Business Transformation Advice, with EY Vice Chair of Consulting - CXOTalk #762
People, generally speaking, don't want to transform. They actually quite like doing what they did yesterday and the day before because there's a level of comfort that comes from that. That's Errol Gardner, Global Vice Chair for Consulting at EY. We operate in over 150 countries and we've got close to 350,000 employees as part of that consulting, which is now at about 100,000 employees on a global basis. A lot of what we're doing is focusing around transformation and what that means for
our clients, so we're doing consulting in its generic sense – business-related technology, technology related, as well as people and change. Errol, you are the vice chair for consulting. Can you give us some insight into what your role involves? I'm very much overseeing the nature of the business that we're running, so it's very much around defining the strategy of that business in terms of where we want to be as a business over a three- to five-year time horizon. Also then working with the leaders across our business on the performance (on a day-to-day basis, quarterly, monthly, and annual basis) making sure that a lot of the global assets and infrastructure that we have and leverage are in place and are working for the benefit of all of our practitioners on a worldwide basis. And I also sit on the global executive of the firm and obviously represent the views and needs of consulting in that context. As an aside, as well, I also sponsor our global diversity, equity, and inclusion initiative, which is a social equity task force that we've set up looking at some of the diversity issues that we have around underrepresented minorities (both within EY, with our vendor and ecosystem community, as well as with our clients). EY has been in the news quite a bit lately about a potential restructuring. Do you want to say anything about that?
We are undergoing a strategic review of our business. It's not the first time that we've done this. We have made an announcement in the last couple of days here that we will be taking a decision to our partners across the organization as to essentially splitting into two multidisciplinary organizations. There's a whole series of reasons why we're doing that, and some of the benefits that we imagine that will give to our clients, bring to our people, help with our regulatory position on how we're viewed. That's in essence why we're doing this. Maybe there are some questions out there. Maybe they'll come in while we're doing this. That's maybe as much as I need to say at this point. When you think about business transformation,
what does it actually mean? It's one of these terms that we hear tossed about, like digital transformation, but what does it mean? The critical part is the transformation aspect, if you like, rather than the label that goes before it. Ultimately, this is anything that we're doing, an organization is doing, that is fundamentally changing some aspects of what that business, that organization does. Every business has a rhythm in which it operates on a day-to-day basis. Some call that business as usual, if you like. But what it does, how it operates, how it is historically being able to deliver products to market, satisfy customers, optimize its workflows, et cetera. Transformation, by definition,
is doing something fundamentally different to that. By definition, a little bit disrupting that rhythm with a specific objective and outcome to achieve something different as a consequence. It could be looking at the top line in terms of what you want to do in terms of growing your market share, sales and revenue opportunity. It could be about optimizing costs and efficiency and making sure that you are competing effectively from a profitability standpoint. It could be changing the business model, the nature of products and services that you're selling. Or it could be some of the strategic risks that you face as an organization. On LinkedIn, Suman Kumar Chandra makes the point that this terminology can mean very different things to different people. Do you find that there is confusion out there around
what do we mean by business transformation? It doesn't matter what people append to the term transformation, per se. It's really you're a corporate, you're a government institution, an NGO. Whatever you are, if you have a set of objectives – they could be commercial objectives, they could other objectives – how do you go about achieving those on a day-to-day basis? If there is a step change in the way that you will do that in the future, you can achieve that through transformation. That could be of your business model. It could
be digital and technology-enabled. It could be the operating structures that you have in place. All of those things are examples of transformation. But I think the critical thing probably in today's age, and maybe we'll talk about this more, is I think transformation is becoming more endemic as opposed to transactional, if you like, or happening every three to five years. I think it's, in many ways, becoming the business as usual for most organizations. When transformation becomes endemic and becomes business as usual, what does that imply for managing an organization, leading an organization? What this is about is mindset. Call it corporate
