Be a Better CIO: The Human Side of Organizational Change

CIOs manage change all day, every day – updates, priorities, technologies. What sets CIO’s apart, however, is the ability to manage the human side of organizational change. With this skill CIO’s obtain more support, get more done, and are more likely to be valued as a strategic asset.

The human side of organizational change engages your entire organization in support of critical IT projects, strengthens IT’s reputation as a key resource, and helps IT projects meet expectations by carefully setting organizational expectations and bringing accountability to business unit support.

CIO’s must understand and manage the human side of organizational change to counteract the tendency of those business unit leaders who minimize their project responsibility while maximizing IT’s responsibility. In a CIO Magazine article (1) on the impact of a project failure on a CIO’s career, Thomas Wailgum observes that IT often attracts the majority of the blame even though the lack of business unit support is often a major cause of the failure.

5 Reasons to Include Human Side of Organizational Change Management

1 – You need support from peers across the entire organization

The human side of organizational change demonstrates to both leaders and business units an IT project’s importance to future growth, revenue, customers, clients, and stakeholders. The human side of organizational change is primarily about strategic alignment and changing accountabilities and much less about smoothing user adoption. C-level and business unit executives need to see how the project supports their objectives before they support the project.

2 – It has an attractive ROI

The human side of organizational change pays for itself and more. A McKinsey study (2) of 40 organizations calculated an average project ROI of 143% for organizational change management-enabled projects compared to a dismal ROI for projects with poor or no organizational change management. Extrapolating to a $1M IT project the difference in ROI would be around $1M ($1.43M-$350k). If the organizational change management portion were included at $200k the ROI on this decision would be approximately 400% (($1M-$200k)/$200k). CIO’s rarely see a decision this CFO-friendly.

3 – It’s about executing strategy

Business unit executives do not care about servers, storage, applications, or any other technology silo. They care about things they believe will help them deliver expected business results. The human side of organizational change clearly connects project benefits to business unit deliverables so unit executives see the IT project as strategic – making the business units and the organization stronger, more agile, and more resilient.

4 – It’s about accountability

The human side of organizational change knows employee activities must be modified to ensure the system is utilized to full advantage. Real organizational support is rarely created with a ‘Why we must change’ presentation. To ensure system-support actions remain in place key individuals must be made personally accountable for these actions. The human side of organizational change uncovers key behaviors, suggests ways to make them accountable, and convinces executives to implement adjustments to individual accountability.

5 – It sets up the CIO’s next project for success

The human side of organizational change links business strategy execution to the IT project. Associating strategic goals and the technology required to accomplish those goals reinforces to the organization the significance of IT, the importance of the CIO’s function, and makes it considerably easier to support IT’s next project.

1 - http://www.cio.com/article/499047/After_a_Massive_Tech_Project_Failure_What_IT_Can_Expect
2 - “Change Management That Pays,” McKinsey Quarterly, 2002.

© Streamlined Management Group Inc. 2013 – All rights reserved.

Strategic Planning needs Org. Change ‘Push’

Picture: a swimmer as they reach the end of the pool. They flip, push off the wall, and in a moment they are moving powerfully in a new direction.

Your organization’s strategic planning review should be like a swimmer’s turn – crisp, powerful – situation understood, activities redefined, accountabilities altered, and people informed – moving forward.

It’s the ‘push’, however, the resulting actions – execution, which determines a plan’s effectiveness. It is one of the most important ways by which employees and stakeholders evaluate management.

The key to a strong, crisp push? Add to your review’s implementation some powerful organizational change techniques.

Benefits:

  • Improved performance,
  • Stronger unity (coherence),
  • Increased engagement, and as a side-benefit,
  • Increased respect for management.

Increase Your Strategic ‘Push’

  1. A crisp, comprehensive, and action-able strategic review
  2. Convert your new strategy into operational activities
  3. Package your message to bring people and their energy with you
  4. Use Reinforcing Structures to communicate and motivate every person, every day

But before we cover these four points, let’s address the main reason why an organizational-change implementation is critical as you seek to convert your strategic plan into daily action.

Here it is:
Your organization constantly communicates what is important to your people, even when management isn’t saying anything.

How?
Three ways: Present Messaging, Past Management, and Reinforcing Structures

To be effective your implementation needs to address and leverage these methods:

1.       Present Messaging

What is now said. This is the current set of visual, verbal, and written messages commonly associated with ‘communication,’ including speeches, newsletters, PowerPoint slide decks, letters from Executive Directors, and audio and video summaries. While important, present messaging has less impact on employee decisions and behavior than leaders believe.

2.       Past Management

What was said and acted upon in the past. People have surprisingly long memories about the decisions previous management teams have made especially concerning perceived inequities in the treatment of employees. Employees expect new management to act like those that have gone before.

This cynical (but often realistic) expectation by employees causes them to discount today’s management messages (talk) while staff wait for management’s actions (walk) to resemble the patterns set by previous management.

