In the face of rapid, persistent change, how is it that so few businesses are able – or willing – to make the case for change management to be part of program delivery?
Mobility, flexibility, agility and disruption are just a handful of the challenges facing businesses in an era when the volume, scale and pace of change and transformation is having significant impact.
It’s not uncommon for change saturation and fatigue to take its toll, despite a mindset that change needs to be embraced and business needs to be capable of constant change.
Why is it, then, that change management is often the first casualty when it comes to budget?
Change Management a Key Factor in Project Success
Last month we looked at change vs transformation and why 70% of transformation projects fail. A significant driver of failed projects is a lack of professional and structured change management.
While Quay is typically agnostic when it comes to methodology (it should always be fit for purpose), Prosci is a good starting point for digging into why change management is so important.
Prosci’s approach is widely recognised as the industry standard, with the body of knowledge continuing to develop and focus on how to better manage the people-side of change in a structured, repeatable way.
According to Prosci, the quality of change management within a project can have a significant impact: excellent change management embedded into the project can result in a 6 times greater chance of success than if change is poorly managed.
If this is true, then why isn’t the C-Suite getting on board?
Quantifying the Benefits of Change Management
A recent white paper from IBM on change management and the C-Suite concluded that there are three main barriers facing change management practitioners in selling the benefits of change strategy to executive teams:
- Lack of awareness: Many companies had not heard of Organisational Change Management (OCM), did not understand the full extent of what OCM can deliver or they had not experienced first-hand the benefits it can deliver. Some executive teams had, however, experienced poorly executed change management.
- It’s ‘just communication’: Some companies did not fully appreciate the integral role that OCM plays in project success and were likely to view it as a communication tool that could be ‘handled by the business’.
- Lack of experience: Many companies allocate resources that have little to no experience in OCM to manage large-scale initiatives and the result was poorly managed change.
These barriers can be addressed and overcome if the ROI of change management is properly and adequately articulated at the outset, with quantifiable impacts as a part of the project’s business case.
Building the Business Case
Tangible ROI is fundamental to any business case, including a timeline of when the return will be achieved and who will be accountable for delivering it. In the world of change, too often the benefits have intangible people-focused outcomes, which are difficult to correlate with a P&L or balance sheet. Certainly investors are not particularly interested in whether the staff are happy or have embraced change – unless it has hit the bottom line.
Going back to Prosci, the benefits is a great start for building the business case.
Prosci splits the cost-benefit categories into five perspectives:
Perspective 1 – “People Side” ROI Factors: Three ‘people-side’ ROI factors contribute to, or limit, the value that change delivers to the organisation. These factors are based on the premise that when a change requires individuals to do their jobs differently, it is how effectively those individuals make the change that determines the business value the project delivers for the organisation. The three factors are:
- Speed of adoption – how fast do people adopt the new processes or behaviours?
- Ultimate utilisation – how many impacted employees made the change (and how many did not)?
- Proficiency – How effective were the employees at following the new processes or behaviours?
Perspective 2 – Cost Avoidance: When changes are poorly managed, there are real and tangible costs to the organisation. If change management is applied effectively, these costs can be avoided or minimised. Prosci characterises the benefits of change management as cost avoidance, which is outlined in the table below:
|Costs to the organisation if change is poorly managed
||Costs to the project if change is poorly managed:
||Costs to the organisation if the change is not implemented:
|Easier to Quantify
- Productivity plunges (deep and sustained)
- Loss of valued employees
- Decline in quality of work
Harder to Quantify
- Impact on customers
- Impact on suppliers
- Morale declines
- Resistance (both active and passive)
- History of failed change
- Stress, confusion, fatigue
- Change saturation
- Missed milestones
- Project put on hold
- Resources not made available to project team
- Budget overruns
- Obstacles appear unexpectedly
- Rework required on project design
- Project fails to deliver on objectives
- Project is fully abandoned
- Loss of work by project team
- These costs are tied directly to what the change was aiming to do.
- These costs could include: expenses not reduced, efficiencies not gained, revenue not increased, market share not gained, waste not eliminated, regulations not met resulting in fines/penalties, etc.
- Additionally, the organisation loses the investment made in the project when the project does not deliver results.
Perspective 3 – Risk Mitigation: Individuals, the project and the organisation are all put at risk when change is poorly managed. The purpose of change management is to provide the tools to mitigate risk.
Perspective 4 – Benefits Realisation Insurance: The context for showing the value of change management is tied to an examination of the potential benefits the project is working to achieve.
Wherever the objectives and outcomes, or a percentage of them, are reliant on people doing their job differently, it’s possible to ‘insure’ these benefits and outcomes by applying a solid change management approach. Conversely, it’s possible to leave them ‘uninsured’ by not investing in change management.
Perspective 5 – Probability of Meeting Objectives: The final perspective is tied to the growing body of data which shows that more effective change management results in a higher likelihood of delivering the project’s intended results.
Those projects embedded with a high calibre change management focus are six times more likely to meet project objectives than those with poor or no change management.
Plan for Change From the Outset
The business case for including change management as part of successful project delivery should be able to demonstrate accountability and focus on benefits realisation for the C-suite, particularly quantifying the ROI and ‘insurance’ that change management provides.
It should enable the executive to see change management as a valuable assurance mechanism that has tangible benefits to the business, and should always be an integral consideration for all projects when they are being shaped up.
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