Change Management

How GoodbyIsDavidYour Company at

Michels and Kevin Murphy
Change?
From the Magazine (July–August 2021)
Kelsey McClellan

Summary. As they deal with a business landscape that is evolving constantly,

rapidly, and unpredictably, executives all over the world are full of questions about
change: How much? How fast? How sustainable? And sometimes just How? They
can’t hope to answer those... more

It was a month like no other that Delta Air Lines had ever
experienced: March 2020. Travel bans and rising coronavirus
fears sent bookings into negative territory—more customers were
canceling upcoming trips than booking new ones—and at the
nadir the airline cut 85% of its flights. Not even the terrorist
attacks of 9/11 had precipitated such a sharp drop in business, and
the decline was accelerating each day.

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Unprecedented change required a serious response. A week after

the United States locked down, Delta began calling big corporate
clients and surveying leisure travelers. What can we do, the
company asked, to make you more comfortable with air travel?
Customers consistently said they just didn’t feel at ease being
seated next to strangers, even with mask requirements, improved
air-circulation technology, and heightened cleaning.
Though it would be costly, the best response, Delta executives
decided, would be to block the sale of middle seats. In the first
week of April 2020, when Delta’s CEO, Ed Bastian, made the
decision, planes weren’t filling up anyway, so the immediate
impact was muted, but Bastian and his team were playing the
long game. According to Paul Baldoni, Delta’s vice president of
Americas pricing and revenue management, the goal was to help
customers relax about traveling—in that difficult moment and
over the long term. Indeed, Delta kept its block in place for 12
months, until May 1, 2021, by which time, management argued,
vaccines and a decline in overall cases had customers feeling
much more secure about flying in full cabins again.

Delta made the decision to block the sale of middle seats

relatively quickly. But implementing it wasn’t easy. As a legacy
airline, the product of multiple mergers over the years, Delta has
many different technology systems. Instituting a change of this
magnitude across all those systems, executives knew, would be
complicated. They drew up a list of 25 to 30 things they would
need to do to succeed, from adjustments to the digital site to
internal and external communications about the new policy. As
they worked through their to-dos, and as more levels of the
organization became involved, that list grew to hundreds of
items.

To help ensure that no one was placed in a blocked seat, for

example, the company laminated cards detailing the new policy
and distributed them to gate agents and flight attendants—a
simple fix, but it worked. Over time, though, Delta shifted from
emergency fixes to systemic changes. “We start with the quick
solution,” Baldoni says, describing its approach, “and then look at
how we can make it more efficient.” Soon the company was
building new rules into all its technology systems, which allowed
it to automatically determine passenger limits by plane model.
Many of Delta’s competitors eventually followed suit, though
often with less clear-cut policies, and most dropped the
restrictions within a few months.

Delta’s quick response to the pandemic illustrates how a large-

scale, complex organization can lean into its strengths and effect
major change in rather short order. In the fourth quarter of 2020
removing the middle seat left the airline with 9% fewer seats to
sell than its competitors had, but even so, Delta’s revenue was 12%
higher than the average of American, United, and Southwest
combined—a difference management sees as an indication that
its customers were willing to pay for the extra space. Delta’s
overall Net Promoter Score also skyrocketed to an all-time high,
demonstrating that its long-term focus paid dividends.

The lesson: A company’s capacity for change matters. A lot.

Determining Your Change Power

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.

Kelsey McClellan
Two years ago, in response to the rising chorus of questions, we
began devising a system to help companies measure their
capacity for change—their change power, as we call it. Some
people were skeptical. The idea seemed impractical, even
quixotic. How can you possibly measure something as amorphous
and intangible as the capacity for change? But the more we
thought about it, the more we felt that question demanded an
answer. After all, we have metrics for many things in business
today that once seemed impossible to measure. Just a few
decades ago companies had no good measure of customer loyalty.
Then, in this magazine, our Bain colleague Frederick Reichheld
introduced the Net Promoter System. Today NPS is so widely
accepted as a barometer of success that many companies report it
to their investors. That example inspired us to develop a roughly
analogous system for measuring change power.

