Why business transformation programs fail?
The human factors that put programs on a path to failure
In an interview with Chris Partridge of City AM – published in Business and Industry, Media Planet, David Hilliard, Mentor CEO, shares his opinion on the reasons why many business transformation programs fail.
The biggest program disasters in business are caused by huge egos, mediocre leadership, anorexic planning, weak collaboration, miscommunication and fear-based cultures.
Written by Chris Partridge, Journalist
Failure is, proverbially, not an option, so why is the recent history of business in Britain littered with monumental failures, failures that have scarred companies, destroyed careers and wasted truly epic amounts of money?
Take the NHS National Programme for IT, described by the influential House of Commons Public Accounts Committee as one of the “worst and most expensive contracting fiascos” ever.
The idea was to digitise all medical records so GPs and hospitals could easily and cheaply exchange details.
But it never happened.
When it was finally canned in 2011 it had cost an estimated £20 billion, and we are still paying for large chunks of it.
Look at the BBC’s disastrous program to digitise videotape, the Digital Media Initiative. Originally to be developed with a subcontractor, Siemens, after a series of delays and cost hikes it was taken in house. Finally, it was cancelled in 2013.
After investigating the demise of the program, the PAC branded the programme “a complete failure”, adding “The BBC was far too complacent about the high risks involved in taking it in-house.
No single individual had overall responsibility or accountability for delivering the DMI and achieving the benefits, or took ownership of problems when they arose.”
The cost: £100m. The benefits? None.
These were both IT programmes, a sector notorious for big failures, but disaster strikes in other sectors too.
Boeing’s 787 Dreamliner aircraft, for example, was dogged by technical issues that delayed the aircraft going into service for three years and pushed the cost from the projected £2.2 billion to an actual £12.8 billion.
It may be ten years before Boeing breaks even on the program, and many subcontractors lose money on every plane built.
The human factor
Contrary to received wisdom, failure is not principally a function of complexity or new and untried technology, though these are high risk factors.
It is the human factor that makes the difference between success and failure.
Programs often start as big visions of powerful individuals, who go public with them too early and are thereafter feel committed to unrealistic objectives and hopelessly optimistic timescales.
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And, of course, costs are routinely underestimated.
But any attempt to revise them is branded as negativism. If the company is one of the many operating under a culture of fear, the doubters will sense a career-limiting moment and keep quiet, hoping they will have been able to move on by the time the chickens come home to roost.
The way a program is setup at the start is crucial
A common mistake is to allocate management roles to existing staff, instructing them to spend, say, 40 per cent of their time on it. This sort of job sharing is a recipe for managers to spend all of their time on the most pressing problems on their desks at the time, so any problems on the program are left to fester.
By the time they become serious enough for the part-time manager to notice, it may be too late.
Other issues include lack of clear chains of command, absence of proper areas of responsibility, and putting the wrong people in the wrong jobs (often because it is cheaper to re-assign an existing member of staff than replace them with someone better qualified.)
Once things start to go wrong, everyone begins to retreat, adopting a defensive attitude and making great efforts to conceal the truth, hoping that someone else will be discovered first and their failure will go unnoticed.
It degenerates into a game of bluff, with managers reporting in impenetrable jargon and trendy management-speak rather than plain English.
Eventually, of course, someone misses a deadline, fails to deliver a working technology or has to admit to a cost overrun (usually all three) and the board leaps into action.
Even then, however, directors have a tendency to go into denial, refusing to believe that a program in which they have invested so much in terms of their reputation and standing could be failing.
Even more money and effort is thrown at it in a last ditch attempt to make it work.
Learn about how to nail your transformation program.
Fallout from failure
Eventually, however, even they are forced to accept that good money is being thrown after bad, usually in quite significant quantities. Cancellation is eventually agreed.
The CEO whose original flawed vision and misguided optimism caused the fiasco is usually untouchable, so deputy heads roll.
Consultants are brought in to retrieve the situation before the news has to be brought to attention of the main board.
The fallout from failure can extend right through a business even if it is not catastrophic for the company.
The financial impact can be severe, limiting the company’s ability to attract investment
The reputational damage can be extensive and long-lasting – even today, the Ford Edsel is a bye-word for commercial failure and the thing was cancelled way back in 1960.
The human cost can be high too. All the programs listed in the first few paragraphs took senior managers down with them and a failure on that scale can easily mean the end of a career.
In many cases, the people sacked are scapegoats, sacrificed to protect the directors often directly responsible.
The BBC dismissed the man in overall charge of DMI, John Linwood, who then sued for wrongful dismissal. The tribunal discovered emails from senior BBC managers saying that Linwood should be left “spinning in the wind” when the disaster was finally revealed to the press.
It found in his favour.
The only upside from this sort of catastrophe is that good managers learn from the experience and become the battle-hardened executives who can steer the next program to success.
View this published article online at Business and Industry, Media Planet.