LARS FÆSTE
JIM HEMERLING
PERRY KEENAN
MARTIN REEVES
3 EXECUTIVE SUMMARY
5 UNPRECEDENTED DISRUPTION
Transformation: An Imperative in Most Companies and Sectors
An Approach That Flips the Odds of Success
2 | Transformation
Executive Summary
In the face of this volatility and complexity, most businesses must trans-
form, meaning a comprehensive change in strategy, operating model, orga-
nization, people, and processes. More than ever before, transformation is
an imperative. In fact, forward-thinking companies are launching preemp-
tive transformations while they still hold a dominant market position, re-
tooling themselves to stay ahead. The hard reality, however, is that many
transformations fail. Some 75 percent fall short of their targets—in terms
of value generated, timing, or both.
Our approach breaks down transformations into three discrete steps: fund-
ing the journey, winning in the medium term, and establishing the right
team, organization, and culture.
•• Once the company has taken steps to fund the journey, it must
make a more profound change to its legacy operations and
business model.
4 | Transformation
UNPRECEDENTED
DISRUPTION
More-intense competition and costly, extreme events (for example, natural disasters and
Increased volatility financial crises) are driving more turbulence.
Rising costs across most aspects of government create pressure to trim budgets,
Public spending pressure cut programs, or both.
Volatility in logistics and labor costs and supply chain complexity are changing
Manufacturing economics the formula for where to manufacture and what to outsource.
Sources: “Half a Billion Clicks Can’t Be Wrong,” Foreign Policy, January 3, 2014; S&P Capital IQ; Thomson Reuters Accelus Regulatory Intelligence.
According to research conducted by The Bos- Yet while almost all companies will need to
ton Consulting Group, the probability that a transform themselves at some point—market
sector’s market-share leader is also its profit- leaders and laggards alike—the reality is that
ability leader declined from 35 percent in many transformation efforts fail. Evidence
1950 to just 7 percent in the current environ- from the experiences of non-BCG clients
ment. During the same period, volatility in undergoing publicly announced transforma-
earnings before interest and taxes (EBIT) tions from 2003 through 2013 shows that up
margin increased nearly fivefold.2 A leading to 75 percent of those efforts fell short of
company that misses one market shift loses their targets, in terms of implementation
three to five years in development time, time, value captured, or both. Only 25 percent
which is enough to cede the leading position. were able to capture short-term and long-
Miss two turns, and your company is in real term performance gains compared with their
danger. sector average.3
6 | Transformation
Exhibit 2 | Nearly 25 Percent of Companies Undergo Transformation Efforts from a Position of
Strength
Attempting to Preemptive
sustain change transformers
20
18 24
Repeat Losing
losers ground
–20
46 12
–40
–60 –40 –20 0 20 40 60
Performance versus market
three years before transformation (%)
Sources: BCG analysis; BCG ValueScience Center.
Note: Analysis of 59 companies that underwent a transformation or large-scale change from 2003 through 2013.
• Are we competitive on cost? • Where should we target • Will the organization and
• What quick wins should we growth? culture sustain success?
target? • What markets should we • What talent do we need, and
• How can we free up the enter or exit? when do we need it?
Questions
to funding for future • What is our business model? • Is HR acting as a
answer investment? • How do we optimize our transformation partner?
• How can we keep operating model? • How do we embed change
employees, customers, • What targets should we set, within the organization?
investors, the board, and and how should we measure
other stakeholders with us? them?
Source: BCG experience.
8 | Transformation
VF’s Growth Transformation Creates Strong
Value for Investors
Value creation is a powerful lens for •• A Major Transformation of the Portfolio. To
identifying the initiatives that will have the help fund its journey, VF divested
greatest impact on a company’s transfor- product lines worth about $1 billion in
mation agenda and for understanding the revenues, including its namesake
potential value of the overall program for intimate-apparel business. It used those
shareholders. resources to acquire nearly $2 billion
worth of higher-growth, higher-margin
VF offers a compelling example of a brands, such as Vans, Nautica, and Reef.
company using a sharp focus on value Overall, this shifted the balance of its
creation to chart its transformation course. portfolio from 70 percent low-growth
In the early 2000s, VF was a good company heritage brands to 65 percent higher-
with strong management but limited growth lifestyle brands.
