Why transformations stall—and where only CEOs make the difference

So your research makes the case that the CEO plays both a vital and a singular role in the success of organizational transformations.

Talk to us about where CEOs should draw the line between responsibilities that can be delegated and those that can't during a transformation.

I mean, these are humans after all.

They have a lot on their plate.

If I were to put it in one sentence, I would say they set the conditions for enterprise-wide success, as opposed to just superintending a program or driving a set of initiatives.

They actually set the conditions in human terms for what makes a transformation successful.

And in fact, what led us to this concept that part of the CEO role is to break collective action problems in large organizations trying to change and create transformational change was this idea that there is something undelegatable in the CEO role that's around creating those enterprise-wide incentives and change.

And so we'll talk more about it as we go on here, but that's the essence of what we believe is undelegatable.

There are many other important folks, chief transformation officers, CFOs, business unit leaders that play vital roles in this, but we think the CEO has a unique enterprise-wide role as the senior-most integrating officer of a company.

And I wanna get into what these collection action pro- collective action problems are.

But before we do, just tell us at a high level, what is a collective action problem? What does that term mean?

Yeah.

I would say a collective action problem is one where there is an outcome that is clearly superior for an enterprise, for a collective, but it's inaccessible, in fancy terms, from the standpoint of individual incentives, unless you align those incentives so that everybody can achieve that outcome.

And the collective action problem is where those, those interests don't align.

And we think a CEO plays a huge role in aligning those individual and institutional incentives.

And that's why we say part of the role of a CEO is to break collective action problems and transformations.

You've set out a really helpful model for thinking about collective action problems, categorizing them into five areas, and the five areas are the n- negotiated settlement, the hoarding habit, the lure of the local, the trustworthy few, and the finite program.

Do you wanna just give us a high-level explanation of each of those, and then we can get into a little bit more of the nitty-gritty on them?

The first one is the negotiated settlement, and that's the tendency for teams to want to negotiate targets down to something comfortable rather than aiming for what might be the full potential or maybe what they don't yet see, right? And we see two other issues show up, which is the hoarding habit, as you mentioned, where people hold onto information, right, because they're not sure how that information will be used.

And maybe in the past, they've shared information that was used in ways that they didn't expect, right? A- another one is called the lure of the local, where individuals in functions or teams, right, are of course loyal to people that they work most closely with day to day and have most familiarity with, so they optimize for their own functions, their own teams, sometimes at the expense of enterprise-wide goals.

And the one which is one of my personal favorites is called the trustworthy few.

Everyone knows the ten, fifteen, maybe twenty people that we all know and like and trust, and every project, everything that is of consequence, goes to those same people.

And what happens there is that it, by nature, limits the capacity to execute to just fifteen, twenty people, and also it misses out on an opportunity to truly democratize change and to build capabilities deep into the organization.

And the last one is, we call the finite program, which is where transformation is seen as a finite program and runs separately from day to day.

And a lot of folks may kind of hold their nose right until it, it finishes, whether that's six months, nine months, two years, and go back to old ways of working.

So your research makes the case that the CEO plays both a vital and a singular role in the success of organizational transformations.

Talk to us about where CEOs should draw the line between responsibilities that can be delegated and those that can't during a transformation.

I mean, these are humans after all.

They have a lot on their plate.

If I were to put it in one sentence, I would say they set the conditions for enterprise-wide success, as opposed to just superintending a program or driving a set of initiatives.

They actually set the conditions in human terms for what makes a transformation successful.

And in fact, what led us to this concept that part of the CEO role is to break collective action problems in large organizations trying to change and create transformational change was this idea that there is something undelegatable in the CEO role that's around creating those enterprise-wide incentives and change.

And so we'll talk more about it as we go on here, but that's the essence of what we believe is undelegatable.

There are many other important folks, chief transformation officers, CFOs, business unit leaders that play vital roles in this, but we think the CEO has a unique enterprise-wide role as the senior-most integrating officer of a company.

And I wanna get into what these collection action pro- collective action problems are.

But before we do, just tell us at a high level, what is a collective action problem? What does that term mean?

Yeah.

I would say a collective action problem is one where there is an outcome that is clearly superior for an enterprise, for a collective, but it's inaccessible, in fancy terms, from the standpoint of individual incentives, unless you align those incentives so that everybody can achieve that outcome.

And the collective action problem is where those, those interests don't align.

And we think a CEO plays a huge role in aligning those individual and institutional incentives.

And that's why we say part of the role of a CEO is to break collective action problems and transformations.

You've set out a really helpful model for thinking about collective action problems, categorizing them into five areas, and the five areas are the n- negotiated settlement, the hoarding habit, the lure of the local, the trustworthy few, and the finite program.

Do you wanna just give us a high-level explanation of each of those, and then we can get into a little bit more of the nitty-gritty on them?

The first one is the negotiated settlement, and that's the tendency for teams to want to negotiate targets down to something comfortable rather than aiming for what might be the full potential or maybe what they don't yet see, right? And we see two other issues show up, which is the hoarding habit, as you mentioned, where people hold onto information, right, because they're not sure how that information will be used.

And maybe in the past, they've shared information that was used in ways that they didn't expect, right? A- another one is called the lure of the local, where individuals in functions or teams, right, are of course loyal to people that they work most closely with day to day and have most familiarity with, so they optimize for their own functions, their own teams, sometimes at the expense of enterprise-wide goals.

And the one which is one of my personal favorites is called the trustworthy few.

Everyone knows the ten, fifteen, maybe twenty people that we all know and like and trust, and every project, everything that is of consequence, goes to those same people.

And what happens there is that it, by nature, limits the capacity to execute to just fifteen, twenty people, and also it misses out on an opportunity to truly democratize change and to build capabilities deep into the organization.

And the last one is, we call the finite program, which is where transformation is seen as a finite program and runs separately from day to day.

And a lot of folks may kind of hold their nose right until it, it finishes, whether that's six months, nine months, two years, and go back to old ways of working.