Second Crack – The Leadership Podcast (Episode 39)

This transcript is AI-generated and may contain typos and errors.

[00:11] Gerrit: Dear listeners, a warm welcome to Second Crack, The Leadership Podcast. In this show, we explore everyday leadership dilemmas and paradoxes, and we invite you to self reflect. I am Gerrit Pelzer. I work as an executive coach combining Western science and Asian wisdom to facilitate personal growth and systemic change. Joining me today, as always, is my dear friend and business partner, Martin Aldergard. Martin specializes in driving change and transformation within organizations, and what we both have in common is that we always put people at the center of our work. Hi, Martin. It's good to be recording again with you today.

[00:53] Martin: Hi Gerrit, likewise. You know today we need to talk about change, managing change and transformation, and we need to talk about it again. I came across this research by Gartner saying that 75 percent of typical organizations, large corporations today are still using a top- down approach to change. And what does that mean top down? Meaning that it's management that sets the whole change strategy. They create the detailed roadmaps for how to implement what needs to be done. And then they use more or less effective change communication to try to get all employees to buy into this new way of working. There's other research by PwC that shows that more than 50 percent of employees and middle management showing a high degree of change fatigue. They are overwhelmed by all the change they need to go through. And I think it's not only the volume of change here, it's also how it is done. If we are driven top down to change, at a very high speed, it's going to be an impossible environment to feel motivated, excited, feeling that I can cope with my work. I think we really need to talk about this. There is so much, so, so little focus on putting people at the center. And at the same time, I also think there are so many new opportunities and possibilities. There are new exciting tools out there that could really enable and help us to do this more effective. 

[02:38] Gerrit: Yeah, Yeah so we are finally relieving, revealing the secret, what we mean when we say in our introduction that we always put people at the center of our work. So I think we may have some good examples for what that actually means. Martin, just spontaneously while I was listening to you, you said there's this report that says about 75 percent of organizations are still using a top down approach. What is actually wrong with that?

[03:05] Martin: If you're looking at this, like, what happens when you cannot influence the way your work is done, when you're feeling your voice is not heard, when you don't understand the reason, the rationale, and you might sit somewhere in the organization and thinking, what's wrong with how we do things now? This is working, why they want us to change this again? There's disengagement, of course, if I cannot influence my own work, if I, my voice is not heard. And that drives resistance. The other thing is, of course, we're missing a lot of ideas, we're missing a lot of from the people actually doing the work. They are the ones that know the best how this work needs to be done. Then implementation becomes slower because we are needing to try to fight through this wall of resistance. And the final part, I think, is if we don't build change capability into the organization, if we don't help all our employees to be more comfortable with change, and actively be part of change, we have very low resilience. And today, everybody talking about resilience.So I think we need to put people at the center of change in the way that we really tap into the collective wisdom, the collective intelligence that we speak so much about. Utilize people in the whole organization and we get engagement and motivation as a result,

[04:47] Gerrit: Yeah, wow. That was, that was very condensed, but also very rich. And maybe just want to quickly expand on what resonated so well with me. First of all, this aspect of, yeah, you don't have to buy-in, right? So I've come across many situations where people just execute what top management demands and then they hit a roadblock, something is not working and it's very easy to fall back: yeah, you know, it wasn't my idea, it was my boss's idea. So why should I care when it's not working? Whereas when I am also a driver of the change, when I have the feeling I've contributed to the solution, then when I hit a roadblock, I will probably make an extra effort to make it work because it was me who was part of the solution.

The second one, that let's say top management or the management board, they may have the bigger picture, they may have very important insights into what strategy needs to be established, but then they are often missing the little details that can be really a showstopper. I still remember from the Toyota way, and I must apologize, I don't speak any Japanese, but I think the expression is something like, Genchi Genbutsu, which is loosely translated to 'go and see yourself'. And there's a lot of knowledge on the shop floor. And so we need to bring this into our change and our transformation. And then just very quickly, the last thing we said about the changes, change is always going on. And sometimes we are afraid of the changes. And one aspect is also to just highlight to people, you know, whatever we do, the change is happening anyway, so we can actively steer it, or we have to deal with it later and often than it is too late.