organic growth. Its “jeanswear” and
intimate-apparel businesses, although •• The Creation of a High-Performance Culture.
responsible for 80 percent of the company’s VF has created an ownership mind-set
revenues, were mature, low-gross-margin in its management ranks. More than
segments. And the company’s cost-cutting 200 managers across all key businesses
initiatives were delivering diminishing and regions received training in the
returns. VF’s top line was essentially flat, at underlying principles of value creation,
about $5 billion in annual revenues, with an and the performance of every brand and
unclear path to future growth. VF’s value business is assessed in terms of its
creation had been driven by cost discipline value contribution. In addition, VF
and manufacturing efficiency, yet, to the strengthened its management bench
frustration of management, VF had a lower through a dedicated talent-management
valuation multiple than most of its peers. program and selective high-profile hires.
(For an illustration of VF’s transforma-
With BCG’s help, VF assessed its options tion roadmap, see the exhibit on the
and identified key levers to drive stronger next page.)
and more-sustainable value creation. The
result was a multiyear transformation The results of VF’s TSR-led transformation
comprising four components: are apparent.1 The company’s revenues
have grown from $7 billion in 2008 to more
•• A Strong Commitment to Value Creation as than $11 billion in 2013 (and revenues are
the Company’s Focus. Initially, VF cut projected to top $17 billion by 2017). At the
back its growth guidance to signal to same time, profitability has improved sub-
investors that it would not pursue stantially, highlighted by a gross margin of
growth opportunities at the expense of 48 percent as of mid-2014. The company’s
profitability. And as a sign of manage- stock price quadrupled from $15 per share
ment’s commitment to balanced value in 2005 to more than $65 per share in Sep-
creation, the company increased its divi- tember 2014, while paying about 2 percent
dend by 90 percent. a year in dividends. As a result, the compa-
ny has ranked in the top quintile of the
•• Relentless Cost Management. VF built on S&P 500 in terms of TSR over the past ten
its long-known operational excellence to years.
develop an operating model focused on
leveraging scale and synergies across its
Note
businesses through initiatives in 1. For a detailed description of the VF journey, see the
sourcing, supply chain processes, and 2013 Value Creators Report, Unlocking New Sources of
offshoring. Value Creation, BCG report, September 2013.
Continue developing
operating model to
realize scale Divest slow-growth
benefits and synergies. core business.
Increase dividends
by 90 percent, Begin aggressive
and change Conduct “tuck in” acquisition plan
buyback approach. acquisition. (lifestyle brands).
Organization and
communication
10 | Transformation
FUNDING THE JOURNEY
12 | Transformation
Using that information, the company could about 80 percent of sales volume, are
make smarter decisions about which rolling it out.) Without any changes to the
promotions should be scrapped, which product lineup, that measure has driven a
should be tweaked, and which should merit 4 percent jump in gross sales.
a greater push. The result was another 2
percent increase in EBIT. Critically, this was Throughout the process, management had
a clear capability that the company built a strong change-management effort in
up internally, with the objective of continu- place. For example, senior leaders commu-
ally strengthening its trade-promotion nicated the goals of the transformation to
performance over time, and that has employees through town hall meetings.
continued to pay annual dividends. Cognizant of how stressful transformations
can be for employees—particularly during
Finally, the company launched a significant the early efforts to fund the journey, which
initiative in targeted distribution. Before often emphasize cost reductions—the com-
the transformation, the company’s distribu- pany aggressively talked about how those
tors made decisions regarding product savings were being reinvested into the
stocking in independent retail locations business to drive growth (for example,
that were largely intuitive. To improve its investments into the most effective trade
distribution, the company leveraged big promotions and the brands that showed
data to analyze historical sales perfor- the greatest sales-growth potential).
mance for segments, brands, and individu-
al SKUs within a roughly ten-mile radius of In the aggregate, the transformation led to
that retail location. On the basis of that a much stronger EBIT performance, with
analysis, the company was able to identify increases of nearly $100 million in fiscal
the five SKUs likely to sell best that were 2013 and far more anticipated in 2014 and
currently not in a particular store. The com- 2015. The company’s premium products
pany put this tool on a mobile platform now make up a much bigger part of the
and is in the process of rolling it out to the portfolio. And the company is better
distributor base. (Currently, approximately positioned to compete in its market.
