A BUSINESS transition is a process of organisational change that promises to deliver dramatically increased value. Transitions are the ultimate business investment.
Although they offer potentially high returns, they also hold equally high risks. Small differences in actions during a transition can have disproportionate impacts on business results.
The following findings are from various published researches on organisational transitions:
Up to 40 per cent of new chief executive officers fail to meet their objectives in the first 18 months.
At the most complex level, 70 per cent of organisational transitions fail.
Transformational transitions take a long time and cost a lot of money, yet 70 per cent fail to meet their targets.
66 per cent of companies who have gone through such a major transition find their stock price underperforms the market.
25 per cent of top performers consider leaving an organisation the moment a transformational transition is announced.
Productivity is estimated to decline by an average of 45 per cent in the four to eight months after a major change event.
Studies of transitions that have included making reductions in force, for example, show that nearly half fail to meet their financial objectives.
For every 1 per cent improvement in the service climate, there’s a 2 per cent increase in revenue, and research shows that company stock price was maintained or increased three times more often in the wake of a major transition when career transition services were used.
Securing the benefits of organisational transitions requires an understanding of the major types of transitions and proven best practices for dealing with each.
1.Transformational transitions. Transformational transitions change the entire nature of an organisation, for example, mergers or the change from a product-centred to a service-oriented organisation.
The key to achieving transformational transitions is to align the entire workforce as quickly as possible with the new organisation’s purpose and structure. Successful realignment comes down to mastery of three things: planning, communication and attention to post-transformation recovery.
2.Improvement transitions. Improvement transitions focus on increasing organisational effectiveness or efficiency, for example, an introduction of new processes, or a consolidation of manufacturing plants, or the removal of layers of management, or the offshoring of particular functions.
Improvement transitions need to make immediate financial impact and sustain an increased level of productivity into the medium and long term. Aligning employees with the business during the transition period, and in its immediate aftermath, will make the difference.
3.Capability transitions. Capability transitions maintain the strength of an organisation’s human capital, for example, bringing new staff on board or managing a maturing workforce’s transition to retirement, or developing leaders through frequent challenging assignments.
Success in capability transition depends on addressing two variables: speed and intensity. Successful capability transitions get results more quickly, and they result in richer and deeper alignment with the organisation.
An $800 million consumer products company used transition management techniques to retain critical intellectual capital and leadership skills during a major business consolidation. Security issues, legal claims and disruption to productivity and customer relationships were notable by their absence. Financially, the consolidation achieved on-going cost savings of $4 to $6 million annually.
A $5.6 billion beverage company turned its United States operations from a 70 per cent administrative organisation to a 68 per cent market-facing business. As a result of careful attention to transitions management best practices, the company grew 24 per cent in a market with annual growth of only 2 per cent, and recorded profits of $320 million, surpassing even the stretching targets set at the start of the transition.
Few organisations realise the difference transitions make to their business. Even fewer recognise what kind of transition they are dealing with, and the different solutions that apply to different categories of transition.
Transformational, improvement and capability transitions present significant undiscovered opportunities for business improvement. For each category of transition, it is important to understand the aims, risks and success factors involved.