[06:49] Martin: yeah, I think it's what, what surprised me now when I saw this research is that I thought that we came further in term of leadership style, in term of how we so to say manage change, the old common way still seems to be done to a high degree. And I'm thinking there might be a few things why this is still happening. Involving people at scale in transformation and change, it, at least it used to be very slow and very resource intensive. In the change project, you, you would have to travel around a lot, executives and leaders would have to do a lot of roadshows.

You'd need to run workshops, you need to run surveys. There needs to be a lot of conversations going on. Then with the way that we communicate, you're sending out a survey, you wait for the response, it takes time to put everything together, and then you need to communicate it back. It takes a lot of effort, of course, to scale up involvement if you're using old tools and old approaches. But I think it's not only about technology here, why this has gone slow in the past, it's also about the leadership style, the fear of letting go. If leaders in the older style, when you drive it more top down and you're still trying to involve people, if you don't let go and you're trying to control every part and you're trying to check if what you're saying is correct and what people are saying is feasible or not, you're slowing down the change a lot, you will never be able to scale it. Again, we not only look at new technology to communicate and how to involve people in change, but also we need to really honestly look at our leadership style.

[08:42] Gerrit: Yes, I 100 percent agree. And that is also something I'm dealing with a lot is the understanding of the role of the leader. You know, I'm at the top of the organization or I am one of the very senior people in the organization; I'm supposed to have all the answers. That is one aspect. Whereas we, we spoke many times about this on the podcast, an expression you already used today: we need to use the collective intelligence of the people. The world is so fast paced, a few people at the top of an organization using this traditional expression simply cannot have all the answers. 

And the other aspect that I often also see is this illusion of still operating the organization like a machine, forgetting the human aspect of work. So, um, this idea of coming up with a new vision, a new strategy from a few selected people has often best intentions, right? That I think this is very effective and efficient, doing it this way. And if we only look at where we are now and where we want to go in the future, these are the steps we need to take, and then we just execute it and then we're there. And then reality hits that it's, that is not that simple. 

[10:06] Martin: Yeah. To me, it starts with a basic approach to how we plan and run a typical transformation project. So it's about, one is about the tools that we could use. Another one is around the leadership style and the, and the leadership culture, how we lead. But here is also now the process of the change. And what I've typically seen is that companies focus a lot, they try very hard to explain 'what' needs to change to all employees, where a more people centered approach would typically start by talking about 'why'. Why do we want to change? 

 What is driving this change? What does it mean to me? Talking around more of why to change rather than exactly what needs to change. If we can only change the sequence there, I think we already come a long way. And if we, if we're talking about why we need to change, I think there's two ways that we could look at it.

One is, like you said, from the 'outside in', what does executives see, the top see, because they typically have a much wider horizon, they see more outside the organization. So of course, to understand the purpose of change, As an employee, I would need to have help to bring the outside in to me. 

And by helping employees understand this outsidet in view, we can create a common language, we have a common context. So if we want to involve everybody in the organization we need to basic, base it on common context, a common idea of what's driving change. How can we have a good discussion about what needs to change if we don't understand the bigger picture, the drivers, and we don't have a common language? That is where I see we can have a lot of improvement.

[12:21] Gerrit: And again, when I'm listening to you about the why, it also comes back to our approach to leading. We can look at just the numbers, right? Are we just changing to further increase shareholder value, or is another why also to make our lives better, which can have a very different impact on people's motivation.

And it also reminds me of this why I felt reminded of the good old Kotter, 'leading change', who also wrote this book, 'Our Iceberg is Melting'. And, uh, there's this story about penguins living on an iceberg and then one penguin goes for a dive, he realizes the iceberg is getting smaller. And so he anticipates that if you continue living on this iceberg, like we have done in the past, we're running into trouble. And the analogy for me is here then for top management to also anticipate the future because change is happening anyway. Right? It's happening outside the organization. And then we can either adapt to this change, or we can drive the change. And part of this 'why' is then to let other people see the reasons why we need to change to remain successful in the future.