60 percent of distributors, representing
cal rigor. BCG’s proprietary research shows across the strategic, tactical, and operational
that the rules of thumb and shortcuts many levels to create a common currency of mar-
marketers use to make decisions don’t yield keting performance and the capability to
better results; in fact, they can even destroy measure it consistently across brands, prod-
value. Typically, up to one-fourth of market- ucts, locations, and campaigns over time.
ing spending is inefficient. By reallocating
those resources, companies can achieve the The experience of a leading global consumer-
same level of sales for 10 to 20 percent packaged-goods player, one of the 20 largest
less—or drive 3 to 8 percent higher volume media spenders in the world, serves as an
with the same spending levels—within the example. The company was unable to
first year. measure return on marketing investment
across its global portfolio. This issue became
The good news is that there have never been more pertinent when investors began
more tools and models available to help mar- questioning the efficacy of the company’s
keters improve their marketing performance. recent increases in marketing investment.
Unfortunately, in our experience no tool or Building a common measurement platform
model is sufficient on its own. Achieving sub- allowed the company to strategically re-
stantial positive results requires pulling levers allocate spending across its top 50 brand and
14 | Transformation
Capital Efficiency Levers reduced product and customer complexity. A
Utilizing capital efficiently is vital during a complex portfolio of products often requires
transformation and can help with short-term broad production assets, along with ramp-
cash needs and improve return on invest- ups, ramp-downs, and changeovers. Stream-
ment, positioning the company for growth. A lining the portfolio of products or customer
strategic approach to capital allocation can accounts and rethinking outsourcing deci-
help companies prioritize investment proj- sions can quickly improve productivity and
ects, improve financial discipline, and devel- allow for a reduction of assets.
op a strong governance structure to guide
capital expenditure and growth projects.
16 | Transformation
WINNING IN THE
MEDIUM TERM
Group
strategy
Target segments
Business
model and
strategy
Value proposition Brand
Value chain
1 2 3 4
Organization Infrastructure Operations Performance and
steering
• Organization • IT • Sourcing • Target setting
design • Locations • Shared services • Performance
Target
operating • Process architecture • Customer • Supply chain management
model • Committees intelligence • Off shore and • Portfolio
• Role descriptions • Tools near shore management
• Processes • Process design • Risk management
• Engagement
Culture
18 | Transformation
A Leading Bank Uses a Lean Approach
to Transform Its Target Operating Model
A leading bank in Europe is in the process participating in employee workshops in
of a multiyear transformation of its which they analyzed processes from the
operating model. Prior to this effort, a perspective of the customer. For a mort-
benchmarking analysis found that the bank gage, the process was broken down into
was lagging behind its peers in several discrete steps, from the moment the
aspects. Branch employees handled fewer customer walks into a branch or goes to
customers and sold fewer new products, the company website, until the house has
and back-office processing times for new changed owners. In the front office, the
products were slow. Customer feedback system was improved to strengthen
was poor, and rework rates were high, management, including clear performance
especially at the interface between the targets, preparation of branch managers for
front and back offices. Activities that could coaching roles, and training in root-cause
have been managed centrally were handled problem solving. This new way of working
at local levels, increasing complexity and and approaching problems has directly
cost. Harmonization across borders—albeit boosted both productivity and morale.
a challenge given that the bank operates
in many countries—was limited. However, The bank is making sizable gains in
the benchmark also highlighted many performance as the program rolls through
strengths that provided a basis for further the organization. For example, front-office
improvement, such as common platforms processing time for a mortgage has de-
and efficient product-administration creased by 33 percent and the bank can get
processes. a final answer to customers 36 percent
faster. The call centers had a significant
To address the gaps, the company set the increase in first-call resolution. Even more
design principles for a target operating important, customer satisfaction scores are
model for its operations and launched a increasing, and rework rates have been
lean program to get there. Using an halved. For each process the bank revamps,
end-to-end process approach, all the bank’s it achieves a consistent 15 to 25 percent
activities were broken down into roughly increase in productivity.
250 processes, covering everything that a
customer could potentially experience. And the bank isn’t done yet. It is focusing
Each process was then optimized from end on permanently embedding a change
to end using lean tools. This approach mind-set into the organization so that
breaks down silos and increases collabora- continuous improvement becomes the
tion and transparency across both func- norm. This change capability will be
tions and organization layers. essential as the bank continues on its
transformation journey.
