470 [Thursday Refresh] Leading Change: How Leaders Create Lasting Transformation with John Kotter

Welcome to Partnering Leadership, a top global leadership podcast for purpose-driven leaders with a growth mindset, seeking to learn from the leadership journey of change makers and business insights from leading global thinkers. For additional leadership insights and bonus content, visit us at partneringleadership.com. Now here's your host, Mahan Tavakouli.

Professor John Cotter, welcome to Partnering Leadership. I am thrilled to have you in this conversation with me. Well, I'm thrilled to meet you. Professor Cotter, for more than a quarter century, more than half of my life, you have been a leading thinker on change. I remember studying you and studying your work back in business school. And you have written 21 books, two fables. I think I've read all of the books and fables and love them. We'll spend most of this time talking about your latest book, How Organizations Achieve Hard to Imagine Results in Uncertain and Volatile Times. It is an absolute thrill and honor because you were talking about change when most people didn't expect the pace of change to be where it is right now.

Without question. And again, it was found through just the research studies that I did. I've always been interested in performance. That's where it started. Why do some organizations outperform others? My doctoral thesis was actually on big city mayors during the 1960s. It wasn't on businesses, even though it was done at Harbor Fist School. And one of the most striking outcomes of that work was finally recognizing that no matter how you measure end results of how well those 20 mayors did in their jobs on the economy of the city, on their own re-election, public health, etc. The distance between the top three mayors in terms of results and the bottom three was nothing less than galactic. It was hard to believe. And I think that got me even more interested in trying to understand why some people ended up performing so poorly, but even more interested in how it was possible to produce results which the average, well-educated, thoughtful, intelligent observer would say are highly unlikely, if not just impossible. And those stories that I've been studying for 40 years led me to the topic of change. Because even back in the 1970s and early 1980s, the basic change was picking up. You were seeing more strategic initiatives inside of companies, not just one a decade. And change took me to the topic of leadership because leadership, we decided was not management, the two different things, both serving very, very important functions. But leadership is very much associated with change, innovation, and leaps forward. And so that's become a part staple of the work I've doing. And it's exciting. I had a conversation with a forest student from the class of 95, and what he has done over the last, I think, 17 years into a finance job in New York, I'm not positive. He eventually came back to his firm, which his father had started in the 1930s. And this is, you know, one office. He has taken that over, run it in a way that's very consistent with the stuff that I write about. And 17 years later, its market cap isn't $25 million, it's not $50 million, it's not $100 million, it's $3.5 billion. Oh wow. And that's just the economics. He's got what 25 times the number of employees, he's got a huge number of customers that are very, very satisfied. You bump into these exciting stories, and what he was saying is, much as you did in the beginning of this conversation, that he's been following my written material since he was a student and using those techniques, and they're paying off in a way that seems in many ways hard to believe. But it's true, and we need lots more of that in this world.

And you've contributed a lot to that, Professor Cutter. But knowing that I have some mayors, including big city mayors, that are fans of this podcast that have sent emails, I can't let that go without understanding. When you looked at the most effective mayors and the ones that weren't that effective, what were some of your key findings that then led to your understanding of leadership and change?

Although I'm not sure how much I used the words leadership vision, building a network of relationships that go far beyond just the municipal bureaucracy, empowering people and inspiring people, in a sense, create a mass movement towards some vision of making the city a lot better, despite very, very difficult on it. We had riots going on in the late 1960s that were hurting people, putting people in jail, causing terrible property damage on the downside. And what leadership, which is what we got from the best mayors, did was to not just try to minimize the damage. The mindset is what are the real opportunities at this time for this city that will make a difference in people's lives? People could understand talking relentlessly about it, getting people bought in and enthused and mobilized, and then having the faith to let go. Because all great leaders throughout history are not control freaks. It doesn't work. You don't create mass movements by trying to control everybody's actions. And that's what these mayors did. And what's interesting also, thinking back right this minute, is we're all very different personalities. So it's not a personality issue, it's a behavior issue, it's a mindset issue, it's a way of looking at the job. The worst mayors saw the job as purely a way to further their own narrow interests. A bit up from that, people who saw the job and very much make the bureaucracy function minimally well so I can get re-elected. And then you kept taking steps up until you find people who are really seeing that even if it's not in the job description of the mayor, the name of the game is to provide leadership to find the opportunities in the challenging and changing environment, mobilize people to capitalize on those and achieve more than people think is possible. Exciting stuff.