[13:48] Martin: And I think this is a very, very important point. I don't think we are arguing that all change needs to be driven from down up instead of top down. We need both directions. But you also touch on this, it's not only about the financials, right? I think the second point I wanted to add here, when we're talking about purpose, it's really an 'inside out' perspective. Each employee in the organization needs also to get a chance to think about, from my personal point of view, what does this mean to me? What's in it for me? What's my motivation? And I might not at all be motivated by improving margins. Of course, perhaps I'm motivated by my job security, if this helps us to be more competitive. But more than that, I think if we can contribute more to society, if our sustainability transformation makes us, so to say, a better company. I can be proud, or this helps me to develop myself. I mean, we can tap into our own individual motivators. So if we want to help to put people at the center of change, I think we both need to have the outside in, bring the outside in to give context to every employee, but also help them from the inside out to connect themselves to their own personal motivation. 

And after that, we need to involve, people in how are we going to implement this change? What is the best way to plan and execute change in the organization? The top might not know best exactly how to execute and to drive towards a certain target. 

[15:36] Gerrit: Yeah. 

[15:37] Martin: And then we can start to talk about actually precisely what needs to change. Before that, I think we don't even need to talk about it. and spending a lot of time to try to push what needs to change too early, that is what's leading to change fatigue because people don't understand the purpose.

[15:56] Gerrit: Yeah. 

[15:57] Martin: And they don't agree with how.

[15:58] Gerrit: Yes. And coming to the how, um, would it perhaps make sense to talk a little about this? How do I involve people at scale? Because that is where you have a lot of experience and also you hinted already at, new tools that are available that help make this involvement at scale, meaning involving a lot of people, ideally all people in the organization, makes it a lot easier today than maybe 20 or even 10 years ago. 

[16:32] Martin: Yeah. Even just, before COVID, I think that the COVID pandemic and, and what happens with, with AI technology it has been a huge boost in term of how can we involve people and how can we keep everybody on the same page in terms of change. And I think it's when we're talking about involving people at scale, I came across an interesting McKinsey survey where they actually asked the question, yeah, of course the more people involved, the better, but what's the, what seems to be the minimum? How many do we need to involve? And they found actually, we need to involve, the tipping point is 7 percent of employees in the organization needs to be owner or, so to say, be a driver of some initiative in the organization. And I think we can argue if it's 7 or 15 or whatever, but I think it's interesting to see there is, there's research done on 

[17:35] Gerrit: But what's, what's the tipping point? Tipping from where to 

[17:39] Martin: So, so a tipping point here means they, I think they analyzed 60 companies in different industries over two year, large transformation. And the companies then that had less than 7 percent of employees involved, they actually had a negative financial performance, negative return on that transformation initiative. And from 7 percent involvement the financial return started to be positive. So a tipping point was if you dip below, it's a big chance that your change is not going to be successful from a financial point of view, and of course, that is why we do it from a top management point of view. And then of course, if you increase the amount of people that were part of owning and driving initiatives within this transformation, the financial return increased even more. But the tipping point was, then you actually, if you're below, you actually have a high likelihood to have a negative return.

[18:45] Gerrit: And Martin, I think that is a very important aspect of the message. After the 7%, the more you still involve, the better it gets, right? Because 7%, I was surprised when you shared this number with me before, I thought that's very little, right, that's even less than Pareto, the famous 20 80 rule. And I think it's very important that people understand this correctly. It doesn't mean you just need the 7 percent and then you're fine. So, if you increase the involvement beyond that, it actually proportionally grows.

[19:19] Martin: Yes. It's almost exponentially. And, this question was actually in this survey, in the report as well, saying 7 percent seems small, but if you look into larger companies, 7 percent becomes a lot, and logistically involving hundreds of people, really being owners of part of the change, that starts to escalate in terms of resources.

And there was a number in the report saying that the typical company that they analyzed involved only 2 percent of their employees. 

