Executive Summary:
Management decisions drive changes that affect growth strategy, new market entry, product launches, fiscal performance, and competitive standing. As your company grows, evolves, and faces new competitive challenges, change may occur in many facets of your business. From the time of the ancient Greeks to modern business philosophers, we’ve recognized that the only constant in the world of business is CHANGE. Yet change and change management are often overlooked or ignored when new decisions are implemented, or new processes or systems are deployed. Why? Because modern business leaders regularly fail to take into full account the impact that significant change has on their employees, supply chain vendors, and alliance partners.
CREO designs and implements change management programs for many life sciences and healthcare companies. Industry research indicates that well-planned and well-executed change management initiatives (e.g., ERP implementations) are more likely to achieve their goals and return greater value than initiatives without change management programs. So, when we combine the amount/impact/cost of change management activities, why isn’t every significant initiative supported by change management?
There’s a case to be made that more change management is essential to drive business growth and innovation. So, why isn’t change more widely adopted within major business initiatives? CREO consultants collectively have decades of experience advising leadership teams at Fortune 500, mid-cap, and fast-growing start-up companies. We have seen a lot of successful projects and have seen others that could have been more successful. However, whether the project was related to new software implementation, business strategy, market entry, or a business process management initiative, change management is often overlooked and poses a significant risk to the success of any of these initiatives. Why? We believe it’s because people need help understanding the full concept of what change brings and its impact on employees and their work. For example, business leaders often describe employees as their most important asset, yet their failure to understand and support change management inadvertently calls these statements into question.
From our experience at CREO, we have witnessed more holistic and impactful business and workplace outcomes when change management was actively implemented. Change was received more completely and gracefully than expected, leading to faster realization of desired and promised benefits. On projects where change management is overlooked or ignored, it’s very common that people who are affected by change cannot fully grasp why the company is instituting change, their role in the process, and what the proposed change means to their position and their work. When change management is ignored, it may breed cultural resistance to change, and employees may actively work against change, and major initiatives may take more time to gain buy-in from the employees affected, take more time to deploy than is necessary, and may be slower to achieve promised benefits.
Why Is Change Management So Important? Why Is It So Often Discarded or Ignored?
We are all aware that change is inevitable. We can see change happening around us in our everyday lives. Most people will state that they are relatively comfortable with change if they can dictate the pace and direction of change. However, most employees are creatures of habit, so it can be challenging to acknowledge that new processes or tools must replace old, familiar ones. Beyond acknowledgment, it can be challenging to think about learning new ways of working or adapting to new computer systems or technology implementations. It can be very difficult to take on new work responsibilities. Employees may fear that they do not have the knowledge or skills to do the new work expected. Preparing people to change and helping employees to see the potential benefits of a new promising future and their role in it are just a few reasons why change management is so important to the success of any significant company growth initiative.
Technologies emerge, gain traction, and are often replaced within just a few years. Immigration brings new ideas and cultures to our workplace. New business models – such as the “software as a service” shift in the last decade, change how businesses are structured and how they generate new revenue streams. Some of this change is predictable, and we can plan for it. Some, however, are unpredictable and difficult to prepare for and occur at a noticeably faster rate than ever before. In other words, change constantly happens all around us – the real question is how can we all best learn how to adapt to a business world of constant, ongoing change?
Let’s examine the future state of constant change and its implications.
Unanticipated Change
We are all comfortable making changes that we initiate. That’s because we believe we can control the change and its likely outcome. However, many of us are uncomfortable with unanticipated change – a change thrust upon us by external factors. This change leads to uncertainty and often receives less support, understanding, and buy-in.
Loss Of Expertise or Status
Employees reasonably fear change when they think it may impact their expertise status or title and authority. Generally, most employees want to be good at their jobs and perform their work effectively and efficiently. Employees risk becoming burdened and inefficient when jobs or processes change and new ways of working or new tools are introduced. Since training is often an afterthought, employees likely will resist changes that aren’t effectively communicated or if the future state isn’t easily understandable.
Increased Workload
Changing an existing process likely means maintaining and operating the existing process or model at full capacity while simultaneously trying to implement a new method or toolset. It can be exceptionally difficult to perform well on designing and implementing a new method or process while simultaneously continuing to work within an existing protocol. Increased workload often means that at least one of these jobs won’t be performed very well.
Obsolescence
Another reason to resist change is the fear of obsolescence or failure. When an employee is good at their job and knows the steps necessary to create an excellent product or process, they take pride in their work and learn to become more efficient over time. However, as circumstances change and requirements shift, people worry that they may not have the qualifications to perform under a new change initiative. In many instances, training is inadequate, and people may think that the former way of doing work was better or more understandable and may attempt to revert to old ways of working. This creates conflict and silent chaos.
