“Thanks for the tasty breakfast.”
– Your Culture
The recent COVID-19 crisis has accelerated the need for companies to transform themselves. But the fundamental challenge remains: it’s hard to become something different than what you are today.
The reason transformation is hard – whether digital transformation or some other kind – is that companies inevitably run into significant cultural barriers where old mindsets, behaviors and a lack of skill eventually bring things to a halt. Hence, the famous adage attributed to Peter Drucker: “culture eats strategy for breakfast.”
So how can today’s organizations address the complex and amorphous barriers to transformation that we call “culture” while keeping their breakfast? The answer is to establish an effective Transformation Management Office (TMO).
The Missing Piece of Your Transformation Puzzle
At Prophet, we believe the core failure of most approaches to transformation is that they are not holistic enough to ensure either speed or success. We developed our Human-Centered Transformation Model™ to help see the range of efforts and the necessary interconnections across the DNA, Body, Mind and Soul of the organization. For instance, failed transformations frequently overemphasize technological changes (Body) without buy-in from business stakeholders around how new technologies will enable the strategy (DNA). Or they focus on training up new skills (Mind), without considering the mindsets and cultural behaviors (Soul) that match will with skill, ensuring new capabilities are actually applied in the real world.
Even with a holistic approach, aligning new behaviors, new skills, and new processes also requires new ways of making decisions. And this is – to put it plainly – extremely hard without a team devoted to addressing that challenge head on. We believe a team must actively manage and align those efforts, otherwise there will be no change, and no true transformation. And in our experience, this team cannot live within the rules of the existing organizational structure.
Where Does That Piece Fit Best?
We believe there are two models for this kind of structure for transformation management – federated or centralized. Many companies have (by default) adopted a form of federated management, which assumes that individual business units or functions can be accountable for managing their own transformation as a subset of the whole (see Figure 1). The challenge with this assumption and the federated approach is that you end up with lots of disconnected local work. Most frequently, these local efforts set themselves achievable goals with lengthy timelines and result in very little transformation. Occasionally, companies also set up Program Management Offices, to coordinate communications and track progress. But adding a PMO frequently adds centralized bureaucracy that is divorced from business value – you might get more done, but with less business impact (see Figure 2). The challenge is that these companies are working backwards: the federated model is a destination, but it’s not at all the place where you need to start.
Figure 1: Centralized vs. Federated Approaches to Transformation Management
Figure 2: PMO vs. TMO
Prophet’s experience managing transformations of all stripes leads us to believe that you must start with a centralized model. And our research over the last two years has validated that those companies who set up a TMO with a clear roadmap and rituals around decision-making can overcome cultural roadblocks as they emerge. In fact, in our estimation too few respondents in our recent Catalysts in Action research have stood up a TMO yet. However, 100 percent of those who have report that it has had a positive impact on their transformation. And a whopping 83 percent reported its impact as “very positive.”
The DNA, Body, Mind and Soul of an Ideal TMO
To be successful, a TMO needs to address cultural challenges holistically across the DNA, Body, Mind and Soul of the organization. A critical first step is strong DNA:
- A clear vision about how the DNA of the organization is changing. Who do you want or need to become?
- A specific timeframe for achieving that ambition. When do we want to achieve our goals?
- Real metrics to serve as signposts. How will we know we’re making appropriate progress?
A TMO must also have a strong Body – an operating model for its core processes and functions that covers five key domains:
- Goals & Investments – Defining the transformation, setting goals, and overseeing ongoing investments.
- Portfolio & Governance – Overseeing work intake, classification, prioritization and resourcing.
- Education & Mobilization – Supporting in-flight projects by enabling teams to improve how they deliver on their goals and assisting with roadblocks.
- Reporting & Forecasting – Reporting and actively providing visibility and accountability for the value being delivered.
- Change Management & Communications – Providing an organization-wide point of view and air traffic control for change impacts across portfolios.
An operating model for the TMO outlines clear processes for each of these five areas, as well as interaction models defining how key stakeholder groups work together. Done well, TMO processes are not an added layer of bureaucracy; they help streamline effort across a wide range of leaders, teams, and individuals, giving them the clarity they need to take unambiguous action each and every day.
As part of standing up a new TMO for a major US insurer, our team worked together with key leaders to develop a “TMO Handbook.” The Handbook codified specifically how and where the new TMO would integrate with existing business planning processes, but also helped leaders across the business understand how and where to plug-in and contribute to decisions about the company’s transformation.
The skills and competencies – the Mind – of a great TMO core team include strong EQ and communication skills to provide visual, verbal and written demonstrations of empathy to stakeholders struggling with rapid change; strong process facilitation skills to apply an Appreciative Inquiry-driven approach to collective problem solving; and strong analytical skills to be able to manage and measure progress. In building its TMO, a US financial institution was intentional about selecting resources with strong EQ and communication skills to staff it, given the level of executive interaction the small TMO team would need to support its charter.
Finally, in their Soul the TMO team must adopt a product ownership mindset, viewing the enterprise as a whole, demonstrating the behaviors and rituals common with the best product managers, including creativity, design, an agile methodology, and data-driven decision making. In this context, their product is the organization. As one of the first steps in managing its transformation, a leading quick-serve restaurant trained key leaders of transformational initiatives in Agile ways of working, defining the responsibilities, decision-making and behaviors for portfolio and project leadership roles.
The TMO Lifecycle
Ultimately, a TMO is not something that should last forever. Like the transformations they empower, TMOs have a natural end date. The TMO team should know they have a role to play for a period of time, but that all the new capabilities they create should ultimately migrate into other parts of the business. Over the course of its lifecycle, a TMO should eventually move from a centralized to a federated model so that business leaders can go back to managing their individual parts of the business with a shared enterprise mindset and new set of global and local capabilities. And as with many things in transformation, “timing is everything.”
Thinking about your own organization, consider where it stands in its own transformation journey – are you just getting started? Have you already made good progress? Or perhaps you’re well down the path to a transformed organization? If your organization is one of the 45 percent of companies who have already established a TMO, try to identify where it might be more effective across its DNA, Mind, Body and Soul. If not, consider where a TMO might be able to help accelerate progress with a more centralized approach.