[19:59] Gerrit: Wow. 

[20:00] Martin: From the beginning in actually creating the change. Then, of course, this typical top down when you're then trying to communicate to everybody to buy in, but that's not what we're talking about. This was typically 2 percent of employees are actively involved in the change from the beginning, and they found that you need to be at seven, absolute minimum. I think we can debate about the actual numbers here, but I think this, this concept of a tipping point from negative return to positive return is very interesting. And it is the business case to involve more people.

 I also see this tendency that companies try to keep change small to a small team at the beginning, to not disturbing the organization, to not risking of starting to involve people in something that doesn't work. But I think this is also a good idea, right, we don't want to go out with something that doesn't work and, and waste the time of people 

[21:03] Gerrit: Or scare them.

[21:04] Martin: Yeah, or scare them or looking like we don't know what we're doing. But in today's world, how do we know what's working? I mean,we need to be comfortable with driving ideas of change without knowing exactly how it's going to work out and then adapt and improve on the fly. So I think if we can involve more than 7 percent of our workforce, now we have the data to show that is the tipping point, and that will help us to drive the ideas forward. 

And the tools, use the tools that are available today, that for instance, using AI, not generative AI, but using the AI to quickly summarize and synthesize what people are communicating. It means you can involve thousands of people in a conversation about our strategy, about the change, how it's supposed to be implemented. And we can very quickly condense and understand what's the summary of that conversation, what are the key themes. We can also very quickly understand what's the sentiment. What are people happy about, what are people scared about? What they like, what they don't like. In the past, this took a lot of logistics, trying to look at Excel sheets from different surveys and putting that together manually. Now, it goes with a click of the mouse, you have this data. So we can speed up communication, like up and down, and down and up, and left, right and organization with the new 

[22:45] Gerrit: Yeah. So these tools actually allow you to, to do something similar as we did in the past with, manual surveys, right? Where we would send out the Excel sheet or a questionnaire, but then somebody had to go through it and identify the key themes. And then, like you said, when we then have maybe, you thousands of data entries it's getting very complicated. And now the AI can extract at least themes, for instance, right? What are the priorities for instance?

[23:15] Martin: And we can make the whole thing much more transparent because that means every employee can have access to see what is everybody talking about, what's happening. Management can have access to see what people are thinking and talking. In the past, this happened in small workshops. You could gather employees or you could gather middle management in a meeting room, but that means in a different country or in a different department, they could never tap into that conversation. Now everybody can see what everybody thinks and, and, and this speeds up and this increases transparency and it gives a chance to involve many more people. 

And I think the next point, we not only involve people at scale, but we really need to make it more personal. Again, we talked about this, it's got to be not only what the company, what the executives needs out of this change. People need to be able to discover and talk about what does this mean to us. And so we create meaning beyond only the money. And by increasing the transparency of these conversations, as an employee I can see also, there are some people that have the same motivators as me. There are other people motivated by other things, but at the end, we are kind of aiming towards the same purpose, we are passionate about the same things.

[24:42] Gerrit: yeah. And it comes back to what we say when, what we mean when we say putting people at the center of our work. So it comes back to questions like, why does the organization exist? Is it just to increase shareholder value or is it, I feel reminded about the episode we did on motivation where we quoted Daniel H. Pink and his book 'Drive', where we spoke about purpose as a key motivator. And we also spoke with Tho Ha Vinh once about meaning beyond the financials. Every organization needs to make money, or let's say every employee also needs to earn money for food, a house, pay the bills. But at the end of the day, we want to do something useful, eventually contribute to society, contribute to a better world. So it's, yeah, it's certainly more than just the, the money, but the money also is important.

[25:45] Martin: And then I wanted to lead this, if we're talking about making it personal. In the end, I think personal, if you're talking about a human being, it's not so much the rational. It's the emotional side. 

