Strategy
Does
the Your
Energy Organization
to Transform? Have
by Michael Mankins and Patrick Litre
May 07, 2024
Danil Nevsky/Stocksy
Summary. In a business environment that requires companies to adapt on an
almost continuous basis, burnout is a real risk for many companies. This article
describes the four key steps companies embarking on transformation initiatives
should take if they are to... more
In conversations with senior leaders, a common theme emerges:
Their teams are feeling exhausted. Companies are contending
with relentless pressures on multiple fronts, such as shifting
consumer preferences, technological advancements,
environmental concerns, economic policies, and geopolitical
shifts. Navigating this upheaval necessitates change, which
inevitably disrupts established routines. Many organizations
struggle to cope, eventually succumbing to fatigue and, in severe
cases, burnout.
Neglecting organizational energy is a luxury companies cannot
afford. Continuous transformation is imperative for companies to
successfully navigate the increasingly volatile external
environment. However, transformation entails significant
change, and change is inherently disruptive. Without diligent
management, this disruption can become debilitating, eroding a
company’s ability to transform effectively.
Our research into the primary factors that influence the success or
failure of transformation efforts and experience supporting
effective change programs underscore four pivotal steps in
managing organizational energy to facilitate successful business
transformation:
1. Understand the organization’s change capacity
Each individual or team possesses a threshold for tolerating
disruption — a limit we term “change capacity.” Like adding more
water to a saturated sponge, overwhelming the same team with
simultaneous disruptions to its routines invariably leads to signs
of overload and diminished performance. Prolonged disruption
depletes organizational energy, culminating in fatigue or even
paralysis. We’ve found that if the same organization is asked to
change more than two primary routines simultaneously, the odds
of failure increase significantly.
Consider go-to-market transformations, for example. Dramatic
increases in sales force productivity often demand changes to
how a company manages its existing accounts and prospects. This
frequently entails altering sales territories. However, simply
enhancing coverage is rarely sufficient. Often, changes to the
products that salespeople represent must also take place, which
typically necessitates adjustments in the composition of account
teams, introducing many new players. Implementing all these
changes simultaneously would disrupt numerous established
routines. Asking a sales force to navigate through these
concurrent disruptions risks exceeding the group’s change
capacity, thereby adversely impacting sales productivity and
overall business performance.
2. Measure and manage disruption meticulously
Leaders spearheading major change efforts should strategically
sequence important initiatives to prevent overwhelming the
organization with a flurry of simultaneous changes. Clear and
consistent communication plays a pivotal role in providing
individuals and teams with an understanding of impending
changes, empowering them with a greater sense of control amid
uncertainty. Finally, allocating additional resources to support
those impacted by changes is also imperative. By doing so, leaders
can alleviate the mental and operational burden on individuals
and teams, allowing them to dedicate their energies toward
adaptation and innovation.
Leadership plays a crucial role in ensuring that unnecessary work
is either deferred or eliminated entirely, enabling the
organization to focus its efforts on the ongoing transformation.
Communication strategies should emphasize not only the “what”
and “why” of transformation, but also the “how,” including the
strategic sequencing of critical efforts. Describing the destination
is necessary but not sufficient; teams must also grasp the journey
and their position along the path to effectively prioritize their
work day-to-day.
In our feature article for Harvard Business Review entitled
“Transformations That Work,” we spotlight the extraordinary
turnaround of Virgin Australia as a prime example. In April 2020,
at the start of the Covid-19 pandemic, the airline filed for
voluntary administration as a bankrupt carrier. By September
2020, US private equity firm Bain Capital (an entirely separate
entity from our firm) had acquired Virgin, and by November,
Jayne Hrdlicka was appointed CEO. In less than three years,
Virgin Australia returned to profitability as a much leaner, mid-
market airline, with a larger fleet, many new routes, and a
reimagined customer experience.
The pace and scale of the changes needed to quickly revitalize
Virgin Australia could have been overwhelming, were it not for
leadership’s diligent focus on managing organizational energy
and minimizing disruption. Leadership meticulously evaluated
how each change would impact employees and strategically
sequenced the hundreds of initiatives involved, ensuring no
single part of the organization was overly burdened at any given
time. Non-essential or lower-priority efforts were either
temporarily postponed or permanently shelved, freeing up
organizational capacity. This strategic prioritization and targeted
approach enabled Virgin Australia to swiftly progress without
overwhelming its workforce.
