Five Common Challenges: Why Organizational Changes So Often Fail

It’s a Tuesday morning, and you’ve been sitting at your desk since 7:30 am. You’re rehearsing a presentation you’ll give to your team later today. Focused on making small tweaks, you fail to notice the blinking red circle indicating a flood of new messages. When it suddenly catches your eye, you click to read the first. Your heart sinks: the company has just been bought out. By a private equity firm, no less.

How would you feel?

For most employees, the first reaction is a mix of confusion, frustration, and fear. And for the new owners, this period is crucial. How this moment plays out will have a huge impact on the course of the resulting turnaround and directly affect its ROI. Especially if it results in an all-too-common protracted transformation leading to costly productivity dips or an exodus of top talent.

We’ve seen this situation play out the same way time and again. Employee concern and resistance are practically inevitable. But what if you could invite your employees to appreciate the sense of urgency and help accelerate the transformation with you? It won’t be easy, but it’s a lot less difficult than reacting to an executed plan that lacks cultural understanding. Research by MIT supports this, showing that understanding a firm’s cultural patterns and collaboration provides novel insights for driving change (1).

Below are five challenges we’ve seen in the early days of a private equity firm’s turnaround of an organization, along with ways new owners can use sociological techniques to increase their understanding of an organization’s culture and provide vital insights for addressing change.

1. Aligning the Company to a Shared Mission

Effective turnarounds begin with an honest conversation about the organization’s need for change. These discussions must provide three critical perspectives to be effective:

• Sense of Urgency: Establish why the old way of working no longer suffices and why transformation is the only viable path for survival.

• Compelling Vision: Present a credible business model that solves urgent problems and positions the firm and its people for success.

• Clear Roadmap: Provide a viable proposal for how the firm and its employees will transition from the current state to the ideal future state.

While these elements may seem straightforward, most transformations begin with an almost concrete, non-negotiable approach. However, organizations consist of diverse individuals with unique fears and motives. Owners must appreciate the incentives of each group and allow room for employees to help shape their firm’s future in targeted, but material ways if they want to create a shared mental model of success.

At 3Fold Collective, we’re fond of saying: "People need to be heard before they’re willing to listen." By including employees in shaping their future, new owners can more quickly build trust and credibility, often overcoming resistance and fostering a shared understanding before it gets away from them.

Consulting firms have become renowned for advocating the aligned organization (2), and each offers a host of research that supports the benefits of achieving a shared vision and buy-in. How you get there, however, is as much art as science.

2. Overcoming Cultural Resistance

Turnarounds, by design, disrupt the status quo, which often triggers cultural resistance. Employees may logically understand the need for change but still resist the unknown out of fear. Consider the employee above who likely spent years advancing within the firm: they have an ingrained mental model of what success looks like. A restructured organization threatens that model, naturally leading to resistance. Left unchecked, this resistance can gain strength as others’ mounting fears cascade throughout the organization.

Overcoming this requires the previously mentioned collaboration, complemented by tools like social network analysis. This technique uncovers relationships founded on trust and credibility, allowing owners to identify hidden influencers who can address resistance at its roots. Regular sentiment analysis further enables controlled experiments to refine techniques and scale successful strategies across the organization.

Research stemming from Harvard reinforces these concepts, suggesting that resistance stems from disrupted relationships and fear of change in social dynamics rather than the change itself (3). This, again, provides an opening for new owners to provide employees with a sense of control by inviting them into specific parts of the transformation.

3. Retaining and Leveraging Critical Talent

People are the heart of any organization, but identifying and retaining those most critical to a turnaround is often left to chance. Adding to the challenge, top talent—who are often the most vulnerable—are also prime targets for competitors. If change is inevitable, it makes sense for these individuals to seek stability elsewhere.

The departure of influential leaders or trusted colleagues can create a ripple effect, signaling ambivalence to other employees and increasing the likelihood of additional exits. Left unaddressed, this can jeopardize the entire turnaround effort.

To counteract this, it’s essential to focus on retaining critical talent who hold both formal and informal influence. Social network analysis can identify these individuals—those whose trust and credibility among peers position them as key players in supporting the change. Once identified, these individuals can help stabilize the organization, champion new ways of working, and build momentum for the turnaround.

Additional research from Harvard supports this notion—understanding and leveraging informal networks within organizations often holds the key to outperformance (relative to just assessing formal structures) (4). 3Fold Collective can map these informal networks within an organization. By understanding these hidden networks, owners can better leverage all parts of the hierarchy to help employees gain critical knowledge and perspectives necessary to support change.

4. Equipping New Leaders with Cultural Insights

Turnarounds often require new leadership to drive the organization toward a compelling (and shared!) vision. While these leaders may already have proven track records, their success—and the success of the turnaround—hinges on their ability to quickly establish credibility within the new organization.

Research published in the Journal of Organizational Behavior highlights that cultural alignment is a critical factor in leadership success during periods of change. This research, by Hogan and Coote, suggests that leaders who adapt their behaviors to align with organizational values are more likely to build trust and foster collaboration, which can reduce resistance and accelerate change adoption (5).

Social network analysis provides these critical insights into an organization’s culture by revealing informal influencers, decision-making pathways, and trust dynamics. Equipped with this understanding, new leaders can align themselves more effectively with the existing culture, gaining credibility and support sooner.

5. Redefining Organizational Models for Long-Term Success

Turnarounds inherently refine organizational models, including the skills and structures required for success. A firm’s operating model must anchor new cultural norms and demonstrate new ways of working. An effective model considers not only economic and structural incentives but also the interpersonal dynamics that drive collaboration and innovation.

Research by Galunic and Eisenhardt (1994) demonstrates that operating models that integrate structural and interpersonal dynamics are more resilient to change (6). This integration is key to fostering collaboration and innovation during transitions.

At 3Fold Collective, we can help design these models while equipping employees to navigate new environments, all while fostering a culture of resilience. By leveraging insights from behavioral science and organizational studies, owners can create models that balance short-term priorities with long-term adaptability.

How 3Fold Collective Supports Private Equity Turnarounds

Successfully navigating the complexities of organizational turnarounds requires the commitment of the firm’s employees. Using tools like social network analysis, 3Fold Collective helps new owners uncover and activate the underlying dynamics that influence organizational success. Discover how firms have leveraged these techniques to gain a competitive edge by exploring our case studies here.

References

1. Gray, P., Cross, R., & Arena, M. (2021). Use Networks to Drive Cultural Change. MIT Sloan Management Review

2. Nautin, T. (2014). The Aligned Organization. McKinsey & Company

3. Lawrence, P. (1969). How to Deal with Resistance to Change. Harvard Business Review

4. Krackhardt, D. & Hanson, J. (1993). Informal Networks: The Company Behind the Chart. Harvard Business Review

5. Hogan, R., & Coote, L. V. (2019): Organizational Culture: Why Values Matter. Journal of Organizational Behavior.

6. Galunic, D. C., & Eisenhardt, K. M. (1994): Renewing the Strategy-Structure-Performance Paradigm. Strategic Management Journal.