These are some reasons why change management can spell the difference between a sullen, unhappy workforce that feels overworked and ignored, actively resisting change, and an engaged, involved workforce actively working to make a new change initiative a success.
If Change Is Inevitable, Why Isn’t Change Management A Requirement?
The Greek Philosopher Heraclitus (500 BCE) said, “Change is the only constant in life.” While others may have recognized this truth, he is the first credited with saying it and creating a philosophical approach to change as part of his teachings. So, for over 2500 years, humans have recognized the vital role that change plays in our lives – it is one of the few constants we should count on. Yet, when called upon to implement change as part of a strategic business initiative, we rarely thoroughly consider what information or assistance employees will need to advance successfully through each phase of a change management initiative.
If we recognize that change is inevitable, significant change should be accompanied by effective change management.
What barriers must be overcome?
- Change management is intangible. Change management activities are difficult to see or touch and can be difficult to justify or measure the activity’s value in real time. The absence of change management is only identifiable in hindsight when new systems or decision-making criteria, new processes are not adopted, or benefits aren’t recognized.
- Change management planning and execution add costs to an enterprise’s bottom line. Related project and training costs may often be the first components of a new project to be cut when budgets shrink. Overall, many companies do not plan well for what they consider to be the “core” activities of a project and consider training or change management secondary needs at best.
- A fear that change management can create more problems than it solves. Some executives have expressed concern that change management activities may cause confusion in the workplace and do more harm than good, create anxiety, and create more questions than answers.
- Grin and bear it approach. In some organizations, there can be an expectation that teams simply need to adjust to change as part of their work. This is the “rip the band-aid off quickly” school of thought that suggests it’s best to simply implement a change initiative and expect people to adjust. There’s a bit of old-school machismo about this approach, which indicates that people should merely figure out how to adapt. While this approach suggests that some change resistance is simply that – resistance – there is no substitute for preparing people for change and assisting them through the change.
There are several other reasons why change management is not regularly implemented as a component of strategic business initiatives. As with any project activity, there are risk/reward scenarios, opportunity costs, and return on investment issues to consider.
Does Change Management Improve Outcomes?
The real question we should consider is not, “How much does change management cost?” or “How much will change management distract the workplace?” Rather, the important question is: “Does an investment in change management result in faster adoption, improved learning proficiency, and other measurable outcomes for the enterprise?”
At CREO, we believe that change management initiatives return far beyond their investment cost. Even small investments can improve employees’ capacity to accept change, drive more productive and enthusiastic adoption of new processes or systems, and generate better performance efficiencies and business outcomes. Whether we consider an ERP implementation where change management examines past processes and prepares people to follow new processes and to complete new transactions in an SAP system, or we consider new business models and the role people play in delivering old or new business models, change management has had a significant impact on the implementation and acceptance of change in many projects CREO has been a part of. For example, in one ERP implementation we helped lead, our client was initially reluctant to incur additional costs for a change management consultant. CREO was eventually engaged, and once the system “went live” and the team readily adopted the application and was using it effectively post-migration, the CIO admitted that change management consulting services made the adoption go smoothly.
Good evidence is fact-based and repeatable. Grant Thornton quotes research from PROSCI, a change management organization (and admittedly a biased source), stating that over 80% of projects with change management embedded in the work achieve their goals. Other research shows that projects without change management often have success rates that are far lower than projects that embed a change management program.
McKinsey research (Helping employees embrace change | McKinsey) into the value of change management programs shows that programs with strong change management philosophies and support demonstrated a return on investment of over 143%, while other programs with inadequate or no change management support demonstrated a return on investment on average of 35%. This research clearly indicates that well-planned and executed change management can have a tremendous impact on the success of any significant project.
People Matter. Do You Need a Chief Change Officer?
In the simplest analysis, almost all business breaks down into a handful of primary components: people, processes, and technology (known in the industry as PPT). Designing an elegant system is not difficult; building and constructing robust processes is relatively straightforward. While the reason for the failure of any new change, in a system, in a process, in a new business model, or other factors, can be blamed on the new system or process, more than likely, the failure of adoption and successful implementation rests with people. This is not to say that sometimes problems are rooted in selecting the wrong technology or creating a new process that is too complex. We have evidence that many systems or process failures are due to the technology or the complexity of processes or actions required to make a process work. However, the one easily changeable aspect of the three-legged stool (people, process, technology) is people. We should be able to provide people impacted by change a view of the future that appears to provide value to both the company and the individual, to help people see the benefits of the change, and to create motivations to change.
