As many organizations implement new hybrid work models, improve their sustainability, try to enter new markets or work to realign their cost structures, executives wrestle with implementing change successfully.
It is important for them to understand that more than 70 percent of change efforts fail, and the biggest reasons is employee apathy or a culture that rejects change. Experts on change recommend that companies establish a guiding coalition — including middle management and regular employees — to lead the change and to attract converts. But how many converts do you need to attract?
I have been a fan of the John Kotter eight-step change model and have used it successfully over the years. An overview of Kotter’s eight steps is highlighted in the graphic below. Note that the third step in his model is to create a guiding collation. But how large should that guiding coalition be?
In his book, Leading Change, Kotter writes that a guiding coalition team should have four characteristics. But he does not present research on how big the guiding coalition should be. Below are his four characteristics:
- Position Power. Have enough key players on board, especially mainline middle-managers (in addition to executives who serve as visible sponsors for the initiative), so the middle-managers cannot block the change.
- Expertise. Make sure the various points of view are represented — in terms of functional organization (such as engineering or operations) — work experience, nationality, or any other relevant factor, so the guiding coalition will be trusted.
- Credibility. Have people with reputations for honesty and competence so the initiative will be taken seriously.
- Leadership. Have proven leaders so the group’s recommendations will be taken seriously.
I have found in my implementation of change in large organizations that successful guiding coalitions grow with enthusiastic supporters as the change is launched, often with sub-teams in various departments.
McKinsey and Company has released new research on the minimum level of involvement it takes to implement change. Even though McKinsey does not use the term “guiding coalition,” this research provides important guidance on how large the guiding coalition should be. McKinsey presents the number as a percent of employees (of the total workforce) who have ownership in the initiative.
McKinsey and Company looked at data from 60 organizations that are at least two years into their transformations, and discovered that transformations with at least seven percent of employees owning part of the transformation are twice as likely to succeed as those with less than seven percent initiative ownership. They defined success as having total returns to shareholders (TRS) in excess of their representative sector and geographic stock index.
Companies with less than seven percent employee involvement had, on average, negative excess TRS. McKinsey views seven percent as a tipping point, not a destination. McKinsey’s researchers found that as employee involvement increased, the average excess TRS rose as well. Initiatives with seven to 13 percent participation showed double the returns (as measured by total return to shareholders) of those with lower participation. Those with 21-30% employee participation were nearly four times as successful. See McKinsey chart below.
McKinsey’s research finds that the average company involves only two percent of its employees as initiative owners in a transformation.
McKinsey’s advice is that leaders should think of seven percent as a bare minimum that is both a catalyst and a guide to secure involvement across all functions and geographies that the transformation will affect. If seven percent of employees were somehow isolated while the remaining 93 percent continued with business as usual, then the transformation wouldn’t work. The power of attaining the seven percent threshold lies in the reach that it achieves as employees realize that the transformation is not a distant project but rather a fundamental change in how they work. At seven percent, transformation-initiative owners can no longer be ignored.
One other observation from McKinsey’s recent research is that “innovation should be everyone’s job.” McKinsey researcher’s write:
“Transformation should be something that employees do, not something that is done to them. In our global transformation work, we have repeatedly observed a powerful link between ideation, ownership, and implementation. The most successful transformations enable employees from every corner of the organization to put forward ideas that can improve the focus, process, and execution of initiatives. That empowerment is often an important antidote to the “change fatigue” that so many employees feel, starting well before the pandemic.”[i]
No idea is too small—McKinsey’s previous research highlighted that 68 percent of initiatives are typically worth $250,000 or less and that half of the transformation value typically comes from these smaller initiatives. Ideation and employee involvement are linked.\
The 2020s will see constant crisis and change. Executives and middle managers will need to be competent at leading change and involving employees in the change that affects them. When leaders find ways to meaningfully involve seven percent or more of their employees in a transformation, positive change will start to escalate.
Victor Assad is the CEO of Victor Assad Strategic Human Resources Consulting, managing partner of InnovationOne, and Sales Advisor to MeBeBot. He works with companies to transform HR and recruiting, implement remote work, and develop extraordinary leaders, teams, and innovation cultures. He is the author of the highly acclaimed book, Hack Recruiting: the Best of Empirical Research, Method and Process, and Digitization. Subscribe to his weekly blogs at www.VictorHRConsultant.com.
[i] Michelle Brown and Christina Cregan, “Organizational change cynicism: The role of employee involvement,” Human Resource Management, Winter 2008, Volume 47, Number 4, pp. 663–857, wileyonlinelibrary.com.