It really is, Professor Cotter. And one of the other elements that is really exciting is that in some respects you've stayed consistent with some of your messaging, but you've added more research and more information. And in this latest book, Change, you talk about the three major root systems that define the science of change, and you go into the human nature elements of it more than I think you had gone into in the past. So, what role does the human nature and our resistance to change and our capacity for change play in organizational change?

One of the fields of science that has come a long way in the last 20 years and has a long way to go, is understanding of the human brain and the hormonal system and everything that accounted with is our basic heart wiring, if you will. And four years ago, I started at the consulting company that I found, co-founded, a study group to look into that to see if there was something that would help us go deeper in our understanding of why and how some people were able to bring about incredible changes that benefited the masses. We decided that indeed there was something there. It was sometimes hard to find. We talked to the specialists who are neurologists, because they are business people or don't know much of the organizations. Insight number one, which has huge implications for all of us, is we all, almost savious people, have built into us a system, if you will, like a radar that's going on probably 24 hours a day when we're sleeping, that's looking for threats. And when it perceives a threat, it sends out chemical information that spikes our energy level, that focuses our mind like a laser on the threat, and can get us to do really quite remarkable things very quickly to get away from that problem. When it was originally being developed 200,000 years ago to run away from the fable saber-toothed tiger or whatever, and zip up a tree at lightning speed. That system still is in us and it is very powerful. And the average person, including myself until I did this work, totally underestimates how it plays into our lives today. Because today, that same threat radar doesn't just look for saber-tooth tigers, it looks for anything that it's been programmed to believe could be a threat to our ego, to our job, to our salary and career, to our relationships. And we live in a world today that is more complex and more volatile and more noisy than the world in which that system was developed 200,000 years ago by a factor of who knows what, 100, 200. So what that means is if only unconscious, somewhere in our bodies, all the time, 20 times a day, 50 times a day, there's a little system going threat, chemicals are going up, we're feeling a little stressed as our body tries to figure out okay, do I climb a tree? What do I do here? Now, that system still, when it works well, because there are real threats in this world. Every time you cross the street, you can be hit by a bus. And there are threats on the job that are problems that need to be dealt with quickly, with energy, and with focus. The problem is the world is so noisy, and pandemics, politics, the economy and the stock market, cable TV news, the number of things that can send us off, and after a point, what happens is the system doesn't work the way it was designed for. It just overheats in a sense. It's like a car. It's radiator, it's just run out of water, and it just comes to all. And it kills our capacity to not only deal with the threat, more importantly, any capacity we have to look for opportunities, provide that leadership, mobilize the masses, make important things happen, it tends to get shut down. Now, the good news is we do have another system on this that is oriented toward that latter set of actions, my best mayors. It helps us as a species thrive, and it helps you and I as individuals thrive by A, looking for opportunities, B sending out different chemicals that raise our energy, make us feel excited, sometimes passionate about some issue. And as long as we can make progress for what we perceive to be progress on whatever that opportunity is, then energy can stay up for a remarkably long period of time. It's not at the peak and then exhaustion and you fall asleep. And understanding that those two systems with the survived one more powerful are at the heart of human nature, has all kinds of implications for managing people, running organizations, and the like. And more often than not, because it gets absorbed by an individual view being as a threat to our survival, we define the problem. How do I get out from underneath this problem? Which doesn't help at all. If you look at how great leaders and great organizations create and maintain a sense of urgency, I see much clearer than when I first wrote that 25 years ago. It's all about opportunity, it's all about getting people excited about some possibility. And it's all about that level of energetic passion that gets translated into people being alert on a daily basis as they do their jobs for just little things they can do to push a strategic initiative ahead. That is what makes for a sense of urgency and keeps it up for enough time to achieve something really significant.

Professor Carter, what role does organizational purpose play in being able to create a positive thriving sense of urgency in people rather than a negative one?

