Change management is a tricky exercise with big penalties attached. Here’s how to get it right.
Effective change management in today’s high-velocity business environment is akin to, in the words of a baseball player trying to hit against pitching great Sandy Koufax, “drinking coffee with a fork.”
According to a 2015 multi-industry survey by consultancy CEB Global, 87 percent of executives expect the pace of their organization’s change initiatives to remain constant, or to increase, during the next three years. About 70 percent of executives said today’s changes are more complex than they’ve ever been. The level of complexity is reflected in the outcomes; between 50 and 60 percent of change initiatives will fail, while 16 percent will show mixed results, according to the survey. Only about one-third of change management projects are considered successful.
About 60 percent of managers said they lack the proper experience to adequately implement change management programs, according to CEB. This can cause change-related stress that rolls downhill, with severe performance penalties attached. CEB estimates that the change-stressed employee performs 5 percent worse than the average employee. For the typical company, this means a $32.5 million hit to the bottom line for every $1 billion in revenue, the firm said.
Companies “undertake each change with the goal of improving business performance, yet each change also pressures employees to adapt,” according to a CEB white paper. Perversely, stress-related performance losses can counteract the initiative’s expected benefits, the firm said. It is perhaps with good reason that CEB refers to change management struggles as the “hidden enemy of productivity” in the workplace.
One of the challenges is that change can come from anywhere and can hit all at once. It can spring from the launch of a distribution center or the introduction of an enterprise resource planning (ERP) system or the integration of an acquired company. Change can also result from a renewed focus on broad growth strategies that aren’t triggered by a specific event. iPlan Global, a South African firm that specializes in business process design and implementation, segregates change management strategies into the “transformative,” which focuses on long-range shifts in corporate culture, and the “discontinuous,” or event-driven initiatives such as preparing for an overnight switchover to a new IT system.
“Transformative change is approached as a … long-term effort that encompasses a number of separate standalone assignments that effect specific change in individuals,” said Adri McCaskill, iPlan Global’s general manager for North America. Discontinuous change, by contrast, involves projects that are aligned to one “make-or-break” objective, such as a transition to a new IT platform, she added.
READINESS IS ALL
Fortna, a West Reading, Pa.-based systems design and integration company, thought enough of the change management skill set’s importance to create a position dedicated to “organizational readiness” and to recruit Mike Perkins, an operations veteran with decades of experience with companies like e-tailer Amazon.com Inc., mail-order giant L.L.Bean Inc., and grocery chain Hannaford Supermarkets, to run it.
In a phone interview, Perkins said he has broadened Fortna’s change management efforts beyond the tactical, plain-vanilla approach to encompass more strategic, custom-designed initiatives. “I believe that change management is a subset or component of organizational leadership,” he said. Organizational leadership is “more strategic and holistic than the normal change management methodology” because it represents an enterprisewide approach that includes change management.
In one project, Fortna is hiring the leadership team to run a client’s new distribution center, a process that involves significant talent evaluation and employee training and development. Perkins said Fortna’s in-depth approach to change management is unique among systems integrators.
Perkins said each client is unique in its comprehension of change management and how to approach it. Some are capable of matching the resources to the project, some have relatively scant resources but are aware there’s a problem and have sought help, and still others have underestimated the scope of the challenge and the investment needed to get ahead of it, he said.
Whatever the case, companies that undertake a change management initiative need to understand that the results will appear like a “J-curve,” that is, they will get worse before they improve, Perkins said. “The key is shortening the dip,” he said.
If there is any universal metric for an effective change management program, it is to prepare people for the change, and create a sense of excitement and ownership in the program, Perkins said. Projects fail due to a lack of communication, a dearth of resources, and a failure to fully engage employees in the process, Perkins added. “These things always come back to bite you,” he said, adding that “some of the simplest things I wanted to implement took too long, while some of the tougher things went well.”
(ALMOST) ALL ABOARD
iPlan Global said the traditional approach to change management—enabling permanent change in the individual by focusing on long-term behavior and attitude modification—remains appropriate for broad “transformational” projects. However, a discontinuous event calls for what McCaskill described as a “hard subordination of individuals to the goal of the organization, even though there may be individual casualties.”
Dr. Abré Pienaar, iPlan Global’s CEO, said in a white paper earlier this year that successful execution in an event-driven scenario such as an ERP system launch stems from the organization, not certain individuals, doing a better job of operating the ERP system. “This does not require 100 percent of the people. Only a sufficient number in the right places,” he wrote. Trying to accommodate each person to work to individual timetables is an impossible task when implementing an ERP project, which has inflexible “go-live” dates, Pienaar said.
Furthermore, a focus on the whole enterprise means that those individuals who failed to adapt to the new system can be “accepted, and even expected and planned for, without sufficiently affecting the success of the organization,” Pienaar said.
IN CLOSING …
Change management has traditionally been viewed as a soft science, but failing to adapt to organizational shifts presents a significant business risk. All parts of the organization will require new approaches to avoid unwanted losses while preserving the benefits of whatever transformation is under way, experts say. However, with the right preparation, executives can capture the benefits they’re striving for, with minimal or no casualties.