Employees from different functions took an
active role in the process improvements,
proposition and how they deliver on it. This •• What is our revenue model? Is it aligned
means a deep dive into several aspects of the with our long-term strategy and growth
business: goals?
•• What target segments are we serving? Answering these questions often prompts a
What should they be? fundamental shift in strategy, a reevaluation
of the value proposition, and a focus on new
•• What products and services do we offer? products and services. Companies can emerge
Are we focused on the right ones? from this process to pursue new business
20 | Transformation
A German Health Insurer Transforms Itself to
Better Serve Customers
Barmer GEK, Germany’s largest public branches by 50 percent, while transi-
health insurer, has a successful history tioning to larger and more attractive
spanning 130 years and has been named service centers throughout Germany.
one of the top 100 brands in Germany. When More than 90 percent of customers will
its new CEO, Dr. Christoph Straub, took office still be able to reach a service center
in 2011, he quickly realized the need for within 20 minutes. To reach rural areas,
action despite the company’s relatively good mobile branches that can visit homes
financial health. The company was still were created.
dealing with the postmerger integration of
Barmer and GEK in 2010 and needed to •• Improved Customer Access. Because
adapt to a fast-changing and increasingly Barmer GEK wanted to make it easier
competitive market. It was losing ground to for customers to access the company, it
competitors in both market share and key invested significantly in online services
financial benchmarks. Barmer GEK was and full-service call centers. This led to
suffering from overhead structures that kept a direct reduction in the number of
it from delivering market-leading customer customers who need to visit branches
service and being cost efficient, even as while maintaining high levels of
competitors were improving their service customer satisfaction.
offerings in a market where prices are fixed.
Facing this fundamental challenge, Barmer •• Organization Simplification. A pillar of
GEK decided to launch a major transforma- Barmer GEK’s transformation is the
tion effort. centralization and specialization of
claim processing. By moving from 80
The goal of the transformation was to regional hubs to 40 specialized process-
fundamentally improve the customer ing centers, the company is now using
experience, with customer satisfaction as a specialized administrators—who are
benchmark of success. At the same time, more effective and efficient than under
Barmer GEK needed to improve its cost the old staffing model—and increased
position and make tough choices to align sharing of best practices.
its operations to better meet customer
needs. As part of the first step in the Although Barmer GEK has strategically
transformation, the company launched a reduced its workforce in some areas—
delayering program that streamlined through proven concepts such as special-
management layers, leading to significant ization and centralization of core process-
savings and notable side benefits including es—it has invested heavily in areas that
enhanced accountability, better decision are aligned with delivering value to the
making, and an increased customer focus. customer, increasing the number of
Delayering laid the path to win in the customer-facing employees across the
medium term through fundamental board. These changes have made Barmer
changes to the company’s business and GEK competitive on cost, with expected
operating model in order to set up the annual savings exceeding €300 million, as
company for long-term success. the company continues on its journey to
deliver exceptional value to customers.
The company launched ambitious efforts to Beyond being described in the German
change the way things were traditionally press as a “bold move,” the transformation
done: has laid the groundwork for the successful
future of the company.
•• A Better Client-Service Model. Barmer
GEK is reducing the number of its
Leading from the Front Winning over those skeptics is a central chal-
Nothing contributes more to the success of a lenge for leaders. It requires helping leaders
transformation than its leaders. work through several phases—denial, resis-
tance, exploration, and commitment—with
Transformations are complicated initiatives specific interventions that vary depending on
that take place over time, with significant where leaders are stuck:
potential for miscommunication and mis-
placed priorities by the time they filter down •• Denial. In this phase, leaders may simply
the line. As a result, transformations must be ignore requests, assuming that the
led from the front, by committed leaders who initiative won’t last. Overcoming denial
22 | Transformation
requires making a clear case for change soft skills, experience, and motivation and
and reinforcing the fact that the transfor- personality traits. Leaders also must have a
mation is for real. foundation in adaptability and change leader-
ship. A shortcoming in any one of these can
•• Resistance. This is the most common be a warning sign.