mindset, but, as much as that, obviously leadership mindset of those responsible for driving the organization forward. If you're an organization that has a mindset that you can embark a big step change program once every three years, once every five years, and that will make the difference, then I think you're going to face challenging times ahead. But I think what the last two, three, four years have highlighted when you've had the interplay of some of the geopolitical issues that we're currently experiencing, you've had the pandemic that people have had to respond to in its different cycles and the impact that that's had across the world, you've had all of the supply chain issues that are being caused by kinks and consequential impacts of some of those both geopolitical reasons as well as some of the pandemic related reasons. But then you overlay some of the other, more pervasive business drivers that were always out there like digital (you've mentioned), so how do you move forward to be more technology-enabled as an organization? Then similarly, the new one, which is sustainability, how do you become a much more sustainable business and operation? I think all of these things, when you layer them on top of each other, are going to drive organizations to think and contemplate over the next five to ten years. There is a lot for them to
absorb, change, and transform in order to succeed. You're talking with the leaders of many different kinds of organizations, many of them very large. Are there common patterns that you're seeing in terms of the way that they are relating to this shift where transformation is ongoing? If I can maybe talk of a specific example, one of the benefits of the pandemic brought was a degree of a burning platform that I think made businesses shift, pivot, change in a much more accelerated fashion than they historically have done so, which I think now people and leaders (in many ways) recognize therefore the impact that had as to how did we manage to pivot and change so quickly given that set of circumstances, whereas historically it's been so much more difficult in the past. How
do we almost try and recreate those conditions without creating the negative aspects of that, of course, but recreate the conditions that make something like that successful? The nature of the burning platform, getting the level of engagement and buy-in in order for people to feel part of and the necessity of that change going forward, and then also, of course, embracing technology and doing that in a very agile and accelerated fashion. I think these are some of the behaviors that are changing now that leaders are in need to embrace. But I think there's always a danger that people will revert back. So, I think the challenge is the
interdependencies between some of these different forces that are driving the change, and it's really important that leaders get a holistic view of those as they embark on how they're thinking about their strategic journey going forward. I urge you to subscribe to our YouTube channel and hit the subscribe button at the top of our website so we can send you our newsletter. Errol, when you speak with business leaders, can you identify certain traits, characteristics, or success factors for those organizations that are making this transition more smoothly and more easily than, say, others? The pervasive nature of technology and all of the changes that we're looking to put in place that enable supply chains to optimize more effectively, to connect digitally with your customers and launch new products and services, and drive better distribution channels to your business, all of these changes ultimately still come down to people. The common factor that, generally speaking, makes most transformations unsuccessful is something to do with people. It's either
the people at the top, so the leaders and the extent to which they created and evangelized the compelling vision for change and done that in a way that is not about purely the corporate part of that but also the emotional part of that. How do you connect to that, be it you're a customer of the business, you're a stakeholder in the business, you're an employee in that business? Secondly then, the people that have to be critical to executing that program of change, so there's usually a core project team that are doing that, so how are they incented? How are they motivated? What behaviors are encouraged within that program team in terms of openness to difficulties, to challenges, to risks, to failures, versus having a good news culture and making sure that only the best of information is reported? Then the third element is, I mentioned business as usual earlier. Those not necessarily involved on a day-to-day basis on the change initiative or driving that forward, but ultimately, those that would be the custodians of making it successful by transitioning it into the way that they operate on a day-to-day basis. So, be it adopting new technology, a change of process using new data sources, whatever it may be, are they open to doing that? Are they making – are they embracing that? I think the organizations that connect with those three critical human interfaces and make sure that they're doing better in all of those regards (so, leaders communicating, articulating, engaging on a consistent basis with their teams) will be key. Teams that are delivering,
executing these types of programs, having the air cover from their leaders to operate in an open and transparent way to talk about difficulties as well as to talk about successes. Then thirdly, having the organizational ecosystem, all the teams that ultimately will have to embrace and drive this change forward, that they are also bought into it. They're communicated with. Their concerns are taking into consideration. What is in it for them as part of the journey,
they story, the benefits up to what it will do to their workday, the efficiency of how they operate, the kind of information that they have, their ability to serve customers better? That is a critical part of some of the key changes that we look for organizations to put in place. You said that leadership must develop an emotional connection with folks in the organization. That's a very interesting point and not a point that one hears often. Would you elaborate on that? When you looked at the attributes of transformation programs that were unsuccessful, a lot of them were connected to very negative emotions and what people felt during the journey of doing that. That's again both the people in the core team, the leaders and sponsors of that
