The world is in a new normal of consistent change. To stay competitive, large organisations in the UK are waking up to the need to be agile to stay on course for growth, finds Moorhouse’s latest change barometer report. In this years’ report, 69% say they feel the pressure of change and 70% feel ready for change. Organisations that invest the most in transformation are for the most part, already seeing growth returns.
The Moorhouse report, titled ‘Avoid the zombies, innovate for growth’, is developed from 200 respondents from board members (17%) and their direct reports (83%). Respondents come from UK organisations in the public and private sector, including 7% from the FTSE 100, 25% from the FTSE 250, 24% of UK subsidiaries of multinationals and 8% from the public sector. The survey covers a wide array of industries and sectors, including among others, transport and distribution (13% of respondents), TMT (13%), energy & utilities (13%), financial services (21%), and health and pharmaceuticals (9%).
The changing state of affairs
This year’s barometer reading shows that the business environment continues to be in a state of flux. Over two-third (69%) of organisations respond that they feel an increase in the pace and pressure of change in 2015, up from 58% last year. This years’ change pace and pressure is up slightly on the result of 2013 (65%), although still below the result of 2012 (72%). The consistently high result suggests that the business environment is now in a ‘new constant’ of change – 80% of respondents are expecting the pace of change to increase further over the coming three years.
A culture of change
The majority of senior leaders in surveyed companies smell the need for change in the air, yet to what extent are organisations in the mood for change? The survey asked respondents if their organisation has a ‘pro-change’ cultural state (changeable or change embracing) and found that 70% of respondents say their organisation is pro-change, up from 60% in 2014.
The survey highlights however that, while company leaders are for the most part pro-change, the structural requirements for change remain elusive. When considering whether a company is able to sustain its ‘pro-change’ culture, the role played by leadership to pass on their vision to their subalterns remains key. Yet even for many on the board, the direction of the company is not always sufficiently clear for communication. In 2014, 77% of respondents describe their organisational vision as ‘very’ or ‘extremely’ clear. However, this dropped to 69% in 2015 – the lowest level in three years.
Investing in change
The need for change becoming more pressing for many organisations can be seen in the numbers. According to Moorhouse’s analysis, investment in transformation programmes has increased on average among surveyed organisations. The average spend is up 25% on last years’ reading, from £20.8 million to £25.4 million. The number of those spending on average more than £25 million has also increased from 21% of respondents in 2014 to 34% in 2015.
Embracing change and transforming business culture is having a positive effect on growth. Eight in ten (81%) companies investing more than £25 million find that their transformation is translated into growth in its first year. Optimism about the changes is also reflected in their expectations for the following year, where growth is expected by 85% of those surveyed. 89% expect the transformation to net growth in a three year period.
Changes in the business environment have companies on their toes, with many preparing for a future in which constant change becomes the new normal. Nine out of ten companies surveyed expect to continue to grow over the coming years, further stimulating competition. According to Moorhouse, agility is therefore the key to stay ahead of the competition. Companies will need to carefully consider whether profit is not better invested in developing growth strategies over being paid out, how companies are positioned within the market and whether companies need to develop or attract new capabilities to support expected market developments.