We had been studying corporate change efforts for more than a

decade, tracking which programs worked and which didn’t. From
that research we identified nine common traits and abilities that
make companies excel at change: purpose, direction, and
connection (necessary for leading change); capacity,
choreography, and scaling (necessary for accelerating change);
and development, action, and flexibility (necessary for organizing
change). Delta Air Lines has strengths in each of the three groups,
which helps explain why it responded so well when the pandemic
hit, relative to its competitors. The company is particularly strong
in purpose, connection, and action.
The Elements of Change Power
Nine traits and abilities help companies excel at change. Understanding your
strengths and weaknesses in these categories allows you to determine your capacity
for change and to create a blueprint for increasing it over time.

ELEMENT FUNCTION
Purpose Creates a sense of belonging; guides decisions and inspires
action
Direction Translates your purpose into a plan; clarifies where you are
going and how to get there
Connection Taps into the social side of change; creates networks of
influencers and fans
Capacity Defines the limits of change; allows you to absorb more
change
Choreography Helps you be more dynamic; adjusts change priorities and
sequences moves
Scaling Creates a virtuous cycle; spreads innovation and amplifies
impact
Development Prepares you for growth; builds learning and change
capability
Action Builds momentum; fosters a can-do mindset and a bias for
change
Flexibility Helps you stay in front of change; redefines how you work
and even what work is
© HBR.org
To determine the change profile of an organization, employees
are asked to score it on statements related to each of the nine
traits. The scores are combined to get an overall change power
number, which provides a ranking relative to competitors and
other companies on our change power index.

In developing our system we conducted a survey of close to 2,000

employees from 37 large global organizations representing a
variety of industries. What we found is that a company’s change
power is a strong predictor of its performance. Companies that
appear in the top quartile of the index are more profitable, with
margins twice those of companies in the bottom quartile.
Companies in the top half grow revenue up to three times as fast
as do companies in the same industry that rank in the bottom
half. Each move into a higher decile on the index (from, say, the
50th to the 60th percentile) correlates with a margin
improvement of 150 basis points and an increase in total
shareholder return of more than 250 basis points. In addition,
companies that appear in the top quartile of the index tend to
have leaders and cultures that rate significantly higher in the eyes
of their employees than those in the bottom quartile, and they
have employees who feel more inspired and engaged. These
findings on leadership, culture, inspiration, and engagement were
consistent with Glassdoor rankings for the same companies.
What we learned in our research convinced us that change power
is a valuable metric for companies to focus on. By working to
understand their capacity for change, they can identify their
strengths and weaknesses, take stock of how they compare with
their competitors, and use that knowledge to develop focused
plans for getting better at change.

Four Common Archetypes

Every company will have its own balance of factors that affect
change power. But we’ve found that most fit a pattern
corresponding to one of four common archetypes: In search of
focus, stuck and skeptical, aligned but constrained, and struggling
to keep up. Each archetype has its own symptoms and remedies.

In search of focus. This archetype describes 37% of the

companies we reviewed. Their strength is their energy. They’re
beehives of activity and have had many successes. They’re
constantly innovating, and their people have the capacity to take
on a lot. But, like young children playing soccer, everyone in these
companies seems to be chasing the ball. Statistically, this group
shows weakness in the traits of purpose, direction, and
connection.

To address this, leaders should focus on the big picture,

connecting company activities to purpose and strategy. Defining a
multiyear ambition—and then telling and retelling the story of
how you and your company will make that ambition a reality—is
important to a sense of common purpose. It can also be helpful to
identify top initiatives and assign them to agile teams that
connect various disciplines, functions, and parts of the
organization. But you must prioritize ruthlessly: To stay focused
on the best initiatives, you’ll have to say no to some good ones.

Some people were skeptical. How can

you possibly measure something as
amorphous and intangible as the
capacity for change?