program, as well as those within the organization. The research that we did actually spoke to both leaders and some of the C-suite that drove these programs, but also workers, so those that have to do the heavy lifting and make this work. A lot of the words that those people describe and the feelings that they had in terms of the journey that they went on was super negative and gave a real sense that it's a real obvious predictor of the likely success of something like that because those emotions will not get people all working towards the same kind of goal in the same way and be as effective. Whereas the flipside was then very much the case, you saw those that were successful, their different emotional journey. And so, when you double-click into as to why aren't they different, it's some of those points of the engagement, the way that leaders connect, the way that leaders tell the story of what it is that they're looking to put in place. But also, the way they look after their workforce on the journey and not just set a vision at the outside and say, "Right. Go off and execute," and then just beat them up every three months,
every six months if progress is not being made. Keeping people absolutely engaged, committed, but also showing empathy during the cycle, recognizing that change is different. There is this strong sense of connectedness. Transformation, by definition,
is a macro change. It needs to be applied across an organization and, therefore, the more people that engage buy-in and connect to that and want to make that happen, you will get the benefits. It's almost self-fulfilling in that sense. But without it, you'll get into a cycle of why is it now working and how do we address this and, in many ways, it becomes worse because the behavior is then retrenched into an even more difficult place when you get into that cycle. Finding the ways that individuals – it could be a call center, it could be somebody working on a factory, it could be all of these individuals who ultimately will be touched by this. It could be those that obviously have customer-facing relationships.
If they don't understand that North Star as to how that is going to be different for them and what behavior they need to show up differently the next day, then they will never do things. We have a comment/question from LinkedIn right on this set of issues from Suman Kumar Chandra. He comes back again, and he says, "Business transformation does require a shift of that leadership mindset that you were describing." But he wonders, "Do you think that most senior leaders have an agile mindset to begin with, or do they undertake transformation due to market forces?" basically being forced to transform. Here's the point. "And then expect the rest of the organization to change, adapt, and make it successful."
I think that, for sure, there are market pressures that organizations, obviously listed organizations, have to react to. But obviously, also competitor market pressures, private companies, or governments have expectations their citizens place on them in terms of various standards. Of course, those things are always there. A lot of that competitive thread will drive behavior and activity within organizations to respond and to do that quickly and then maybe not go so much on the journey that I've described. But I think, if you ultimately – you've touched as well on the word when you picked up on me saying emotional. If you look at the emotional versus the rational, and take this view that, as your questioner has said, they don't have the agile mindset, a lot of leaders have got into the roles and the positions they are by taking very rational decisions but thinking about things and the impacts that they will have in a very rational way. If you ultimately see the data that says to embark on a transformation and it to be successful, it requires these attributes but to have an unsuccessful one requires a different set of attributes, then why would you rationally embark on one that displayed a bunch of the attributes that meant you were more likely to be unsuccessful? That doesn't actually rationally make any sense. I think then what's incumbent on the leaders
who may not have some of those EQ (emotional connection skills) is then rationally to say, "Well, how do I solve for that? How do I find the right people, the right influencers, the right leaders, bringing people in, potentially, who can do that, that are therefore going to make this an easier journey?" I think that some will want to go on that journey themselves individually and get a coach, do some things differently, do some reverse mentoring, all of these things to get to a better place themselves. But of course, not everybody can change. If you know you can't, rationally, it still makes sense to put the provisions in place to make sure that you do that. I think which then begs the question, how does an organization begin transformation? I mean just for example inside the consulting business itself is undergoing all kinds of change, so how do you think about driving transformation? If I can ask you directly because you're in this unique position.
Yeah, and it's interesting (being in the business that we're in) and, to a certain extent, we are an organization that enables and hopefully supports our clients on their transformation journeys. I'd say quite openly, for us as an organization, it's as hard for us to do to ourselves as it is helping and working with others to do that because fundamentally, with respect to people, people (generally speaking) don't want to transform. They actually quite like doing what they did yesterday and the day before because there's a level of comfort that comes from that.