Once you get some clarity on what your biggest opportunities are, the second question is, okay, it's an opportunity, but what's the point? Capitalizing on that opportunity that could be done in ways that produce a variety of different kinds of benefits. So what's our objective? What's our mission? What's our purpose? And then with that in mind, you can take a step back and say, okay, if that's the mission, that's the purpose, what would this look like if we really made progress over the next year or two years or five years? And that's a vision, which you can start articulating and talking to people about and making something less abstract and more concrete about how you would be treating what kind of customers you'd be dealing with, how you'd be treating them, et cetera, et cetera. So I think purpose is an important piece of it, but it's a piece that kind of sits in between opportunity and vision. A month ago, two months ago, had an opportunity to talk to the gentleman who was the chairman and CEO of now the sixth largest bank at the U.S. His name is Kelly King. I've not met him face to face, but I've had a chance to talk to. He came into my life because, believe it or not, he bought close to 28,000 books for his entire staff. And the general public, unless you're in the southeast, would not recognize the name of this company because it's a new name, a function of a merger. And in talking to him, and in talking to his CEO, Bill Rogers, when I asked them, how did you go about thinking about merger integration? And where did you start? Kelly says, We started with purpose and they got hit with COVID like three months later. But they have managed to do a remarkable job during this COVID period of bringing these two organizations together because they didn't do what is the normal MA game, which is you've got a checklist of things that have to be done, and you've got to check them all off, and nobody thinks they're a bigger sense or a more human sense or recognizes the big problem that could come about, which is you've got two organizations that don't ever grow together, you never get the one plus one equals three. You end up with two cultures that fight each other. And by talking about purpose and in very human terms for the entire bank, they got the MA integration off to a terrific start, and despite the problems of COVID, they've made incredible progress.

That's a wonderful example, Professor Cutter. And the reason I encourage everyone to reflect on it is that a lot of times we forget when we're talking about change and change in organizations. It's humans in human systems. It is not structural. And the mistakes. A lot of times people make it, even looking at your eight steps, is that they approach it as steps on a PowerPoint slide rather than recognizing it's humans that need to embrace this. That's why the research and the thoughts that you shared with respect to how to incorporate that sense of purpose and a positive sense of urgency are, in my view, some of the most critical thinking needed for organizations to be able to change. Most change initiatives, as you know, vast majority, almost 80%, fail in part because that's exactly what they fail at doing.

There's no question. It's ultimately people that either make it work or end up in a survive mode and resisting change or passively undermining you. Not because they're bad people, they're just being human beings, and you're not approaching them correctly in the way you go about trying to make change.

Yes. Now you build on that, and you also talk about the challenge we have with modern organizations and their limitation. There is a management-centric design that has been built at least over the past hundred years for reliability and efficiency, and those are not the designs that can take us into the future.

Most people, I suspect, don't realize that organizations as we know them really were first built because of the Industrial Revolution and science in the late 19th century. The average business before that, before the Civil War, had maybe five employees. A single textile bill with maybe 80 employees. That all began to change at the end of the 19th century. And what they discovered is that when you try to involve a thousand or five thousand people at not one but fifty locations, the whole thing dured chaos. And so they had to invent, and they did invent in the late 19th century, something which today we call management. There were no managed schools of business before the 1880s. They didn't exist, they weren't needed. But the disciples' purpose was to somehow coordinate all of these people doing different jobs in different locations in a way that was efficient enough to make money for investors and reliable enough to give the service or product to the customer. That was a huge innovation at the time and a hugely difficult task. Although, if you looked at a business around 1990 versus today, you would see a lot of differences that are a function of the fact that they didn't have cell phones, they didn't have TVs, they didn't have the kind of building that I'm in right now. But the organizational form in terms of an entity plans and budgets, and has a hierarchical structure, and uh has a system for bringing in and hiring floor and cinematic stuff, and that focuses on metrics. That was invented then, still used today, but it doesn't produce outcomes of innovation leaping into the future, adapting quickly and agily to change that wasn't the purpose, and it doesn't do it. Now, can you take the basic organizational form that comes out of the industrial revolution of 150 years ago and make it something that can be much more adaptive, agile, etc.? Yeah, that's what we've been studying now for decades. And it comes back to leadership, it comes back to a variety of processes and behaviors that were not centrally in court to most businesses under 50 years ago, like creating and maintaining a sense of urgency. And what the great businesses are doing today, and I would say public institutions too, is they're experimenting with how to not throw away the machine that makes sure that the trains run on time, so to speak, but they can add another piece that can work hand in glove together with the traditional form that can be innovative and adaptive. It's more leadership than management, it's more network than hierarchy, it's more hard and monitored or physical labor. And everybody's gonna have to go that way eventually. And right now, I'm going to be talking to some people who run federal agencies in the U.S. next week. It's just doing it prep before we started talking. And some of them have got real challenges. Their bureaucracies are just so slow, slow to adapt and so survive oriented. Who's the next administration? What are they gonna do to us? And yet, if we can't get those federal, state level, and city level bureaucracies into the 21st century, we are all going to suffer greatly. But I go back to my mayors and I can say it can be done. We've seen it. It's amazing what can be done, understanding what creates adaptive change, agile change to take advantage of the opportunities.