Delta has harnessed its proclivity for action by focusing on

purpose and connection during this time of change. The company
has accelerated a number of its airport-renovation projects
despite the drop in air travel, and it is now 18 months ahead of
schedule on one of the biggest: a $1.9 billion project to connect
and refurbish two terminals at LAX in Los Angeles. Speeding up
construction meant closing an entire terminal, so Delta
management worked with frontline employees to understand
what the implications would be, from mapping new shuttle bus
routes to adjusting staffing. Executives consistently made the
case with employees for the value of new technology and the
better door-to-door customer experience the upgrades would
enable. To build connection and ensure that its workforce felt part
of the process, Delta (which, unlike many other airlines, manages
its own construction projects) invited all employees, from gate
agents to pilots, to come out and sign the beam that would be
placed over the new terminal entrance before it was hoisted into
place. “It’s making everybody a participant in the process,” says
Mark Pearson, Delta’s vice president for corporate real estate.
“Change is hard. People don’t like change in general. The more
you can get people excited about better service, the community, a
better airport, the better.”

Stuck and skeptical. Of the companies we reviewed, 20% fit this

archetype. They have good ideas and a history of success, but too
much of their change gets stuck at the local level. They tend to
underestimate the full scope of what they have taken on. They are
commonly weak in connection, scaling, and action. Innovations
seem to stall and don’t spread across the organization. That
makes people impatient: How can all our hard work have so little
impact? The elusiveness of success comes to feel almost unfair.
Skepticism, even hopelessness, grows.

No single leader can lift a whole company out of this state.

Success will come only from reigniting the enthusiasm of your
teammates, which starts with convincing them that they can in
fact succeed. One way to do that, and to build energy fast, is to
quickly put some wins on the board.

A few years ago the CEO of one of the world’s largest

transportation and logistics companies found himself in exactly
this situation. After a year of hard work on a strategic
transformation designed to ease competition with digitally native
rivals, he noticed that the pace of change seemed to be slowing.
This was frustrating. There was still so much to do. His team
struggled to convey the urgency of the challenge. Operating in a
highly competitive, increasingly commoditized industry, the
front line was focused on day-to-day execution and thus easily
distracted from the broader strategic challenges.

After some debate over the best approach, the company’s leaders
tried something they had never done before. They invited 40
influential and respected executives from across the company to
meet at the European headquarters. Their task was to create a
shared story of the company’s future—its common purpose.
Together they would articulate why they had to change and what
was needed to get there.
Kelsey McClellan photographs the meticulously trimmed, personality-filled topiary of her San Francisco
neighborhood. Kelsey McClellan

Two days later they had come up with a narrative that they all
owned. It did more than set targets and make logical arguments.
It had emotional goals: to create a sense of belonging and purpose
at all levels, to tap into the staff’s love of the industry, and to
cultivate a culture of caring, humility, and honor. The 40 leaders
returned to their respective markets around the world inspired,
aligned, and connected. They were able to catalyze the next phase
of transformation for the company, including an energetic new
focus on data analytics and artificial intelligence, which they are
now using to improve capacity utilization, cut energy usage, and
better predict and plan for required maintenance.

Aligned but constrained. This archetype applies to 24% of our

companies, which share important strengths: Their employees
work well as a unit, have locked arms, and are headed in the same
direction. Early success heightened their expectations, and now
they find themselves pushing against hard constraints. These
companies often don’t have the people they need to fill key roles
in managing greater amounts of change and its accumulating
disruption. Picture running a race in the mud. Each step requires
more energy than the one before, which saps optimism. Teams
that fall into this category struggle with connection, capacity, and
development.

To counter these problems, companies need to identify and

address their capacity bottlenecks. They may have to reorder their
priorities and add resources where most needed. That involves
closing key capability gaps across the organization by bringing in
new talent and helping existing talent develop new skills.

Talent development has played an important role at Worley, a

global company that provides professional project and asset
services to the energy, chemicals, and resources sectors. During
the past six years the company has met a series of difficult
challenges and established a record of effectively managing
change. The first challenge came when a glut of oil overwhelmed
a slow-moving economy, causing prices to plunge by 70% from
mid-2014 to early 2016. With many of Worley’s customers and
much of its revenue vulnerable to changes in the price of oil, the
downturn forced a significant restructuring.