I think, ultimately, you've got the two, three, four triggers that are clearly out there in terms of I mentioned earlier about the pandemic. That was a burning platform that came that you didn't have to make the case. It was very clear and obvious. Talk about the services business, my business in EY, but also a number of our competitors. We had to shift the business model literally overnight that was working directly on client sites with our customers, with our clients, all of our people as a business. We had to shift that in person, light touch, and visible with clients to remote, on video, working collaboratively with other people on a remote basis and yet still making change happen.
Fundamentally, it changed our business model and how we work and operate. But I think the transition, the clients made it, we made it, other organizations made it. The technology enabled it in a fantastic way. I think that enabled the change to work much more effectively. You've got other examples, though, that clearly get triggered. We talked about some of the other
factors there. We've been through, for instance, with the war in the Ukraine, we've had to make choices about our business footprint and what we do in Russia as a business. A number of companies have had to do that, so how do you make that kind of change? How do you do that? That's been a hugely difficult, emotional process with teams and splitting up people, and all kinds of things that has been very difficult for us. That again is another example of the nature of a change that gets forced upon you very quickly and that you need to make that change.
Maybe on digital transformation, think about us as a business. We are affected. I mentioned earlier EY is an organization with 350,000 people, so we are a people-based business. But we also need to transform digitally. Our clients or the expectation of stakeholders continues to be that we provide and challenge ourselves to drive much more effectively, much more digitally in terms of every interaction that we have with them. Obviously, working remotely is an example of that. But in the sales process and in our delivery process,
how we transfer knowledge across our business, IP, how we codify solutions so that clients can get accelerated benefits from that, that's really important in the nature of our business, but it's really difficult to make happen (for us). Just as it is for our clients to make those changes, it's really difficult to engage such a breadth of folks across so many different industries, so many different countries into the need to come to a common and standard way of doing things. It's a lot of change management. It's a lot of convincing of folks that this is the right model. All of these are the ways that
we get into challenges like that, and we have those as an organization ourselves as much as we help others to achieve and work their way through these challenges as well. We have a question from Twitter on exactly this point. You mention digital transformation and Arsalan Khan, on Twitter – and Arsalan is a regular listener and he asks really insightful, thoughtful questions – he says this. "We know digital transformation should be an organization-wide effort." Here's the kicker. He says, "But why should anyone who is not
inside IT or leadership actually care?" Digital is a lot about the adoption of modern technology and data to drive new ways of working and business practices. Predominantly, the most significant use case has been around the pivot to being much more customer-oriented, much more experience and engagement oriented around your customers. That then driving much more into the value chain of how you digitize in order to fulfill that. If I use that as a premise, then I go back to the question and say, "Who are the people within an organization who deliver on that promise?" Now, I think IT are a stakeholder in that, but I think, ultimately, customers very rarely interact with IT in any way, shape, or form. They interact with technology, but they very rarely interact with IT. Generally, if something goes wrong, depending on
how they interface with the organization, the app that they're using, the website that they use, it could be something that happens in terms of product delivery. Whatever it may be, the first person they talk to is very rarely somebody who sits in IT. It's somebody in customer service. It's a call center rep. If those individuals are not absolutely front and center in representing how to fix, how to help, how to make sure these changes are adopted and adapted as fast as possible, then digital transformation will never be successful. If digital is about, "Well, let's get onto cloud, and let's implement data and AI capabilities in a much more effective way, let's build apps and modern software engineering techniques to deploy technology as fast as possible into our business," if you don't take the people that interface with your stakeholders [into account] – it could be your customers, it could be your vendors, it could be your regulators, citizens, whoever it may be – then you'll find that your organization has not digitally transformed. You've just actually spent a lot of money on technology again.
We have a lot of organizations that have always spent a lot of money on technology but fundamentally didn't get the real benefits from them. I have to say I love the questions from the audience. You guys in the audience, you should be asking lots of questions. You guys are so smart. We have another great question. Lisbeth Shaw says, "Okay. So, if transformation is a journey, how can organizations survive and thrive throughout that journey?" The first way to thrive and survive (in any context) is being open and honest about the fact that that's the new normal and engaging your people, be it your customers and whoever you think will be impacted by that, in that being the way you see your business going forward. I think what that does then is give
permission for people within the organization, especially employees, to be clear about what they can and can't achieve within that context, how they can support that, what that means to them, how that's going to change their way of working and way of operating. I think it's really important that you engage in a discussion around that. Obviously, at the leadership level, but that needs to cascade through the organization.
