By Abiy Getachew
Even though change management has been in existence for over half a century and companies invest a lot in tools and trainings, most research shows a constant failure rate of 60-70% for organizational change initiatives (McKinsey & Company). Does this imply that all we know about change management is wrong? Should we divert from the Kotter eight success factors and go to the drawing board and start a fresh? Should we abandon the main elements of the change management framework such as engagement, communication, small wins and building the business case?
While it may be reasonable to rethink the basics, scholars and practitioners unanimously agree that the content of change management is reasonable correct. The problem arises mainly because the managerial capacity to implement change is woefully underdeveloped (Ashkenes, 2013). This applies not only to organization wide change but also for change within a piece of it, for instance HR transformation.
Successful HR transformation will benefit the business in multiple ways. First it helps to develop personal competencies which is needed to deliver personal, stakeholder and business result. Second it helps to directly develop business capabilities which are important to deliver business result. In other words, HR transformation helps to:
- Build competencies used to deliver personal, stakeholder and business result (A),
- Build an effective HR department (B) and
- Build business capabilities (C), all with tremendous business result (D) (Fig 1).
Hence, the most important question to ask is how to pursue a successful HR transformation? And how to make that change sustainable?
In an effort to answer the above questions, this article is organized as follows: first we discuss what HR transformation really mean and why organization need to pursue it. Following it, we outline the process of HR transformation along with the major success factors and its implication for Ethiopian companies. Lastly, we conclude by summarizing the key points to consider when conducting HR transformation.
The business world has seen arguably the most disruptive change in the last nine months than the last nine years which brings a new and urgent demand for change. In the midst of COVID induced recession, some industries are in the verge of extinction while some few gain a momentum upward profit. In this context, HR faces a unique challenge and probably needs to redefine how it works within an organization. In other words, HR needs to pursue a true transformation that demands an integrated, aligned, innovative and business focus approach. In that sense, HR transformation is not equal to efficiency gain and should not be done in isolation. It should not also be initiated by the whim of some individuals. And it is successfully completed only when it helped to implement the business strategy and drive business result.
However, the old way of thinking that this process takes more time, rely on heavy process and should start from inside the company is no more useful and valid. The current unique situation requires a fast, slim, and an outside-in approach where HR transformation should focus on its impacts on external stakeholders who matter to the company. In other words, HR transformation begins with an understanding of the business context (both the general conditions and specific stakeholder situations) and translate this into business strategy that feeds to HR Re-design.
While stakeholder measure primary tracks the outcome of HR transformation as a recipient of transformation, HR transformation has far more impact within organization and outside. For instance, a successful HR transformation should change the culture, identity, and image of the company. This means it will enable the company to build these capabilities which result in huge impact on the business. Ultimately, these capabilities become the identity of the firm, part and parcel of deliverables of HR practices and will be key in implementing business strategy.
Even though there is no magic list of ideal capabilities, the following seems to be an inherent outcome of successful HR transformation in a well-managed firm.
- Talent attraction
- Motivation and Retention
- Speed in making important decisions
- Shared mindset
- Collaboration and Learning
- Customer connection
- Strategic unity
- Simplicity in strategies, process and products
- Social responsibility
- Risk anticipation and Management
However, the HR transformation team should do a capability audit to identify those capabilities which are critical for the organization’s future success. With those prioritized capabilities, scorecard may be created, and progress can be track from the base line.
Practitioners in HR transformation suggest four core phases to pursue effective change. First, the process should start with a clear rational for why transformation matters. This is building the case for why organization do transformation. The second phase is to clarify the expected outcome from transformation. Following this is to redesign HR which answers the question of how we do transformation. Lastly the process focuses on transferring ownership to line mangers and strategist to create sustained change.
Within the four core phases, the pieces come together in milestones, activities, and outcomes. HR practitioners who have worked with many companies (both which have succeeded or faulted in HR transformation) identified 13 milestones, outcomes and activities to turn these phases into action plans. However, the duration of transformation may vary from organization to organization depending on the unique organizational culture, level of anticipated change, expected resistance and degree of support from the broader organization.
But even with a carful description of the phases and detail of doing HR transformation, change is difficult, and many people not only resist it but try to undermine it. Hence it is not surprising that many studies found that only a third of change initiatives succeed. Hence, the issue here is, what factors distinguish successful HR transformation than those with partially success or complete failure? Several research in change management mention several factors like empowerment, incremental change, and key stone change. Since the factors are many and varied, it is difficult to arrive at an exhaustive list. However, one comprehensive study (lead by Dave Ulric and his team) which is made for the last 20 years on effective organizational change shed light on the issue and hence better to skim the cream.
According to that research, the major success factor is to have the leadership support for the change. This is a measure of the extent of having public and legitimate leadership inside and outside HR. Successful HR transformation also rely more on having a shared need of why the organization do transformation and developing a clear sense of outcomes of transformation. Moreover, mobilizing commitment from key individuals and knowing the decision that needs to be made are key in moving the transformation forward. However, all these conditions will not bring sustainable transformation unless the change is integrated with business activities and a blueprint of it is tracked, refined and adjusted while learning is taken from the transformation during the process.
Can we adapt the outlined process to local firms? That may be the primary question which readers of this article may ask. As many developing countries, Ethiopian human resource practice is different from the west due to differences in cultural factors, economic systems, political and legal systems and industrial relations. It is at a rudimentary state where most of the practices is done randomly and without any strategy, mainly because of Ethiopia’s limited experience in industrialization. Hence, a tremendous improvement in HR practices can be achieved by following the outlined approach, which in turn accelerate the transformation to strategic human resource practices in all areas of HR. Of course, the level of resistance and leadership buy in may initially work against the change. But never lose hope as this might take some time to reach its critical mass.
Overall, if done successfully, HR transformation will greatly contribute to deliver personal, stakeholder and business result. Explicitly, personal effectiveness, value for internal and external stakeholders and business competitiveness. Effective HR transformation produce in business result because it equips the HR department with capability to impact the business performance. Out of these capabilities, the one with the highest business impacts are employee practice (HR policy/practices used for employees), Capability support (HR effectiveness at supporting capabilities) and Stakeholder value (HR design to deliver values to stakeholders).
Abiy Getachew Sime is Senior Consultant at HST consulting PLC
You can reach at him at email@example.com