A company can have an experienced management team and well-run operations and still struggle with major change. Transformation places different demands on management, people’s capacity, decision-making and accountability. Mistakes in production relocations, new system implementations, acquisitions or restructuring can be extremely costly. In the next instalment of You ask, we answer, we therefore focus on three questions that determine the success of transformation projects: why they fail even in capable companies, when it makes sense to bring an external manager into the team, and how to recognise early signs that a project is starting to slip out of control.
We have a capable management team. Why do transformation projects still fail so often?
Because running a company and managing major change are two entirely different disciplines. Many owners have a strong management team. Production runs smoothly. Customers receive their deliveries. Employees turn up for work. Reports are produced.
Then a major change comes along: a production relocation, a new plant, an acquisition, an ERP or CRM implementation, automation or a company reorganisation. The same management team that handles day-to-day operations well suddenly starts to struggle. Not because it is ineffective, but because, alongside the existing business, it has to manage what amounts to a second business: the transformation project. Managing operations and managing transformation are different disciplines. It is like asking an elite marathon runner to compete in a decathlon. Both require capable people, but very different skills.
One of our clients was building a new plant while continuing to run the existing one. All the managers and both owners were capable, hardworking people. Yet the project kept falling behind schedule. Each day was spent dealing with customer claims, customers, employees and production. Construction and relocation were left for evenings and weekends. The result? The project gradually began to unravel. In the final phase, day-to-day operations also started to break down, and both owners were on the verge of exhaustion. Once a dedicated manager with clear accountability was assigned to the transformation, the situation began to stabilise.
Transformační projekty většinou neselhávají kvůli špatné strategii. Selhávají proto, že nikdo nemá kapacitu je skutečně odřídit.
When is an external manager more cost-effective than your own management team?
This is one of the most common questions, but it is usually framed incorrectly. The right question is not: Is an external manager cheaper or more expensive?
The right question is: What do I need to achieve, and what will the consequences be if it does not happen?
Can I deliver the project without additional people? Are there people on the market who have successfully managed similar changes several times before? What risk does an employee bear? What risk does a service provider bear? How much does a mistake cost?
At BM4U, for example, we take responsibility for the outcome, and our work is covered by insurance. That is something a regular employee cannot offer. Transformation can be unforgiving. A single poor decision during a production relocation, technology selection, ERP go-live or acquisition integration can cost tens or hundreds of millions of Czech koruna.
Yet many companies try to save money precisely on managing the change.
We worked with a company that spent several months considering whether to invest in an experienced project manager. At the same time, it was preparing an investment worth hundreds of millions of Czech koruna.
The owner eventually asked a simple question: Do I really want to cut costs on the person whose job is to safeguard an investment of this size? An external manager may not be cheap. But a poorly managed transformation is almost always far more expensive — especially if it leads to project delays, production downtime, lost customers or additional investment.
The most expensive manager is not the external one. It is often the manager who is missing when the company needs them most.
How can you tell when a transformation project is starting to slip out of control?
Usually much earlier than management is willing to admit. The first warning signs are rarely technical. They are organisational. Deadlines begin to slip. Outstanding tasks pile up. People lose confidence in the schedule. Meetings involve more explanations than decisions. Problems are addressed long after they arise.
We worked on a major project where all the reports had looked positive for several months. When we examined the actual status of individual activities, however, we found that the project’s critical path was several weeks behind schedule. No one had been willing to acknowledge it openly.
The project was ultimately saved. Although we joined partway through implementation, we brought it back under control and completed it by the required deadline. As a result, the company avoided writing off an investment of more than CZK 180 million. This was possible only because the problem was identified in time.
Most transformation projects do not begin to fail when a problem becomes visible. They begin to fail when people stop being honest with one another about the actual situation.
That is why we always ask: What is the biggest problem facing the project today? If no one can answer that question quickly, the problem is usually bigger than the company thinks.
Transformation does not start to slip out of control when problems arise. It starts to slip out of control when people stop talking about them.
Most companies can manage day-to-day operations. Far fewer can also handle major change at the same time. That is why the most successful transformations are usually not led by the person with the heaviest workload. They are led by the person who has taken full responsibility for them.