Ultimately, it is about cultural change. It's a way of looking differently at how you do business that says we aren't necessarily going to be doing the same thing tomorrow that we did yesterday. Actually, part of making sure that we still exist tomorrow is that we need to change today in order to make sure that happens. The more you do that incrementally, the easier it is. The more you kind of store that up to be something that's massive and significant, I think then the harder it is to then survive and thrive, if you like. I think the more you accept this is culturally the way it needs to be, and you are open and honest with your employees to go on that journey, and that mean as well that you reward different types of behaviors, skills, capabilities in order to help on that journey, I think that's the way you get through this. It seems clearly to me that your theme here
is this human element of connection when it comes to transformation of really any type. I say that because I'm very passionate about that being the case. It's my experience in my 30+ years of doing this, in working and seeing organizations who culturally say they want to change but culturally don't embrace any of the behaviors or changes required to enable that change. Then also, the research, as I mentioned, now is very much supporting that.
If you unravel what I do now today from a management, a leadership perspective, ultimately, my core skill and competence is driving and executing on technology transformation programs. We call them digital transformation programs. As much as I understand the importance of technology, and as much as I understand the capability of what technology can do and drive and deliver and the benefits we can deliver to organizations, what I know is that unless the organization embraces it, it's a waste of money. It's a waste of time. It's a waste of resources, and oftentimes, doesn't leverage the true benefits of that technology.
Marrying up the huge advances that we've seen in capability of technology and, bear in mind again, if you look at it from a B2B, a business perspective, if you like, the corporate organizations don't embrace technology to the sophisticated level that consumers do. You're now with a very consumer-literate organization who have technology in every aspect of their lives and are very comfortable with it. Then they work in corporate organizations and think, "Wow, this technology is really clunky. It doesn't work in the way that my normal life works." You have a captive audience now who are prepared and want to use better technology in the corporate environment. So, you have potential to engage those people to do it. It's just then about how do you tell that story that you're making their corporate lives much more easier based on how things work in their personal lives. Picking up on this idea of telling that story so that it's engaging so people feel that emotional connection so that they respond to it, Arsalan Khan, on Twitter, comes back, and he says, "Okay. How do we make transformation
not just another idea that leadership wants to do? How do we make it alive?" I'll ask you to answer relatively briefly because we're simply going to run out of time soon. I don't think transformation is an idea in that context. I genuinely think the forces of change that I've described mean that there are existential issues for many organizations that they have to address. I think this is critical and compelling for them. My general sense, speaking with most clients that are out there, is that they understand and embrace that. I'm not sure I would agree with the premise of the question. I don't think people think it's just an idea. I think the evidence of what's happening in the market
would suggest organizations are embracing it. The real challenge then is how do they do it in the most effective way. At the very outset, you mentioned diversity. Can you talk about the importance, the role of diverse teams? If you have teams that you want to deliver change to, you have to acknowledge that your workforce is diverse. If all of the people that you're trying to drive and leverage (in terms of transformation) are of a singular mindset – it could be that they're all male, it could be that they're all of a particular color, it could be that they're all a particular mindset, it could be that they're all of a particular geography (if you're doing it on a global basis or multi-country basis) – that, by definition, is going to deliver suboptimal outcomes because most workforces are diverse. Most customer bases, for sure, are diverse. If you don't take that into consideration, you'll miss things.