sticking point, at which some leaders seek,
either actively or passively, to undermine However, the right leaders will fill roles in
the initiative. The key to engaging leaders varying ways throughout the journey, from
in this phase is to air the points of resis- champion of the venture (offering sponsor-
tance and address them openly. Some ship and support), to resource (offering infor-
concerns are legitimate, and heading them mation and direction to employees, managers,
off increases the odds of success. and other leaders), to example (embodying
the right actions and behaviors), to compas-
•• Exploration. For leaders at this point in the sionate team member (acknowledging that
journey, the goal is direct engagement and change can be disruptive and stressful). (For a
reassurance, through quick wins, that the case study in how leadership can impact a
process is working. transformation, see the sidebar “Nokia’s Lead-
er-Driven Transformation Reinvents the Com-
•• Commitment. Leaders are fully on board pany [Again].”)
for the transformation and willing to help
engage the rest of the organization A transformation often brings significant
regarding next steps. turnover and, consequently, many leaders
who are new to the organization. Beyond
Each leader should be assessed for past per- understanding their commitment to the
formance, current readiness, and future po- change journey, it is vital to ensure that they
tential across four dimensions: knowledge, have the right tools and capabilities to lead
Organization
How do we create a high-performance
organization that is faster and more nimble?
Top 150
executives
How do I drive real and sustainable change?
Leadership
team
How can we help clients build capabilities and
ensure that clients are successful aer we leave?
CEO
How much is change management really
changing management?
In 2014, Nokia embarked on perhaps the Right after these radical announcements,
most radical transformation in its history. Nokia embarked on a strategy-led design
During that year, Nokia had to make a period to win in the medium term with new
radical choice: continue massively investing people and a new organization, with Risto
in its mobile-device business (its largest) or Siilasmaa as chairman and interim CEO.
reinvent itself. The device business had Nokia set up a new portfolio strategy,
been moving toward a difficult stalemate, corporate structure, capital structure,
generating dissatisfactory results and robust business plans, and management
requiring increasing amounts of capital, team with president and CEO Rajeev Suri
which Nokia no longer had. At the same in charge. Nokia focused on delivering
time, the company was in a 50-50 joint excellent operational results across its
venture with Siemens—called Nokia portfolio of three businesses while plan-
Siemens Networks (NSN)—that sold ning its next move: a leading position in
networking equipment. NSN had been technologies for a world in which everyone
undergoing a massive turnaround and and everything will be connected.
cost-reduction program, steadily improving
its results. Nokia’s share price has steadily climbed.
Its enterprise value has grown 12-fold since
When Microsoft expressed interest in bottoming out in July 2012. The company
taking over Nokia’s device business, Nokia has returned billions of dollars of cash to
chairman Risto Siilasmaa took the initia- its shareholders and is once again the most
tive. Over the course of six months, he and valuable company in Finland. The next few
the executive team evaluated several years will demonstrate how this chapter in
alternatives and shaped a deal that would Nokia’s 150-year history of serial
radically change Nokia’s trajectory: selling transformation will again reinvent the
the mobile business to Microsoft. In company.
parallel, Nokia CFO Timo Ihamuotila
24 | Transformation
Four Reasons Why Executive Teams Underdeliver
Strong leadership can be a critical factor in achievement rather than team efforts;
executing a transformation, yet there are talent and leadership styles vary widely.
also many ways that ineffective leaders can
undermine the effort. The following are •• Internal Competition. Multiple leaders
among the most common: are vying for the top job, which can
erode the open and trusting climate
•• Lack of Clarity or Purpose. Individual needed for constructive group
accountabilities among the executive dynamics.
team are not aligned with business
requirements; the team is not clear on •• Team Structure. Some structures foster a
governance bodies and roles. focus on personal accountability and
individual business units instead of the
•• Individual Personalities. Senior executives overall organization.
have been promoted for individual
On the basis of BCG’s client work, we have •• Identify critical interventions. What aspects
observed that high-performance organiza- of organization context do we need to
tions and cultures have three characteristics: change?
•• Individuals and teams that are engaged in •• Develop a path to get there. How do we
achieving the desired results make change happen?