[25:59] Gerrit: Yeah. It's, it's one of our favorite topics. Or also I look a lot into applied neuroscience to understand what actually triggers change within the organisation, within the individual, and how can I use this in coaching to help people change in the desired way? And I think when we look at emotions as not something fuzzy, something soft, but as the result of very complex neurobiological processes, it changes the whole picture. And if you think about one aspect of the brain is to keep us safe. And if I'm like, I'm sitting right now here, everything is fine, my brain is checking all the time, am I safe or not? Am I safe or not? Yeah, I'm pretty safe right now. So why would I change anything right now, there's a risk that my situation gets worse. And I think I'm getting tired of all these articles,about dealing with resistance to change as if this resistance to change is something negative, we put a negative label on people. You know, this, this one is always resisting change. I think we need to, first of all, understand that this is the nature of almost everybody. So for most people, the brain just doesn't like to change. So if I'm comfortable right now, again, why would I change anything? And we need to acknowledge this, especially then the hopes and the fears of people involved in this change? Because there's also this other aspect, when we have changes in the organization, there's at least the perception that there will be winners and losers in this change, right? And I certainly don't want to be among the losers in this process.

[27:54] Martin: I think you're, you're right on so many layers here and, and when, when we're trying to, to design an approach to change, when we're trying to lead change, we really need to embrace the emotions and understand how to use that to our advantage, not trying to avoid the, the conversation about hopes and fears. I think I see there, there is a, there is a fear among leaders to bring up the emotional side of change.

[28:29] Gerrit: Yes. 

[28:30] Martin: But I think if we try to suppress that, especially in change projects, it's going to come back and hit us later. 

[28:38] Gerrit: Yeah. And the paradox here is we're actually dealing here with the fears that top management has. They can't deal with the emotions of people, right? But we see again and again that also even, you know, also if top management is, vulnerable about this. Then it opens a whole different level of the conversation. And very importantly, it builds trust. So as the senior leaders in the organization, we may not have an immediate answer to the hopes and fears of the people, but at least opening up this discussion that people can voice their concerns, that then opens also the road to dealing with this in a more effective manner than, you know, just ignoring it and coming back to operating the organization as a machine where, you know, 'here's no room for emotions, leave them at the, uh, the office door.'

[29:39] Martin: I agree with you. When people feel heard they are usually much more open to also accepting things that might not be directly positive for them. the bottleneck is to feel heard. And I'm, I'm also trying to link what you said back to the beginning of our conversation where I tried to argue that many times we have the sequence of involving people in change wrong. If we start by only communicating 'what' you have to change, of course, typically I would react defensively. But if the beginning is a conversation about the purpose, the 'why', why would we need to change, and so to say, you as top management help me as an employee to understand the bigger picture, already my defensiveness probably is going down. If you then also involve me in saying, Hey, Martin, now you better understand, for instance, the outside drivers, and you involve me in a conversation about, so what could we do? What should we do? How should we do that? In what sequence, et cetera. Of course, then, suddenly I feel I have a certain level of control. I'm not a subject. I'm not totally out of control. So you're building my trust. So I think this is this whole sequence of how we do things will help to also reduce the emotional impact. 

Also, with the new tools and technology that we have with sentiment analysis, organizational network analysis, when we can see how people connect, when we can also analyze from a large amount of data, from a large amount of employees from the conversation, what are their hopes, what are their fears, their concern, we can address it. So I think now we talked about the sequence. We talked then about involving people at scale, how many, what's the tipping point. We leading this to a scale still means not one size fits all. It means we need to make it personal. Then we made that coming to it's all about emotions. To me, this, this now is a way moving from a very, rational, top down plan and top down driven 

[32:12] Gerrit:

[32:12] Martin: change to something that is much more, how can we say, 'Open source', 

[32:17] Gerrit: Hmm. 

[32:18] Martin: where people are part to co-create and be part of not only implementing the change, but also to design and plan.

[32:28] Gerrit: Yeah, Martin, I just imagine, a CEO listening to the podcast and he had already, on the agenda to invite the management board to an offsite to decide about the new strategy and is getting now second thoughts and said, 'Oh yeah, yeah, I realize, we need to scale that, we need to involve everybody in the change. They haven't, these organizations, they have never done it like this before. What could be their first steps in scaling such a change initiative or scaling the input?