3. Recognize and reward success
Recognition and rewards serve as potent catalysts for energizing
change efforts. While minimizing disruption is crucial, sustaining
a transformation requires more. The transformation journey itself
should evoke energy and enthusiasm, with rewards playing a
pivotal role. Our research highlights the potency of recognition
and reward in positively influencing behavior, indicating that
they have four times the impact of penalizing undesirable
behaviors. It falls upon leaders to establish effective mechanisms
for identifying individuals and teams that demonstrate positive
adaptation in their routines, thereby offering explicit recognition
and rewards to maintain the momentum of transformation.
Importantly, rewards need not always be monetary, as not
everyone is motivated solely by financial incentives.
Understanding the unique “currency” that resonates with each
individual or team is critical. For some, it could be the public
acknowledgment received at a town hall meeting. For others, it
might be the opportunity for new career pathways or avenues for
professional development. And, of course, for some, financial
rewards and compensation may be the primary motivator.
Whatever the preferred currency, individuals and teams must
share in the benefits of the company’s transformation, rather than
solely bearing the burden of executing the necessary changes. By
aligning rewards with individual motivations and ensuring
everyone sees the personal benefits of transformation,
organizations can foster a culture of engagement and
commitment, driving sustained progress toward their goals.
Consider the recent resurgence of the fast-food chain
Chipotle under the leadership of CEO Brian Niccol. In 2016,
Chipotle experienced a significant decline in system-wide sales
due to food safety incidents at its restaurants. However, since
Niccol took over as CEO in early 2018, Chipotle’s sales have
consistently grown. Alongside implementing an improved food
safety program, which includes DNA testing ingredients before
they reach restaurants, altering food preparation and handling
procedures, and providing paid sick leave to discourage ill
employees from working, Niccol has strategically focused on
advancing the brand’s mission of “Cultivating a Better World.” He
has steered the company’s efforts toward enhancing visibility,
expanding accessibility, fostering innovation, and promoting
engagement among both employees and customers.
Another crucial aspect of the transformation is Chipotle’s crew
bonus program, which provides hourly employees the
opportunity to earn up to an additional month’s pay annually. To
qualify for the quarterly bonus program, restaurant teams must
meet specific criteria linked to Chipotle’s marketplace success,
particularly sales and throughput. Additionally, Chipotle has
intensified in-store training for its managers aimed at improving
connectedness and enhancing store productivity. This
collaborative “work together to win together” program has helped
to reinvigorate the workforce, boost crew productivity, and
revitalize the Chipotle brand.
In the fourth quarter of 2023, Chipotle saw a notable 8.4% increase
in same-store sales, outpacing rivals McDonald’s and Starbucks,
coupled with a 7.4% rise in foot traffic, bucking an industry-wide
trend of declining visits.
4. Expand change capacity
A company’s capacity for change isn’t fixed but rather fluctuates
over time. Fortunately, there are practical strategies to boost an
organization’s ability to adapt, responding to change more
efficiently and with less strain.
Streamlining decision-making processes and empowering
individuals can help reduce resistance when implementing
important changes. One major U.S. retailer exemplified this
approach when rolling out a new, geographically tailored,
merchandising strategy across hundreds of stores. By
standardizing merchandising procedures across all locations and
entrusting more location-specific product and positioning
decisions to frontlineassociates, the company involved a broader
segment of its workforce in the change effort, significantly
augmenting its overall change capacity.
Cohesive teams exhibit greater productivity and responsiveness
to changes. Drawing a comparison, Special Forces units
demonstrate superior adaptability compared to standard
platoons. By assembling well-aligned teams and deploying them
to execute pivotal aspects of the transformation, leadership can
bolster the entire organization’s capacity for change.
Finally, leaders can proactively nurture resilience within their
organization. In talent acquisition endeavors, priority can be
given to individuals who demonstrate resilience in the face of
disruption. For instance, individuals with sales experience often
showcase a greater capacity to rebound from temporary setbacks
compared to those lacking such experience. Development
programs can then be customized to underscore adaptability as a
critical skill. Furthermore, rewards, including pathways for career
advancement, should be structured to recognize and retain
employees who have proven their ability to excel in an
environment characterized by continual change.
...
Continuous transformation is imperative yet taxing. For most
companies, organizational energy is the limiting factor in the
speed and success of their transformation efforts. Leaders must
diligently measure and manage change capacity to fully realize
the full potential of business transformation.
Michael Mankins is a leader in Bain’s
Organization and Strategy practices and is a
partner based in Austin, Texas. He is a coauthor
of Time, Talent, Energy: Overcome
Organizational Drag and Unleash Your Team’s
Productive Power (Harvard Business Review
Press, 2017).
PL
Patrick Litre leads Bain’s Global
Transformation and Change practice
and is a partner based in Atlanta.