It is really hard, Professor Cotter. I'm, as you know, out of Greater Washington, D.C. region, and a lot of organizations, whether federal agencies or quasi-government organizations, talk about the limitations, their board of directors, and the structures and how hard it is. But part of what you talk about is the fact that there is need for leadership and there is need for greater leadership. I love your quote. You say leadership is not the province of the few. The only way we can adapt is to have lots of us lead.

The hardest solution to our biggest challenges these days is getting more leadership from more people. The unusual suspects. We have seen in our consulting practice again and again examples that of people who the top executives have never heard of. They're buried in the hire. We got great stories about third shift manufacturing workers, about young people that are on nobody's chart of high potentials, about old people, somebody that's five years from retirement, that is assumed by the powers that be out the pasture, who, if you handle them correctly, if you can reach and help activate their throttle mechanism with good leadership, they turn into leaders for people around them, and you get enough of those people leading, and you get a mass movement. I mean, if you go back, the first high tech organization in the globe was IBM. And if you look at the Tom Watson story, it's a fascinating story. But even though it's set at a time that's almost a century ago, and in an environment that had no computers, that's post-World War II. Nevertheless, if you look at his actions as the head of a business, they're not that different from the student I was telling you about earlier, who's increased the market cap on his firm by an unfathomably large amount. He mobilized huge numbers of people within IBM to innovate at a time when innovation as an industry was not the norm, and to work hard and be loyal and be positive during the beginning of the depression, when most organizations were facing and created by the actions of the executive, the exact opposite loyalty going down, depression going up, etc. etc. Then now mobilizing more people to provide more leadership. I am absolutely convinced, based on now what, fifteen research studies over 40 years is the central key to a prospering organization, and even broader to a prospering society and world.

And Professor Cotter, the question is how you highlighted beautifully that there is an element in human nature in creating this sense of urgency, we need to appeal to the thrive rather than push people into survive. That modern organizations need to be rethought with respect to greater leadership and less management structures, and that we need leadership all across the organization. So, as leaders are listening to you, what do they need to do to make that a reality within their organizations to have more people lead the way you say it takes to lead change in the organization?