•• Individual and collective behavior that is Effectively changing the organization context
clearly linked to the company’s unique is an iterative process. The actual interven-
strategy tions will evolve over time in response to
refinements in the business model and the
•• A work context that reinforces the desired strategy.1
behaviors and culture
One essential element of context is organiza-
If any of the three elements is not in place, tion design. Reporting lines as well as roles
leaders need to actively change the organiza- and responsibilities, and how those are de-
tion and culture—by setting the target cul- fined, all significantly shape how people be-
ture and then changing the organization con- have. A critical component of the organiza-
text to reinforce that culture. Aspects include tion design process is the delayering
the right leadership behaviors, organization discussed in the chapter “Funding the Jour-
structure, role mandates, people policies, per- ney.” Both processes—organization design
formance metrics and management, rewards and delayering—are necessary to increase
and recognition, and the physical work envi- the effectiveness and punch of the organiza-
ronment. (See the sidebar “Key Lessons in tion and facilitate the environment that will
Cultural Change During a Transformation.”) encourage employees to exercise the desired
This process is a microcosm of the overall behaviors.
transformation effort, and it follows the
same path: Organizations need a deep understanding of
the interactions between functions and busi-
•• Diagnose the current situation. How do ness units, as well as the roles and account-
people behave? What culture do we have, abilities of individual contributors. To under-
and why? stand these dynamics, companies should
create “role charters” that define what each
•• Set the target culture. What behaviors and employee is accountable for along with “col-
culture do we need? laboration charters” that define how respon-
sibilities will be shared throughout the orga- develop employees, assess and promote the
nization. (See the sidebar “A Contrast in most promising individuals, and engage the
Organization Design Approaches.”) entire workforce.
26 | Transformation
A Contrast in Organization Design Approaches
A telecom company failed to properly ability for costs and rolling out the new
define roles and accountabilities and to design as part of a comprehensive
align individual capabilities with the change-management program. The
appropriate roles. The result was that company globalized business units and
several business units lacked a clear functions but gave country-specific chief
mandate, leading to high turnover among operating officers sufficient authority to
executives in those units. adapt global operating-model design and
implement it locally, enabling the organiza-
By contrast, a large global bank achieved tion to quickly roll out the new design with
greater success in its transformation high levels of buy-in across the company.
because it developed a clear organization
design, establishing end-to-end account-
•• Marketing the company to potential the demands that will be placed on HR and
employees who fit the new strategy, the department’s capabilities and capacity to
through a targeted employer value respond—and an opportunity to address any
proposition and investment of time to critical gaps.
standardize the talent experience globally
through frequent monitoring of employ- In addition, companies need to determine the
ees’ engagement potential impact of the transformation on the
HR organization itself. In the short term, HR
•• Helping the managers of the company at many companies will need to evolve from
succeed in their human-capital perfor- a mere service provider (focused on adminis-
mance objectives with cross-silo talent trative processes) and functional expert to a
reviews and career-management and transformation enabler and strategic partner
enterprise-development programs at for the business. (See Exhibit 7.) To enable
different career levels, encompassing job the HR function as a strategic partner, the
rotations and a cycle of training programs transformation’s leaders must include HR in
planning and provide visibility into the pend-
The time that the senior leaders of the indus- ing changes so that HR has time to prepare
trial-goods company invested in talent man- for its elevated role in the transformation.
agement was considerable—up to a month
annually for each executive. But talent man- For example, a global technology company
agement has become a competitive advan- with a history of high growth had long re-
tage for the company, which is now a truly quired HR to focus on scaling the organiza-
global leader in its sector. tion. As growth slowed, the company set out
on a transformation journey, and it needed
HR to play a critical role as a transformation
HR as a Transformation Partner partner for the business. To begin, the com-
HR is a powerful transformation enabler be- pany created an inventory of all the transfor-
cause transformations typically touch almost mation initiatives and determined the impact
all aspects of HR, including organization de- on various HR disciplines. In parallel, the
sign, leadership and talent development, company conducted a series of workshops
workforce planning, recruiting, compensation, with critical HR staff to assess current capa-
and performance management. For that rea- bilities, strengths, and weaknesses. The out-
son, companies need to understand how and come of these sessions was alignment on a
where the transformation will affect each HR focused set of HR priorities that were essen-
discipline and the current capability and ca- tial to support the business. The department
pacity of the HR function early in the change also put together a roadmap to build new ca-
program. That gives management a grasp of pabilities, enabling it to assume an expanded
As a strategic partner
As a transformation
enabler
As a functional expert
As a service provider
Focus on reliable and Focus on providing Understand the business Be “at the table” for
efficient execution of core expertise in and advice on transformation require- senior-leadership
HR services including the core HR disciplines: ments and how they will discussions and help
following: • Recruiting affect people and the shape the strategy.