According to Worley’s CEO, Chris Ashton, the stark circumstances

demanded that the company create a transformation team staffed
by its best people—those with the ability to learn quickly on the
job and engage the broader organization. Many of these people
were emerging leaders, and the operations they worked for often
had a difficult time letting them go. But given the circumstances,
they had little choice. The new team built a turnaround strategy
that helped Worley survive the shock. And for the leaders who
took part, it was a big development opportunity, says Francis
McNiff, the company’s executive group director of transition and
change, who estimates that the time they spent on the
transformation team probably accelerated their careers by several
years. When they returned to the business lines, these leaders
were armed with a new network of connections from across the
organization and quickly became effective local evangelists for
the company’s strategy.

What Kind of Company Are You?

To better understand your organization’s change
archetype, consider these questions.
In search of focus
Are your teams uncertain about where the
business is headed?
Is there an ongoing debate about direction?
Do your efforts feel disjointed?
Stuck and skeptical
Do new ideas get stuck where they originate?
Do people across the organization feel
disconnected?
Do results take longer than they should?
Aligned but constrained
Do you feel as if you’re moving through mud?
Do you worry you don’t have the right talent to
deliver?
Do you struggle to get your arms around
everything that’s going on?
Struggling to keep up
Are your teams weary?
 Do you seem to be losing the battle for energy?
Are you slow to make decisions and adapt your
approach as conditions change?

Worley followed a similar blueprint in 2019, when it merged with

the energy, chemicals, and resources division of Jacobs
Engineering Group: It assembled a team that was able to ensure a
successful integration of the businesses. Then, in 2020, came the
“double black swan” of Covid-19 and another oil-market crash.
“We had to get right back on the horse,” says Mihaela Carpo, a
member of the new transformation team. Job one for the team:
almost immediately equipping 45,000 people to work from home.
Carpo, now the director of Worley’s Group Project Management
Office and Innovation, gained confidence in earlier
transformation projects. “If this had happened a few years ago,”
she says, “I’m not sure if we would have been able to mobilize
everybody as quickly or know what to do or what levers to pull.
The last few years prepared us for this.”

Worley recently tapped more than 1,000 people, from support

staff to PhDs and senior executives, for 70 structured workshops
held around the world and designed to help develop and codify a
shared purpose and values for the company. At them, groups of 20
to 25 people spent three to four hours exploring questions about
what got them out of bed in the morning, what they saw as the
company’s greatest business opportunities, what behaviors they
believed were key to success, and what they understood Worley’s
key strengths to be. Karen Sobel, the group president of Worley’s
business in the Americas, took part in a number of workshops.
She recalls that at a large fabrication facility in Norway, teams
working in a mix of Norwegian and English really put their hearts
into it. “It allowed the people in our organization to tell their story
and share their perspective on the direction they thought the
company should take,” she says.

The workshops produced a huge amount of data that the team

distilled into a core purpose—“Delivering a more sustainable
world”—and four company values. According to Ashton,
everybody from “graduates to grandparents” agreed that this was
the right focus, and the process gave employees a valuable feeling
of connection. That sense of purpose, he says, became “a powerful
force for change.”

Struggling to keep up. Among the companies we reviewed, 19% fit

this archetype. They’re like teams of cyclists in the Tour de
France, battling a grueling race of many stages. Each day the
riders must adjust to changing terrain, unpredictable weather,
and the strategies of their competitors. They must plan how
they’ll work as a team, supporting and even sacrificing for one
another. They’re great athletes whose single-minded focus and
action orientation have delivered results. As the race wears on,
fatigue sets in, and adaptability becomes increasingly important.
But these companies struggle to cope because they’re weak in
choreography, scaling, and flexibility. Their single-minded focus,
once a virtue, begins to morph into a vice.
Companies in this category need to get better at anticipating
what’s around the corner and changing their plans accordingly.
To catalyze this shift, they must first take stock. Is their strategic
direction still the right one? If not, they need to reprioritize and
reallocate resources to be ready for the next leg of the race.