But then if I also go to the point about open styles (and we talked about rational versus emotional), again the diversity that you have will, by definition, make sure that that's embedded, if you like, because people will be more respectful of each other in diverse teams, as opposed to accepting more of the command and control, more of the, "You do it because I told you to," as opposed to wanting to hear any feedback or challenge in response to that. I think diversity in its broadest sense, in the true nature of the word, is critical in terms of mindset, in terms of different types of individuals in its truest sense, needs to be part of that in order to make sure that the outcome is also built in that fashion. What advice do you have for business leaders? If you could kind of sum it up, what advice do you have for business leaders that are looking at a major transformation project and just thinking, "This is daunting. This is really hard"? What advice do you have for those folks? Change is hard, and I think acknowledging that is important. Not to make it daunting, but to
be honest about what you need to do in order to be successful in that regard because the alternative is not changing is not an option. I think it's important that you get into the current mindset. We've talked about the people aspect and the engagement. Now I won't repeat that. But there are, I think, some key interventions and practices an individual can take in order to drive that. The most important thing, I'd say, is that they have to think about this as something they have to work on for themselves. If it's daunting, if it's challenging, and it's difficult, then how do they know they have the skills to do it? Unless they've done it three, four times before, who are they getting as a coach to help them on that journey? What skills are they getting coached on? Now, some of that is technical skills, and they'd need to know whatever technology platform solution is being put in place. But as I mentioned on the people side, it could be also on the business outcomes side.
What else do they need to know? What are the gaps that they have? It could be for them personally. But then also, change is delivered by teams. It's not delivered by individuals. Who do you need? What skills do you need in your team that will optimize your strengths, but also then cover your weaknesses? That's the way I would outline that for those that find that daunting. One of the issues that I've seen in some organizations is the leadership has a vision for the transformation. They clearly are describing it. And yet, the transformation itself seems to not go anywhere. It seems to fizzle out and, inside the organization, there are people pushing back. What advice do you have for folks who are in that kind of situation, for leaders, business leaders, that are in that situation? There is a reason why people are pushing back. It's either that they don't want the change to
happen or that they are fearful what the change and encouraging it will mean for them personally. The only way you're going to address that is by conversations with those individuals to work that through and then by a process of changing their view, changing the story in terms of how they see this, or actually maybe changing your own view of what the change needs to be in order to deliver the outcome will help you through that. Let's say you don't deliver transformation unless the people you've said are pushing back are pushing, leaning in, and pushing forward on this thing. So, you have to address that. There's no alternative to that, and it's something a number of organizations who have middle management do make it hard for things to land appropriately. I think it's really incumbent on leaders to connect with those middle managers and find ways through that that empower and motivate them because, generally speaking, middle managers want to succeed, want to transition, want to also get progressed within the organization. Finding the means to connect with them that enable
them to do that, I think, is a pathway to success. Well then I need to close out by asking you advice for those middle managers who are in that situation who they're not comfortable with what's going on, and they're not compensated in the right way, or whatever the issue might be. What advice do you have for those folks? It's important that they let their voice be heard and try and organize themselves in order to make that happen. I say that with some hesitation
knowing that I'm sure some – if there are any on this call – would say, "Yeah, that's easy to say, but it's next to impossible to do." I think finding ways (with their colleagues, for instance) they could talk through this and make representation to leadership about not challenging what they want to do or the outcome that they want to achieve, but maybe offering alternatives that, based on their proximity to the field, if you like, or the real business, their point of view on how they could affect that much more easily, more efficiently, with less challenges, I think being positive about raising challenges, I think is a means to do that. I think then otherwise working and being prepared to challenge yourself with others that are clearly influencers of change and are positive to say, "Well, why are they positive towards this but I'm negative?" You can't always assume that your view is the right one. If there are people advocating for this, then is it something you're missing? Be open-minded and be prepared to see the alternative point of view.
As I say, you can resist change in an organization. It may mean that the transformation, therefore, is not successful. That generally is not good for any middle manager's career. Okay. Be open-minded on both sides. Listen and try to understand what the other side is finding important, problematic, or positive. Yeah. With that, we are out of time, so I want to say a huge thank you to Errol Gardner. He is the global
vice chair for consulting at EY. Errol, thank you so much for taking your time to be with us. I appreciate it. It's been great and fascinating questions, so I appreciate those coming in, and appreciate talking with you as well. To everybody who asked questions and who watched, thank you. You guys are an amazing audience. I urge you to subscribe to our YouTube channel and hit the subscribe button at the top of our website so we can send you our newsletter. Check out CXOTalk.com. We have excellent,
really excellent shows coming up on the schedule. Take care, everybody, and we'll see you next time.