• Payroll organization.
• Compensation and
• Employee data and benefits Frame and raise strategic
record keeping • Learning and development Assess HR’s capability and people and organization
• Training administration capacity to respond in each issues and priorities.
• Performance management HR discipline and address
• Time and expense • Mobility any gaps.
management Share perspectives on how
• Occupational health and to set up transformation
safety Mobilize HR resources and initiatives for success.
operate in an agile mode to
support the transformation. Adapt the HR operating
model to enable HR to
engage with the business
as a strategic partner.
role. In essence, HR had to undergo a small- understand what is happening and can make
scale transformation so that it could help course corrections to ensure ultimate on-time
drive the larger transformation of the rest of value delivery.
the company.
Beyond the quantitative metrics of an initia-
tive, rigor-testing each initiative roadmap can
Embedding Change Management produce tremendous value. This is a qualita-
Within the Organization tive assessment of the robustness and consis-
Depending on complexity, some 50 to 75 per- tency of each plan that ultimately addresses
cent of change efforts fail. However, a holistic three important areas:
approach to managing change—one that en-
rolls and activates leaders at all levels, en- •• Is the initiative roadmap clearly defined,
gages the broader organization, and ensures a logically structured, and readily imple-
high level of confidence in initiative deliv- mentable?
ery—can powerfully flip the odds in favor of
success. •• Is the financial impact at each step clearly
identified, along with the source, timing,
To fund the journey and win in the medium and leading indicators?
term, many high-impact initiatives need to be
identified. It is important to establish an •• Are interdependencies and other known
initiative roadmap for each, made up of risks identified and understood?
multiple milestones—typically, 15 to 25 are
most effective—along with time frames, Analysis has shown that roadmaps whose rig-
financial and operational metrics, and clear or test earned “excellent” scores captured an
accountabilities. This roadmap communicates average of 130 percent of their planned val-
the story of each change initiative in such a ue. One company, which had more than 100
way that the transformation team, on the initiative roadmaps with 1,800 specific busi-
basis of monthly updates, can easily ness milestones, performed rigor testing with
28 | Transformation
every initiative team, leveraging the support authority of the business units or functions in
of its program management office (PMO). By delivering results. The PMO does not need to
challenging each roadmap with key questions be liked, but it should have broad-based
on these three topics, the company had confi- respect. “PMO used to be a dirty word around
dence in its ability to deliver on its aggressive here. This PMO has changed that,” remarked
goals. a senior leader at a global oil and gas com-
pany whose PMO is now recognized as a key
An activist PMO, one that closely supports part of a major transformation program.3
senior leaders and the transformation
agenda, has time and time again proved
critical in enabling and facilitating impact
across the business—particularly for cross-
business initiatives. The value of getting the Notes
PMO right cannot be understated. Only one- 1. High-Performance Culture: Getting It, Keeping It, BCG
report, June 2013.
third of PMO leaders feel that their PMO has
2.Strategic Initiative Management: The PMO Imperative,
realized its full potential to enable change BCG and Project Management Institute report,
within the organization.2 When leveraged November 2013.
correctly, the PMO helps the leadership team 3. Changing Change Management: A Blueprint That Takes
Hold, BCG report, December 2012.
maintain an appropriate pace of change and
acts as the steward of the aspiration for
change, ensuring that there is a clear line of
sight to senior executives regarding imple-
mentation progress and any emerging issues.
At the same time, it must never usurp the
30 | Transformation
Rune Jacobsen Alexander Roos
Senior Partner and Managing Director Senior Partner and Managing Director
BCG Oslo BCG Berlin
+47 21 04 68 00 +49 30 28 87 10
jacobsen.rune@bcg.com roos.alexander@bcg.com
Jean Le Corre
Senior Partner and Managing Director
BCG Sāo Paulo
+55 11 3046 3533
lecorre.jean@bcg.com
Ross Love
Senior Partner and Managing Director
BCG New York and Sydney
+61 2 9323 5600
love.ross@bcg.com
Axel Reinaud
Senior Partner and Managing Director
BCG Paris
+33 1 40 17 10 10
reinaud.axel@bcg.com
Rafael Rilo
Senior Partner and Managing Director
BCG Madrid
+34 91 520 61 00
rilo.rafael@bcg.com
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