[33:04] Martin: I think it is a good question. I think also here it might be good to work in smaller steps to not drive it too fast, it depends on the culture of the company. So perhaps a first step could be, at least from traditionally only involving the top executives in a retreat, start to also involve a few layers further down in the organization.

You could also go out into the organization to involve them in a pre conversation about what do you see from your perspective in the organization. Where are we heading, what's working well, what do you see as our future possibilities from your perspective, what are your hopes and fears about our organization today. And then you can bring this as food of thought into a more traditional top executive retreat. That would already bring a lot more input to that retreat. Of course, if you are already on a different level of maturity, you can involve people in the whole strategy process. That's really interesting and something that we're doing, right? When you're involved in a company with perhaps 1, 500 employees, and you involve at least five, six hundred of them in a conversation about the strategy. Of course, it doesn't take two days in an off site meeting. This is a process that might take a couple of months with well craftet and facilitated process, using digital tools. So this doesn't mean flying 600 people to, to a resort and then working on flip charts for two days. 

[35:00] Gerrit: Yeah, wonderful. I think that's already a beautiful wrap up of the episode. Is there anything else you would like to add or conclude before we go to the reflection questions? 

[35:12] Martin: I was little bit frustrated that we're still today see this research that's saying 75 percent of companies drive change top down. I think it might be a consequence of just a higher and higher volume of change and expectations. There is just not bandwidth among leaders to involve people in change in the proper way.

So, even if we as leaders know what is the right way, we just don't have time to do it properly. But then I think we really need to stop and reflect as leaders. And going slow might be actually going fast in the end. How can we prioritize among change so that we get the most important ones done properly?  

That was in, in a way already my reflection question. So something on your mind as a reflection question?

[36:14] Gerrit: Indeed, two very different questions came to my mind. One is a very fundamental one that goes back to the purpose and the why, and I wanted to expand this to the reflection question, 'why does your organization exist?' Is it just for the money, for increasing shareholder value, or is it because you're contributing in a way to society, the good for, the greater good, let's say.

The second one is much more down to earth. And I felt reminded of this when we spoke about, go and see yourself. And a challenge that I experience with almost everybody I'm working with is their workload. And I see executives who, let's make it very practical, a person retires or for another reason they leave the organization. More often than not nowadays, they are not replaced by another person, but the work they did is split to other people. So, people in senior positions have less time than they had in the past. And what I experienced a lot, also when I was still an employee, that, for instance, shop floor people would notice this. And I said, well, you know, our managing director in the past, he came to visit us more often. And it had both, it had this motivational aspect. The top people in the organization, they're actually interested in me. But also the other one getting this feeling for what is really going on outside my office, outside the boardroom.

So, the actual question probably boils down to 'how can I, despite being so busy, make more time to go and see myself, spend it with the frontline people to see what is really going on?

[38:19] Martin: Yeah, I love this question. I think this is the whole essence, uh, both in term of the tactics, how to make a specific change project work, but also how to make your whole organization work in a better way in everyday operations. And I, I have a question now that comes to mind that builds on this and, and as a leader, how can I spend then less time on thinking of what I need the organization to change and more about how can I help people to change? It is, it is not the organization that changes. It's the people that change.

[39:04] Gerrit: Yeah, Martin, I think that's a beautiful wrap up for today's episode. Thank you it was great recording with you again today. 

[39:13] Martin: Thank you, likewise. 

[39:15] Gerrit: And if you as our listener enjoy our conversations, don't forget to subscribe to Second Crack on your preferred podcast platform. And of course, we'd really appreciate it if you could share the podcast with a friend. And of course, a positive review or rating would mean a lot to us. And then for more insights about our work, you can go to secondcrackleadership. com, that's all in one word. And we would love to hear from you personally, so send us your thoughts, questions, or feedback to hello at secondcrackleadership. com. Thanks for tuning in and bye for now.