Heraclitus, the Greek philosopher, has been cited as the original source of the statement, “The only thing that is constant is change.” Whether that is his actual statement or is a reasonable variation, it is generally accepted as a truism. However, John Kotter reported in his book Leading Change that 70% of attempts at business transformation fail. One of the reasons for failure is insufficient leadership. There have been a number of change management models developed for use by organizations, but at the heart of all of them is the need for leadership. And in all of the models, the greater the transformation, the greater the need for leadership. Changing an organization’s pricing strategies and processes is no different – real leadership is required.
There are five elements of leadership needed in change management:
- Create the vision
- Inspire the organization
- Align people around the goals
- Enable the resources
- Lead by example
Senior management’s first task in transforming an organization is understanding why there is a need to change and identifying what the new culture, behavior, or process looks like. More specifically, the executives must describe how the transformed organization would do business and how that would improve success. Without this first step of creating the vision, change would either not occur, or it would be random and haphazard. Those conditions are not conducive to success.
The next element of real leadership is inspiring the organization. All members of the organization already want the team to be successful, but they may have different ideas of how to do that. If the team members’ views of achieving success are not complementary, their efforts will likely interfere with each other. Team members want someone to lead them past that. It is up to the leaders to articulate the vision for the future and create a compelling sense of how that vision will enable success. It means creating a sense of urgency. We see it in all kinds of organizations – sports teams, symphonies, schools, non-profits and for-profit businesses. The team members of those organizations talk the same talk.
Once the organization has a shared understanding of the vision, they need to have the right people taking the steps that will enable the transformation to occur. Usually that means roles must change. Often it means realigning existing skill sets to match the activities, and more importantly, making sure that important roles are filled by those who want to execute the changes. Teams perform much better when they are filled with people who want to perform their assigned activities, rather than those who reluctantly do so.
Having the right people in place and inspired to make meaningful change only works if they also have the right resources. Too often, companies try to transform themselves, but then don’t invest enough to make the change successful. Those resources can include access to technology, meeting space, authority to travel to other parts of the organization, access to subject matter experts, and even time with senior management. Leadership involves making trade-offs in the allocation of resources, and when you are trying to make a meaningful transformation, that is not an area in which to scrimp.
The last area of real leadership is leading by example. We have written about this in previous newsletters and blogs. It is the kiss of death in change management for executives to say one thing and do another. In moving from cost-plus to value-based pricing, leaders completely undermine themselves by only talking about margin percentages when reviewing large deals and monthly/quarterly results. They need to walk the talk and discuss relative values for each customer and segment, and discuss how and why prices vary.
Real change is hard and can be messy. While it is often said that people resist change, perhaps that is really just resistance to undisciplined, sloppy efforts at change. People want their teams to succeed, and they will enthusiastically do their part when they understand why and where they are going, they don’t have to fight the organization to do what they are being asked, they are shown how to do it, and they are supported in their efforts. Those things are all provided by the most important aspect of change management – real leadership.
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