moorhouse barometer on change 2013
TRANSCRIPT
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If a change is worth doing, focus on doing it well.
Barometer on Change 2013
Topic Headline Example
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Growth against the odds
“We have all witnessed the challenges of the past few years as the UK economy has struggled in and out of recession.
These challenges have been particularly evident on the high street with
some big names having to close stores and undergo large-scale
redundancies. In spite of this, the FTSE is performing strongly and (as
seen in this survey), many larger organisations are still achieving growth.
However, with UK non-financial corporate cash balances at nearly three
times the level a decade ago1, even those that are growing seem
reluctant to invest the funds they have.
But in an increasingly competitive market doing nothing is not an option.
With official growth projections remaining below 3% for the next 4 years2,
organisations cannot rely on the economy to drag them up. They will
need to identify their own growth initiatives and invest accordingly.
However in such a risk-averse market, organisations will need to be sure
they are picking the right initiatives to deliver this success.
This is the second time that we at Moorhouse have surveyed UK business leaders through the
Barometer on Change, and this year provided some interesting results. In particular we can see that
senior decision-makers are relatively confident in their strategies. However, for some this confidence
may be misplaced. Comparing those who have achieved high growth in the past three years with
those that have not, there are some definite differences in outlook and approach. These include: better
alignment of change initiatives to their strategic challenges; more effective staff engagement to foster
a pro-change attitude; and the ability to deliver initiatives more effectively and adjust what they are
delivering to remain on track.
This all suggests that success can be achieved in spite of the economy, but that organisations will
need to be proactive in setting the conditions for that success.”
Stephen Vinall Managing Director, Moorhouse
1 In 2002 UK non-financial corporate
2 Source: official Office of Budget Responsibility growth forecasts
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Contents
5 Context: The force for driving change
6 Introduction
8 Growth in a challenging market
11 Aligning the strategy
15 Cultivating the strategy
19 Dynamic effective delivery
22 Conclusion
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Context
At Moorhouse we have witnessed a number of organisations grappling with the challenges of successfully transforming for the long-term, whilst simultaneously addressing very pressing cost reduction priorities.
In particular, we have witnessed organisations are often unclear on their priorities which are not
always consistently understood by their people. We asked senior business leaders if this is the case
for them, and in particular how confident they were in their strategies and their ability to address their
strategic challenges.
The 2013 Barometer on Change points to a positive outlook among senior business leaders, who are
generally bullish about their growth prospects and confident in their strategies. However there are a
number of difficulties that organisations are facing which may challenge this confidence:
• Strategies are not always as clear as organisations claim they are;
• The lion’s share of focus is on cost reduction and organisations are generally less focused on
addressing other strategic challenges;
• There is resistance to change from staff and messages supporting the strategy are not always
getting through; and
• Organisations are finding it difficult to deliver individual initiatives.
However, the results also show us the lessons that can be learned from those organisations that have
achieved high growth to address these challenges and provide the building blocks for success. In
particular, higher growth organisations:
1. Align their change initiatives to the broader strategic challenges facing the organisation, besides
cost reduction;
2. Effectively engage with their staff to foster a pro-change attitude embracing new skills;
3. Deliver initiatives effectively and are willing to adjust what they are delivering based on relevant
performance information.
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Introduction
The Barometer on Change: this is the second year that Moorhouse has undertaken this survey, focused on what is driving strategic change and how effectively such change is delivered.
More than 200 UK Board members and those who directly report into the Board provided their views
on their strategic priorities and change initiatives3. Those surveyed were responsible for spend on
strategic change initiatives averaging £22m per organisation, representing a total spend of £4.4bn.
Barometer Sample
3 Structured telephone interviews were carried out by Illuma Research amongst 201 senior managers and directors in UK public & private sector organisations during February to April 2013.
Industry type
Duration of change initiatives
Level of organisation
Value of change initiatives Business type
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We surveyed those
responsible for
spending £22m per
organisation on
strategic change
initiatives. This
represents a total
spend of £4.4bn.
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Growth in a challenging market
The findings from the Barometer on Change show
organisations are relatively confident about their overall
growth prospects.