Seven years ago Assurant began just such a transformation. In

2014 it was an insurance holding company, a conglomeration of
independent businesses acquired over several decades by its
former Dutch parent. Each division had its own chief executive
and its own leaders of finance, IT, HR, marketing, distribution,
and operations. The business units were so distinct that in 2015,
when its recently appointed CEO, Alan Colberg, traveled to
Atlanta to meet with senior leaders from three of the company’s
businesses, he discovered that those executives had never been
together in one room, even though they worked in the same office
building.

Among the companies we reviewed,

19% are like teams of cyclists in the
Tour de France, battling a grueling
race of many stages.
Not long after that, it became clear that Assurant’s health
insurance business—the oldest in the company’s portfolio but
recently upended by market changes created by the Affordable
Care Act—no longer had a sustainable business model. Colberg
and the board seized the opportunity to make dramatic changes.
Since then Assurant has exited three of four business segments,
made a number of significant acquisitions, and centralized many
functions. “It’s been perpetual change,” says Keith Demmings, a
24-year veteran of the company who will succeed Colberg at the
end of 2021.

Constant change has led to a lot of questions at Assurant, so

management has put a strong focus on communicating its
strategy to employees and making the case that as the business
evolves, they personally can have a bright future at the company.
Today half of every meeting with employees is devoted to Q&A,
and executives are always on the lookout for signs of change
overload. “I step back every once in a while,” says Francesca
Luthi, Assurant’s chief administrative officer, “and ask myself,
Can we still absorb all this? Because it has been fast and furious.
There are opportunities for growth, to stretch yourself, but is this
just too much? Are we going to break?” Since Colberg became CEO
and began to shift its operating model, Assurant’s annual
shareholder return has risen to 14.6%, up from 10.1% in the decade
prior.
According to Luthi, Assurant in recent years has developed new
“muscle” and “elasticity” and as a result is better equipped than
ever to handle change. The company is more open now to trying
new things—and to learning from failure. It has trained 1,000
employees in agile principles of IT management and has
introduced a new focus on customers, innovation, testing, and
learning.

Steps to Take Now

We live in unprecedented times, and our challenge as leaders is to
build businesses that will thrive in a world of unpredictable and
accelerating change. So what can you do to boost your change
power?

1. Get the facts. Too many companies and executives are

wandering in the dark, speculating about what might or might not
be. Dig in, determine your change power baseline, and
understand where you are relative to your competitors. Identify
specifically what you can and must improve. Small moves now
are better than big ones later—test, learn, and iterate, as Delta did
when implementing its middle-seat block.

2. Disrupt how you work. Approach your current and upcoming

changes by thinking not in terms of distinct projects but, rather,
in terms of an organizational shift—just as Assurant did when it
transformed itself from a disjointed group of independent
operators into an organization focused on evolving toward a
shared future. Consider these changes a balance-sheet issue and
invest actively to build the strength necessary for sustained
success.

3. Mobilize your leaders. Transformations provide the best

training ground for the next generation of leaders. If you want to
disrupt old patterns, embrace a new approach, and improve
critical change capabilities, you’ve got a lot to do: You’ll need to
orchestrate a team effort, develop a shared ambition, and map an
action plan. That’s what the logistics company’s 40 executives did
at their European retreat.
...

More than ever before, companies need to measure, understand,

and boost their capacity for change. The ideas we’ve laid out in
this article can help with that. By studying and improving your
change power, you can build a nimbler and more resilient
organization and become a more formidable competitor in the
process.

ABusiness
version Review.
of this article appeared in the July–August 2021 issue of Harvard

DM
David Michels is a partner in Bain &
Company’s Japan managing partner and a
senior executive coach in the global
transformation and change practice.
 KM
Kevin Murphy is an expert partner in Bain’s
transformation and change practice. He
advises and guides organizations and people in
transition, and is based in Washington, D.C.

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