Start small and let it grow organically. Do not put together a plan with 96 PowerPoint slides that will put all your people to sleep. Seriously. Start with yourself. As next, what do you think are the big opportunities that your department or your division or your company how well are you moving to take advantage of those opportunities? The answer, if you're honest, will be not as fast or as well as you could, then all right, how can we get some discussion going about that and not just about problems? Not to ignore problems, that's not the point, but more communication and more dialogue and more hallway chatter on opportunity for us, then see who reacts to that. Everybody won't react in an enthusiastic and positive way. That's okay. For those who do, allow them into the discussion. Form informal network groups that start looking for ways to move projects along faster and better. Don't stifle them with rules and how to run the task force or whatever. Let it be more organic. Be very careful to make sure that they actually do achieve something. One of the things that we do at the Selling Firm is show people how you can mobilize a group of people in 90 days to achieve much more than they believe is possible. And how that builds momentum, creates credibility, pulls more people into this. Now you're getting a kind of a mass movement around whatever the initiative is. There's no reason that everybody has to be brought in at the beginning. That's just not natural. Innovation comes for first. We know that. When we set up guiding coalitions, what we call guiding coalitions, we always want to have a senior exec and an executive assistant. It's awkward at first because they're not used to being in the same media as peers. But you can teach people to do that. And once they get used to it, it's so human, it's so natural. They like it, and they can start interacting in a new way with new information, better information flows, which means more innovation. The fact that they're doing it and it's their ideas, they get it more and more excited about it. Again, as you guide to make sure that they achieve something that will start to squell skepticism and start to get more people excited, you start to bill and you bill. And over a period of time, you go from maybe at first three people are providing leadership on this big opportunity to a time when hundreds or more are. I mean, the data is so clear when you look at how much the rate, volatility, complexity of change. It's been going up for 200 years with a big blip in the last 50 years, and now in the last two, of course, COVID has thrown all kinds of wild challenges at us. Who knows what will be the next thing in the produce spike? But the curve is that one, and building change muscle, if you will, inside a firm is essential. And it can be done by actually doing it. Number one, watch out for people who are selling you a blueprint of exactly the way it should be in five years because nobody knows. The name of the game is learning, trying things that are intelligent, which will require change always, and leadership. Learning, evolving. Number two, taking a look at what you're doing that you didn't do before the pandemic. And making sure that it works better, and making sure you don't lose this when you go back to work. Companies are going to kind of stumble upon some habits that are actually better the way we used to work. We don't want to go back to that. Three, be very careful that you don't pull back with the real estate and the face-to-face interaction and the normal way we have meetings, etc. Some methods of operating that you should have probably gotten rid of ten years ago, that the pandemic forced you out of, but never underestimate the power of history of pulling things back the way they were. And search relentlessly for the opportunities that this awful two years presents to you. I have yet to see the business that I've had a chance to look at innate detail. One arena of activity that is open to them today for great promise that literally was not available two years ago because of the conditions then. Everybody should be looking for those opportunities and getting their people to focus on them. And finally, we've got to start using the time when we quote go back to work, which is going to require some changes, as not only a time to make intelligent changes, but as a way of practicing building our change muscle. Because we all need to have firms with greater change muscle, which relates to more people providing more leadership for better results. To go back to the very first thing I said on this, I can see it coming because I've seen some articles recently. The future of work, here's what it's going to look like in four years. Nobody knows. That's okay. Don't be afraid of that. As a matter of fact, the fact that nobody knows means your competition doesn't know ether. The name of the game is Evolving, Changing, Learning, and not making negative assumptions. Again, if you look at the big picture over the last 200 years, humanity has made unbelievable progress. There is no reason why that kind of progress, if we handle our organizations, businesses, and governments can't continue for another 200 or 400 or 600 years. I think the possibilities for the human race and for my children, your children, our grandchildren are absolute fantastic.

They are.

And it's with some text about his life, pictures from his life, on the first page, which is blank, in shaky handwriting, is a note from Nelson Mandela to me. It's a long story about what created that, but it reminds me that his autobiography is one of the great books, I think, of all time in helping us to understand something about leadership. There is so much in there that you can pick up about the way a person like that thinks and the way he treats other people, the way he goes after opportunities. It's a marvelous book to read.

So, Professor Cotter, what's the best way for the audience to find out more about your own consulting firm that you have in addition to your books and other resources?

Okay. If you go to www.cotter Inc., so it's K-O-T-T-E-R-I-N-C.com, you will find a lot of free resources and stories from the feedback we've got can be very helpful. This is the new book. It's only been out two months, and it has the latest of the studies and the recommendations and the stories for my work. And that's available through regular book sources.

Professor Connor, as I mentioned at the beginning, you have contributed significantly to our understanding of change over the years. And I've studied a lot of your work, both in leading organizations and now in guiding organizations, in coaching them and consulting with them. So I appreciate that. And I most especially appreciate this new book, Change, How Organizations Achieve Hard to Imagine Results in Uncertain and Volatile Times, which we do live in, primarily because, as I mentioned to you, I hadn't married the concept of the urgency with the need for it to be a positive urgency as much. And that really resonated. And the difficulty, but the necessity to have leadership at all levels, it is not just at the senior or most executive levels. Those will be the organizations that survive and thrive into the future. So I truly appreciate all of your contributions over the years and taking your time to share some of your thoughts in this brilliant book and in the partnering leadership conversation. Thank you so much, Professor John Cotter.

It has been my pleasure. Keep up the good work.

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