But this faith may not be well founded for all. Achieving year on year growth will be no small feat given
the challenges of today’s market.
First, the market-place is competitive. With
an economy that has dipped in and out of
recession, 44% of survey respondents
have achieved a Cumulative Annual
Growth Rate (CAGR) of greater than 5%
for the past three years. However, with
55% forecasting this level of growth for the
next three years and 98% forecasting
positive growth, such opportunities will be
highly contested.
Second, external pressures are
increasing. 65% of those surveyed felt the
pace and pressure of change had
increased over the last three years, and
three-quarters projected this pace will
increase yet further over the next three
years. In such a changing market, the
ability to anticipate, accommodate and
exploit change is increasingly important.
Actual and Forecast Cumulative Annual Growth Rates
How much has the pace & pressure of change increased and how much will it increase?
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In addition to these external pressures, organisations face their own internal challenges. The majority
of organisations reported a tendency to deliver initiatives late, indicating they are still finding it difficult
to deliver change effectively and efficiently4.
Even when organisations are able to change, there remains a significant focus on cost reduction.
Whilst much of this may be essential, many organisations are not then reinvesting these savings in
initiatives focused on growth.
This means that organisations will have to work pretty hard just to maintain their current position, let
alone deliver growth. Yet many are targeting above-market performance despite a notable absence of
past success. What are they basing these positive predictions on?
So what can organisations do to achieve high growth in a struggling market?
The Barometer on Change 2013 researched senior decision-makers at organisations that have achieved high growth and those who have not. The results suggest there are three particular characteristics of success.
4 This mirrors the findings in the Barometer on Change 2012, where more than 40% of respondents stated that less than half of their change programmes were delivered successfully.
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74% of respondents
believe their strategies
are clear, and 82%
believe their
organisations are
focused on doing the
right things.
Aligning the strategy
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Aligning the strategy
74% of respondents believe their strategies are clear,
and 82% believe their organisations are focused on
doing the right things.
However comparing what they are reporting to do, with what they claim they should be addressing,
we can see a mismatch. In particular:
• Strategies may not be clear – the majority of organisations are seeking to be “all things to all
people”; and
• The focus of initiatives is too narrow and not addressing the strategic challenges that
senior decision-makers are identifying.
The confidence leaders have in their strategies may reflect an inherent optimism bias. This is not
really surprising. After all if leaders are not confident in their strategies, how can they expect their staff
and shareholders to be? However, if this confidence is to be justified in the longer-term and grounded
in reality, it is worth learning from, and applying, the lessons from those organisations that have
achieved higher growth.
Strategies are not as clear as organisations think they are. Despite 74% of respondents claiming their strategies are clear, the reality seems different. Almost
90% of respondents claimed their organisation was focused and organised around simultaneously
differentiating itself in at least two of: best products; operational excellence / efficiency and customer-
centric solutions. Rather than being highly focused around a single differentiating strategy,
organisations are hedging their bets and pursuing less focused strategies with greater breadth. In
particular a large number of organisations are focused on driving out operational efficiencies (80% of
respondents) alongside developing market-leading products (75% of respondents).
How focused is the organisation and how clear is its strategy?
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The theoretical case against this has already been made by Treacy & Wiersema’s Value Discipline
Model5. They argue that excellence can only be achieved in one area. Organisations must decide
what they will excel in if they are to avoid diluting that excellence by spreading themselves too thinly.
The reality suggests that very few have made such a choice.
Initiatives are too narrow in their focus With such a trend of broad strategies with multiple areas of focus, one would expect there to be a
range of initiatives being undertaken. Yet, when asked to describe what challenges their change
initiatives were addressing, respondents were overwhelmingly focused on cost reduction. 54% of
organisations stated that they had initiatives aimed at addressing cost reduction and 22% aimed at
performance improvement. Less than a fifth of organisations claimed to be addressing new products
or services.
As a result organisations are claiming their strategies are relatively broad in focus, yet their change
initiatives are myopically focused on operational efficiency in the form of cost reduction and
performance improvement.
It also seems that organisations may know their focus is too narrow. When asked to identify the main
challenges facing their sector over the next three years, there was a clear mismatch with many more
organisations identifying challenges than were addressing them. For example, 72% cited new
products and services as a strategic challenge, yet only 19% of organisations have initiatives
addressing this.
