The Secret Behind Successful Transformation? Simpler Than You Think.

Transforming a company is no easy feat.

It takes careful planning, execution, and, most importantly, buy-in from employees. According to McKinsey Global, the more a company takes transformation actions, the greater its chances of success.

Unfortunately, success remains to be the exception, not the rule. For decades, we’ve known that a comprehensive approach to organisational transformation is more beneficial to lasting change, yet the success rate continues to be persistently low.

To put numbers to it, an analysis of 128 companies that had undergone transformation between 2016 and 2020 reveals that 78% of companies fail to transform their organisations. Worse yet, that’s higher than John Kotter’s assertion over 25 years ago that 70% of corporate transformation efforts are doomed to fail.

First, let’s define this latest buzzword so we’re on the same page, then we’ll dive into how you can make sure you’re in the 22% that get it right.

What is Business Transformation?

Business transformation is a change in how an organisation functions. This could manifest in changes to the company’s strategy, structure, processes, people, or culture. A company may decide to go through a corporate transformation for various reasons, including the desire to:

• Increase profitability
• Enter new markets
• Address disruption changes in the industry
• Keep up with the competition
• Respond to changing customer demands

Factors to a Successful Transformation

Going back to the analysis of 128 global companies conducted by three organisations (Copperfield Advisory, Insider, and Revolution Insight Group), the analysis showed that companies that succeeded made their employees the focus, driving change from the bottom up. This people-centred approach has several benefits, including:

• Increased diversity and inclusion
• Support for women’s managerial careers
• Access to healthcare

Diversity and inclusion are critical to success in the 21st-century workplace. For example, a recent study by McKinsey found that companies in the top quartile for racial and ethnic diversity are 35% more likely to have financial returns above their respective national industry medians.

Similarly, companies in the top quartile for gender diversity are 15% more likely to have financial returns above their respective national industry medians. Yet, despite the clear business case for diversity, many companies struggle to create inclusive environments.

One reason is that traditional management practices often favour those who are “like us.” In other words, we tend to gravitate toward people who share our backgrounds, experiences, and perspectives. Unfortunately, this can lead to homogeneous teams that lack the creativity and innovation needed to succeed in today’s rapidly changing world.

When it comes to supporting women’s managerial careers, companies often face a similar challenge. Women are typically underrepresented in leadership positions, which can be traced back to several factors, including unconscious bias and the “old boys’ club” mentality.

Fortunately, there are numerous things that companies can do to create more diverse and inclusive environments. For example, they can implement policies and programmes that promote diversity and inclusion, such as the following:

• Unconscious bias training
• Flexible work arrangements
• Mentorship programmes

Companies can also make a concerted effort to hire and retain employees from underrepresented groups.

When it comes to healthcare, employees often have different needs and preferences. For example, some prefer on-site clinics, while others prefer telehealth services. As such, companies need to offer various options so employees can find care that best suits their needs.

Common Attributes of the 28 Successful Transformers

In the study, out of the 128 companies that attempted to transform their organisation, only 28 succeeded. From that, the study found six common attributes among the successful transformers that separate them from the unsuccessful onesーmost of which are related to employee compensation and diversity and inclusion.

1. Employee Pay: Employees were receiving higher compensation compared to other companies of a similar size.
2. Employee Stock Options: Employees have more stock options compared to companies of a similar size.
3. Employee Satisfaction: Employees experience higher satisfaction with their job and roles at the company.
4. Diversity and Inclusivity: Companies hire employees with equity as their goal.
5. Women Managers: There are more women in managerial positions at these companies.
6. Women Employees: Women are not underrepresented and make up a higher share of employees at these companies.

Companies Transforming Their Business the Right Away

Being successful in transforming an organisation is not easy. Yet, despite the odds, three companies have succeeded in achieving both reputational and financial success. And it’s worth understanding what got them to where they are today, so you can emulate their success.

1. Microsoft

Microsoft is a leading technology company that develops, manufactures, and sells various software products and services. The company has successfully transformed itself from a traditional software company to a cloud-based services company.

In recent years, Microsoft has made a concerted effort to diversify its workforce and create an inclusive environment. As of 2021, women in its global workforce are 27.1% managers, 22% directors, and 21% partners and executives.

When it comes to employees, Microsoft commits to a growth mindset, which is to use technology to put people first. As a result, they found a more engaged workforce where 95% of employees feel proud to work at Microsoft, and 92% of employees would recommend Microsoft as a great place to work.

2. Netflix

Another one of the biggest transformation stories of the past decade belongs to Netflix. What started as a DVD rental service quickly became an online streaming service that offers users a wide variety of TV shows and movies. In order to keep up with the competition, Netflix has had to continuously adapt and innovate.

For Netflix to continue dominating the online streaming services, they ensured they could develop and retain great talents. One way they do this is by ensuring their employees have positive financial health. Netflix offers competitive salaries to employees by up to 50% higher than its competitors.

More than that, Netflix also offers 10-year stock options that are fully vested and which employees can keep even if they leave the company. In doing so, Netflix was able to attract and retain top talents while maintaining the company’s financial success.

3. Hershey

Did you know Hershey had their first woman CEO, Michele Buck in 2017? This was groundbreaking for the company’s then 123-year history. When she took the lead, the organisation grabbed an opportunity to diversify its snack portfolio and advance the company’s approach to diversity and inclusion. Since then, the company’s market cap has grown from $23.93 billion to $46.72 billion today.

In 2021, Forbes recognised Hershey as the Top-Female Friendly Company. A reason for this is that the company achieved pay equity within its U.S. workforce, where women and people of colour receive the same salary as their white male colleagues in similar positions.

What’s more, Hershey also transformed gender diversity within its company achieving 48.1% gender diversity worldwide in 2020. With a woman CEO at the helm, it’s clear that Hershey prioritises diversity and inclusion in its workforceーa major factor that helped them succeed in business transformation.

People at the Heart of Successful Transformations

Simply put, how companies treat their employees is what sets apart successful company transformations from those that fail. Companies that focused on creating a positive work environment, where employees feel valued and appreciated through diversity & inclusion and competitive salaries, saw stronger reputations and greater financial returns than other organisations.

So, if you’re planning on undergoing a business transformation in your organisation, make sure to keep your employees’ best interests at heart. Only then will you be able to create a thriving business that can adapt and succeed in today’s ever-changing business landscape.

_Do you have the right employees to lead and transform your business to thrive?

Marlin Human Capital can help in looking for the right talent to lead your journey towards creating a positive impact. We broker pioneering executive and technology leadership appointments for organisations like your own._

Get in touch with us today to start your transformation journey.