If we follow the logic that people are a vital component to business success, and if we believe that companies are sincere in their statements that people are important and that employees and their opinions and beliefs matter to the company, then helping people through change management initiatives should be a top priority. In fact, given the amount of change in any of today’s business environments, the frequency of change, and the breadth and depth of change in many business functions and processes, one could imagine a new “C” level role for an organization – the Chief Change Officer, whose job would be to anticipate change and to help people plan for, understand the need for and to change successfully as business processes, systems or business models change.
Change Management Approaches
There are a number of change management philosophies, from Lewin’s unfreeze/refreeze model to the ADKAR model advocated by Prosci. All these models start with the idea that employees need to understand the rationale for change and, just as importantly, why the change is needed urgently. If the employee base does not believe that change is important, or does not believe the change is needed urgently, then they are likely to resist change. Moreover, employees need to see that the outcomes, once the change is complete, will leave the company, and themselves, in a better place. We believe that companies also need to acknowledge the work necessary to move from the current state to the future, something that is often glossed over or ignored.
Change management programs, then, will rely on communication, which is important to help people learn that change is necessary, and on evidence to help employees understand that change is important and urgent. Change management will require the ability to create a vision of a future state in which the company is better able to compete or gains a competitive advantage. The employees need to be able to see themselves in that future as well, so change management must create a vision that helps people see the value in the future state not just to the company but to themselves as well. Finally, change management relies on good training to help people see the new roles they are likely to fill and obtain the skills they need in order to succeed.
Change management must also acknowledge a road map that defines the amount of work necessary to move from the current state to the envisioned future state. That work must be fully supported by the executive team, while the executive team also provides resources for the employees who must shift their work or learn new processes or systems to thrive in the new way of doing work.
Change Management Does Not Happen by Accident
Change management does not happen on its own, it is not organic or spontaneous. People and systems are much more likely to remain in their current position or condition rather than accept even a positive change. Newton’s “bodies at rest tend to stay at rest” is a good way to think about the perception of change. Change management must be planned and executed by people who are empowered to help employees change how they work. Merely changing a process or system without identifying the resources to help the employees understand the change and adapt to new ways of working does not automatically mean that employees will be as effective or efficient in the new process or that they will not resist the change. Change management requires proactive thinking and investment but almost always returns far more value than was invested.
Does Every Project or Change Require Change Management?
Clearly, not every business growth strategy requires a change management initiative. Several factors will determine if a change in processes, business models, or systems will require change management support.
Some of these factors include:
- The breadth and depth of desired change. A minor tweak to an existing process is unlikely to require change management. Reworking a major end-to-end process, such as a new order to cash business process, will likely require some change management support, as tasks, responsibilities, and timing may all change in the new process.
- Complexity of operations. The more complex an activity or process is, the more likely it is that change management will be necessary to support the change.
- How deeply rooted the existing way of work is in the business. A process or decision-making framework that has been a core mainstay of the business will require far more change management than changing a newly adopted process or system.
- Corporate culture. Workplace culture plays a significant role in change management. A company with a long history based on trusted systems will find it more difficult to change than a young company or one founded on agile principles.
- Cross-silo, cross-function. Changes that impact more than one workgroup or function are more likely to require change management due to hand-offs between teams or process steps.
- Significant shifts of responsibility. New ways of working, new business models, or entirely new processes may shift responsibility for key activities from one team to another. In cases like these, change management is often very helpful, both for the team gaining new responsibilities as well as the team giving up or changing its responsibility.
- Mergers and acquisitions. Change management is exceptionally valuable when two groups are merged, or a new group is acquired. Helping teams with similar skills determine which functions or activities should be retained, which should be moved to another group, and how both groups should operate or function as one team often requires change management expertise and a third-party perspective.
- When the future state is uncertain. People are much less likely to want to change and to support change when the future state is unpredictable or uncertain. You’ll need a larger investment in change management if you cannot create a clear vision about the future state or if the external market and circumstances simply do not allow for a clear expectation about the future.
Any one of these factors may indicate a need for change management help. The need for change management increases when several are present in one project or when several projects are underway simultaneously.
Conclusion
We hope we’ve made the case that 1) change is a constant, 2) change of almost any sort has an impact on employees, who are your most vital assets, and 3) you can’t afford to ignore the impact that change has on your teams. Change management is not a nice to have, it is a must-have to drive significant initiatives that will impact how your teams and business perform in the future. While there are different approaches to implementing and managing change, all address the fact that employees must understand the need for change and the urgency and need to have a shared vision of what the company’s future, and their role in it, will have post-implementation. Adding change management to your strategic growth initiatives can help your teams recognize benefits faster and reduce resistance to change.
Jeffrey Phillips, Principal Consultant, in CREO’s Strategy Development & Insights practice helps companies manage change.