5 See Treacy, M. & Wiersema, F., The Discipline of Market Leaders: Choose your customers, narrow your focus, dominate your market, Perseus, New York, 1995.
How focused are organisations around different market differentiators?
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Optimism bias? Overall the results tell us that organisations as a whole are not delivering the change initiatives that
are consistent with their claimed strategy or addressing their stated strategic challenges. However
they are also claiming to have clear strategies and be doing the right things. This may well reflect the
optimism bias of individuals whose job it is to build support for the strategy.
The route to growth Comparing high growth organisations with both lower growth and negligible growth organisations, we
see some contrasts. Higher growth organisations are less likely to cite cost reduction as their biggest
challenge. They are less likely to have cost reduction initiatives in place. They are also more likely to
be investing in initiatives to engage their staff or pursue growth (such as culture change, accessing
new markets or mergers and acquisition).
For lower growth organisations seeking a higher performance the lessons are clear. Growth is
unlikely to come through focusing on cost reduction alone. The savings may be better being
reinvested in initiatives that generate revenue or engage employees.
How well do organisations’ change initiatives address their strategic challenges?
How does the focus of initiatives differ with the organisation’s growth success?
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The strategy alone
cannot deliver success.
It needs to be
understood by the
business and translated
into effective action.
Cultivating the strategy
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Cultivating the strategy
Of course the strategy alone cannot deliver success. It
needs to be understood by the business and translated
into effective action.
The results of the survey suggest there may be a discrepancy between those who are able to set the
conditions for strategic delivery, and those who are not. In particular, high-growth organisations:
• Adopt a pro-change attitude;
• Get the message through with more effective communications and engagement; and
• Are more open to new skills to ensure they have the right skills.
We have already seen that higher growth organisations are more likely to make deliberate
investments in growth releasing initiatives such as culture change. This proactive attitude seems to be
at the heart of their ability to cultivate and foster the strategy across the organisation.
Adopt a ‘pro-change’ attitude The majority of organisations reported an increased
pace and pressure of change over the last three
years (65%) with even more (74%) projecting
that the pace and pressure will increase yet
further. However, 41% of respondents described
their organisations as ’change-sceptical‘,
‘change-resistant‘ or ‘entrenched‘. However
despite this resistance, almost half of such
’anti-change‘ organisations projected year on
year growth of over 5% for the next three
years.
So, in a climate of increasing change pressure, and
with an organisation that is, at best, sceptical of
change, how can organisations deliver such growth?
The answer is they are less likely to.
Looking back at historical performance we see that
those organisations who are pro-change (‘change-
able’ or ‘change-embracing’) are almost twice as likely
to grow at above 5% as those organisations that are
anti-change.
"Pro-
change"
"Anti-
change"
How pro-change are organisations?
How related are growth and attitude?
41%
59%
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Get the message through Despite 95% of respondents saying their strategies were ‘clear’, approximately a fifth felt the strategy
had not been either communicated to, or understood very well, by their employees.
The strength of belief in the effectiveness of communications drops for Board-reports compared to
Board-members. Those who ultimately sign-off the strategy seem to have a more positive view of
their employees’ perceptions (which may reflect the optimism bias discussed earlier). 60% of Board-
level respondents believe their strategies have been understood ‘very’ or ‘extremely’ well by their
organisations, compared with 48% of Board-reports.
There is also a difference between higher and lower growth organisations. High-growth, pro-change
organisations are better at building commitment. They are 1.6 times as likely to have ensured their
people understand the strategy ‘very’ or ‘extremely’ well.
How clear, how well communicated and how well understood is the strategy?
Do Board members perceive the effectiveness of their communications differently?
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Putting the right skills in place Most organisations surveyed believed they would need new skills and capabilities to support growth,
but high-growth organisations are more likely to seek new skills to realise their strategy. 60% of high-
growth organisations felt they were likely to need new skills to deliver their strategy, compared with
only 44% of lower growth organisations. This suggests that higher growth organisations are setting
themselves a greater challenge in trying to do new things.
