's not a good charter setup. And they don't invest properly by putting their best people on these programs."

Indeed, when asked to identify the single most important factor in initiatives that failed over the last 12 months, about one-quarter of respondents (the largest percentage) cited a lack of clearly defined and/or measurable milestones and objectives.

"Employee resistance" is often fingered as a cause of initiatives fizzling, but the study focuses attention squarely on leadership issues. Commitment of senior management was identified as the most important factor in determining success, cited by 31 percent of survey participants. That sponsorship is critical, says Hendrickson, "so that the change program is driven from the top, there's good communication, and it's clear why you're undertaking the change and what's in it for the business."

At the same time, an inspiring leader can empower people to "reach out and be part of it," adds Hendrickson. "You need the workforce's input. Your people can add to the creativity of the solution and ensure its sustainability. It has to be clear that this is something you want to do with them -- not to them."

See the full report from the Economist Intelligence Unit, "A Change for the Better: Steps for Successful Business Transformation" here.