How Adaptable is Your Company to Organizational Change?

A change management strategy is crucial to any business's survival and growth strategy. The pace of change isn’t steady, it’s escalating - in terms of both frequency and significance due to factors like advancements in technology, globalization, market competition, changing customer expectations, and the need to adapt to evolving trends and disruptions in various industries.

The capacity to adapt consistently, swiftly, and on a large scale is now a crucial element to achieving superior performance. As traditional change management has become outdated, business leaders are looking for new ways to understand and measure their organisations’ capacity for change.

Kevin Murphy and David Michels, Partners at Bain & Company in the Transformation and Change Management say:

"We talk to executives all the time, all over the world, and no matter how we start out, we always end up discussing change. These executives are seasoned professionals—experts in their fields, with a deep understanding of their companies and their markets, and usually very well schooled in the art of management. But the current business landscape is evolving so rapidly and unpredictably that they are full of questions about change. How much? They want to know. How fast? How sustainable? And sometimes just How? In our experience, companies can’t hope to answer these questions unless they understand their own capacity for change. Traditionally that has been hard to determine, because they’ve lacked effective tools for measuring it. To paraphrase the old adage: If you can’t measure it, it sure is hard to address." 

Co-authored by Aura and Bain & Company’s Transformation and Change Management practice, this article dives into:

• What is ‘Change Power Index®’?- a way to measure company’s ‘changeability’

• How can Aura help you to understand your organization’s critical change elements?

• A comprehensive case study on ‘Change Readiness Assessment’ of a mineral fertilizer producer.
  

Change Power Index® is a tool that measures a company’s “changeability” and compares it with other companies. It allows business leaders to see gaps in their business and determine where to focus to improve their capacity for change. The system hones in on nine critical traits and abilities under an umbrella of three broad categories that are key to successful change: Leading for change, Teaming for change, and Organization for change.

An organization's Change Power Index score can be calculated using the Outside-in methodology, which leverages publicly available metrics from various sources like Aura, CapIQ financials, Drucker rankings, MIT rankings, Dealogic, CrunchBase, etc. The model uses 27 predictive metrics for Change Power elements, with each metric having a regression coefficient and weighting. The predicted CPI scores are then compared to industry benchmarks.

1. Companies in the top quartile of the index are more profitable, with EBIT margins twice as high as those of companies in the bottom quartile.
2. Top-half companies in the same industry grow revenue up to three times faster than bottom-half companies.
3. Additionally, top quartile companies have higher ratings from employees for leaders and culture, and their employees feel more inspired and engaged.

Identifying Workforce dynamics and quantitative changes through AURA

Utilizing and understanding workforce data is essential for several reasons:

• Firstly, it helps organizations predict potential issues and identify areas where intervention may be required. By analyzing factors such as attrition rates, tenure, diversity, and digital skills, organizations can proactively address potential barriers or facilitators to change.
  

• Secondly, workforce data provides hard metrics that can gauge whether an organization is actually improving its ability to change over time. By tracking and measuring workforce-related indicators, organizations can assess their progress and make data-driven decisions to enhance their capacity for change.

• Lastly, workforce data serves as a proxy for long-term performance on a company's ability to change. Organizations with higher change readiness, as indicated by workforce data, are more likely to achieve better long-term outcomes and adapt successfully to evolving business landscapes.
  

Aura provides essential quantitative and qualitative workforce dynamics data. This data is crucial for calculating the Change Power Index (CPI) score, specially the metrics linked to elements such as Direction, Development, Scaling, Capacity etc. See sample metrics below:

How Prepared was a Mineral Fertilizer Producer for Change?

Context:

FertilizerCo, a mineral fertilizer producer, was going through a major transition as it prepared for new CEO leadership and the complex task of merging two acquired entities, Subsidiary A and Subsidiary B.

Approach and Methodology:

FertilizerCo ran the Change Power survey with its employees to understand its readiness for change and challenges due to the integration of the two subsidiaries.

Results and Insights

• Subsidiary A’s Change Power scores (18th %ile) are substantially lower than Subsidiary B (82nd %ile)

  • This implies that Subsidiary A has a lower readiness for change and faces more challenges in adapting to and implementing changes. On the other hand, Subsidiary B has a higher Change Power score, indicating a higher readiness for change and potentially a better capacity to handle and drive successful transformations. To increase Change Power for FertilizerCo as a whole, it needs to identify gaps in Connection, Capacity, Action, and Flexibility in Subsidiary A, while leveraging the strengths and leadership of Subsidiary B to inspire change and align the organization.

• Capacity is the lowest scoring element in both Subsidiary A and Subsidiary B

  • This implies both subsidiaries should address this by prioritizing initiatives on a recurring basis and allow people to focus.

• For Subsidiary A, Connection is at 15th %ile and 67th %ile for Subsidiary B

  • This implies that Connection between people and the spreading of ideas is lacking and should be improved by sharing subsidiary B’s best practices with subsidiary A.

• For Subsidiary A: Scaling, Action, and Flexibility are in the lower quartile, and this should be addressed by encouraging testing, learning and prototyping, having a can-do attitude and determining how to flex roles and structures to meet changing business needs

3 Key Take Aways

1. Navigating organizational change is complex but can be streamlined with the strategic use of evidence-based data. This data provides a clear understanding of how to facilitate change by identifying and addressing gaps in the organization.
2. Customize changes to align with the unique attributes, strengths, potential areas of improvement, and workforce capacities. Incorporating this data heightens the chances of achieving lasting and impactful change.
3. Understand and compare relevant workforce metrics against industry benchmarks and exemplars to better yourself for significant, measurable changes. Utilize AURA’s readily accessible workforce data and analytics to enhance this process.

Dishanth Umamaheshwara
Associate Product Manager, AURA

This article was written in collaboration with Bain & Company's Transformation and Change Management practice. A special thank you goes to Laura Hollister, Kevin Murphy, David Michels, and Melissa Burke for their invaluable contributions in terms of data and insights. Their expertise has greatly enriched the understanding of organizational change and has been instrumental in writing this article.

Note: All information mentioned in this report comes from publicly available data; if you believe the information on your company is incorrect, please reach out to us at:
aura@bain.com

This article was written in collaboration with Bain & Company's Transformation and Change Management practice. A special thank you goes to Laura Hollister, Kevin Murphy, David Michels, and Melissa Burke for their invaluable contributions in terms of data and insights. Their expertise has greatly enriched the understanding of organizational change and has been instrumental in writing this article.