Over three-quarters of respondents suggested they would need to look externally beyond their
organisations to find these skills. This suggests opportunities for mergers, outsourcing and
professional advisors.
Remarkably only 11% of respondents were not confident in their ability to access the right skills.
Having a proactive approach
It is clear that growth strategies are not realised by themselves. They require deliberate and
methodical action to build the organisational buy-in and harness the right attitude to change. The
results show organisations that are more likely to grow have a better attitude to change, are better at
engaging with their people and are more open to new skills.
Do high growth organisations understand their strategies better?
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Dynamic effective delivery
Organisations are still
experiencing a general
delivery challenge with
42% identifying a
tendency to run over
cost, and 53% identifying
a trend of late delivery.
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Dynamic effective delivery
So far we have seen there are differences between higher and lower growth organisations in both the
strategic decisions they have taken and the culture they have fostered to embrace and harness those
decisions. These differences continue when looking at the ability of organisations to deliver their
initiatives and flex what they are delivering to remain on track.
Higher-growth organisations are more likely to:
• Deliver individual initiatives effectively;
• Flex their portfolios and be able to stop initiatives that aren’t delivering; and
• Keep their strategy live through informed decision-making.
Delivering initiatives effectively Organisations are still experiencing a general delivery challenge with 42% identifying a tendency to
run over cost, and 53% identifying a trend of late delivery. This picture differs according to the
organisation’s growth performance. Higher growth organisations are better at delivering change
initiatives. They are over five times as likely to deliver ‘ahead of time’ and 1.5 times as likely to
be on budget.
Are higher growth organisations better at delivering individual initiatives?
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Flexing the portfolio However, whilst high growth organisations are undoubtedly better at delivering change initiatives, they
also seem to be better at changing their change initiatives and flexing to keep on track. Indeed
respondents from high growth organisations were 1.5 times as likely to be ‘very’ or ‘extremely’
confident in their ability to cancel change initiatives if they are no longer adding value or supporting
the strategy.
This suggests that a key delivery capability is not just the ability to do what you planned, but the ability
to alter what you are doing in line with changing plans. The higher growth organisations seem to be
better at both.
Keeping the strategy live Higher growth organisations are more likely to review their strategy in flight, and less likely to be
linked to the individual movements of Board members. 75% of high growth organisations
characterised their strategy development as either following a regular review or live and evolving, as
opposed to only 55% of slower growth organisations. Conversely slower growth organisations were
proportionately more likely to review their strategy reactively because of external shocks or internal
changes in senior management than higher growth organisations were.
Are higher growth organisations more confident in their ability to cancel failing initiatives?
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Such dynamic decision-making hinges upon information and being able to effectively weigh-up the
benefits of competing demands on resource. Whilst there is a general trend of tracking benefits whilst
initiatives are delivering, higher growth organisations are 1.4 times as likely to still be tracking
benefits after delivery. This suggests that flexibility and dynamism needs to be underpinned by
reliable performance information.
The lesson seems to be that faster growth organisations are better informed about how they are
performing, more dynamic in changing what they choose to deliver, and better at delivering.
Do high growth organisations approach their strategy development differently?
Are higher growth organisations better at tracking benefits?
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Conclusion
Whilst many organisations are confidently projecting above market growth for the next three years not all of the organisations appear set-up to achieve it.
If organisations want to succeed against their ambitious strategies, they need to learn the lessons
from those organisations that have delivered high growth, and put the building blocks in place for
success. In particular:
1. They should align their change initiatives to the broader strategic challenges facing their
organisation, besides cost reduction;
2. They should effectively engage with their staff to foster a pro-change attitude that embraces new
skills;
3. They must deliver initiatives effectively and be willing to adjust what they are delivering based on
relevant performance information.
Growth certainly seems possible, but it is unlikely to come without a proactive effort from those
seeking it.
Moorhouse helps organisations design and deliver successful transformation. Moorhouse is committed to sharing its knowledge and improving the effectiveness of transformation programmes across all industries. As part of this commitment, Moorhouse regularly surveys those responsible for transformational change and has produced publications and articles which can be found at: www.moorhouseconsulting.com
Published May 2013 ©2013. Moorhouse. All rights reserved.