• Faculty & Research

    Knowledge creation on China, from proven China experts.

  • Faculty & Research

    Knowledge creation on China, from proven China experts.

  • Faculty & Research

    Knowledge creation on China, from proven China experts.

Tuesday, July 2, 2019

Four Leadership Skills to Avoid Failure in Organizational Change

By Katherine Xin

In the era of new retail, companies are facing the pressing demand for organizational change, which is no easy feat. According to the data from McKinsey, among all manner of organizational change projects, 75% have ended in failure, with many companies paying a heavy price. What impact will the new retail have on organizations? What hallmarks does a new retail organization bear? How can a leader lead his company through organizational change? Katherine Xin, Professor of Management at CEIBS, shares her point of view about these questions.

Technology-Driven Retail Change

Since the first industrial revolution, the retail industry has experienced a revolution brought about by consumption upgrade and technological advancement, as evidenced by evolution of retail formats from department stores to supermarkets, convenience stores, and shopping malls, and then to e-commerce, mobile shopping and today’s O2O integration.

The new retail is, in essence, a “people-centered” and “data-driven” model that aims to redefine the relationship among consumers, commodities and scenarios.

To be “people-centered” means two things: one is to deliver consumer-centric services, and the other is to kindly treat employees who serve consumers. In other words, a retailer should properly deal with the relationship between the organization and its employees and between the organization and consumers.

To be “data-driven” means we can use data to deliver consumers a new experience that meets their needs, while bringing convenience to staff within the organization. To redefine the relationship among consumers, commodities and scenarios, we need to leverage Internet, big data and mobile payment to provide consumers with a better experience in order to satisfy their needs.

The new retail will make a great difference to an organization because it requires closer collaboration among functional departments. Meanwhile, the organization needs to get ready for “new retail” and respond quickly as it is data-driven. Therefore, a greater ability to adapt and make changes is a must-have for a new retail organization.

What hallmarks does a new retail organization need?

I have mentioned that organizations will take on four new forms: network-based, circle-based, platform-based, and group-based. Among them, a network-based structure will perhaps be more suitable for a new retail organization.

In a network-based organization, irrelevant and independent business units or teams are rallied around the shared goal of serving customers. The resulting nodes constitute an interconnected and complicated network.

This task-oriented organization can be flexibly formed and disbanded to meet the needs for rapid change and quick response in the context of the new retail.

Based on my research, I think the platform-based management model is suitable for a new retail organization. The so-called platform-based model does not mean building a platform, but managing the organization with platform thinking instead. Such organization usually bears the following hallmarks:

First, diversified relationships;

The new retail organization needs to redefine and handle a tangled web of relationships - between the superior and the subordinate, organization and people, customers and employees, and organization and customers.

Second, granulated performance metrics;

As the new retail organization is data-driven, performance is fairly measured in solid figures. The performance management units will become smaller.

Third, flexibility of organizational structure;

This means in the new retail organization, the required organizational structure varies from department to department. For example, the production department should be organized around key functions, while the services department should emphasize network-based coordination.

Fourth, culture of altruism.

An enterprise needs to operate as a borderless organization as is required by the platform-based management model. It has to think about how to help downstream suppliers, customers and employees. Therefore, altruism becomes all the more important in the era of new retail.

How to spearhead the new retail revolution?

As the new retail revolution requires top management commitment, the founder and executives will undoubtedly play the most critical role. However, given the stubbornly high failure rate, leaders cannot help wondering why making changes is so hard.

What will happen when we merge all departments into a new retail division? These departments used to operate on their own and conduct accounting independently, with clearly-defined KPIs. After the merger, who will be calling the tune in the division? Will former department directors be a cog in the wheel of the division or still head of their departments?

People resist change for a variety of reasons:

First, they do not understand why they should embrace change, because they know little about the change. Leaders should spell out the reason and purpose for the change in a way employees can understand and accept.

Second, they do not like making changes. As I have just mentioned, after five or six departments are merged into a new retail division with only one director, the change will provoke pushback from former department heads, who may feel deprived of power, autonomy and control over resources.

Third, they do not like you. Perhaps owing to something unpleasant in the past, there is no trust at all between you and your employees. As employees do not trust you, they do not want to do anything you advocate. In this tough situation, you need to come down off your high horse and face up to your responsibility so as to rebuild trust.