Changing people’s view of past management is very difficult, but it explains in part, the lack of enthusiasm when employees hear about new directions. Current management should continue to demonstrate their professionalism and care for employees until the weighted average of employee perception begins to include current management’s track record.

3.       Reinforcing Structures™

The actions management reinforced in the past. Reinforcing Structures are motivational mechanisms: policies, procedures, incentives, and configurations, which powerfully exert influence on employee behaviors and decisions due to personal impact on their compensation, esteem, and careers.

Although these Reinforcing Structures are in place now, they were developed and implemented in the past. This layering of reinforcing devices over time creates a patchwork, as each new policy, procedure, performance metric, incentive, or accountability corresponds to the thinking and business situation of the date of its installation.

Implication

Organizations cannot help but send a mixed or at least a hybrid message to staff.  While employees listen to current management, they are invariably influenced by previous leaders. This is even more evident and confusing for employees in an organization that has merged with another.

Which communication component has the greatest influence?Relative Influence

  • Present Messaging – small
  • Past Messaging – larger
  • Reinforcing Structures – largest of all

For Your Organization

Unless your strategic review and implementation accommodates and incorporates these elements, the ‘push’ off into your new direction will be significantly less than expected.

Building Your Review

In the following four brief notes, we will cover some of the essentials you and your board should consider as you push into a new direction.

Keith Miles MBA is a management consultant who helps organizations improve performance and engagement. Content adapted from his book, “The Improvement Toolbox” – website:  smgknowledge.com   Comments-questions: kmiles@smgknowledge.com

© Streamlined Management Group Inc. 2013– all rights reserved

Incentives – Proceed with Caution

Pay-for-performance approaches, once exclusively the domain of sales departments, are becoming more widespread. The intent is to give employees a stake in the company’s success, with the hope of improving individual performance. These incentive systems can be effective but they can also produce the opposite effect. Naive organizations see these systems as a quick-fix even for complex work situations.

Deceivingly powerful, these systems tempt management, but without sufficient anticipation and planning the long-term impact is often negative. A poorly conceived incentive system can damage a company’s culture for years to come.

What about the intent? Is it wrong to want to reward high-performing employees? We’ve spent years studying how organizations encourage effective behavior and there is no single, best incentive formula. Every situation is unique with its own culture, history, and goals. We use a careful, deliberate approach to improving and aligning work activities. Do not rush and seek an external point of view because extremely important factors can easily be overlooked due to familiarity.

If your organization is considering incentives, however, be sure to consider the following:

Opportunity

Is the opportunity to participate equal for all concerned or will some people have an advantage? One bank executive wanted to increase deposits. The plan: give employees 1% of each new deposit as a commission for bringing it to the bank. This commission was less than the amount that the bank was spending on advertising to obtain new deposits. In this case, though, future problems were easily seen. An employee who gives bank-sponsored retirement seminars would meet hundreds of people a month while a back-office clerk may meet only a few new people. The opportunity to benefit from the incentive would be unequal and this would quickly lead to frustration and disengagement.

Effort

Rarely is the effort required to perform a function uniform even for those in the same role. Geographic, customer, and product/service differences can effect how much work is required to produce acceptable outcomes for an organization. Those several organizational levels above can easily be ignorant of these differences but the discrepancies become quickly evident to those performing the roles in question. If a similar incentive is earned with varying degrees of effort the harder working crew can become disillusioned. Without a thorough pre-incentive review to identify differences in effort it is easy for the incentive’s goal to be missed, money wasted, and respect for management reduced.

Objective

Is the incentive based on objective input? Sales/margin dollars can be objective. A customer satisfaction rating, for example, must be very carefully constructed if it is to be objective. Incentives work best when based on consistent and objective information – whether from available performance metrics or from a long-tested source. Employees will often try to create an advantage even with objective, hard-to-distort data.

Trust

Do employees trust those who will evaluate and tabulate the information for the incentive? If not, the incentive will not have the desired result. Also, trust can not be manufactured quickly. It is fragile and earned over time. One breach and years may be required to heal a situation. A system that is implemented then quickly revised when management sees results accrue too quickly in their employees’ favor will destroy trust and deeply shake respect in managements’ integrity and judgment. A climate of trust and a simulation of possible outcomes are both essential prerequisites for a change in your performance management system.

Bottom Line

  1. An effective performance management approach considers the full range of components that drive employee activity, not just the financial ones.
  2. Incentives powerfully communicate the strategy and values of the organization – how it values its employees’ strategic contributions.
  3. Incentives can be a way to share the benefits of this desired activity with the employees involved.
  4. A poorly-implemented incentive system, however, can disappoint employees, damage performance, and clearly reveal management’s inability to think through a decision.
  5. Handled with care, considered with attention, and placed well, this powerful management tool can produce substantial results.

High ROI Change Management

Change management is critical to achieving expected results and engaging talented professionals in any enterprise-level initiative. When delivered with excellence, change management services provide an unparalleled return on investment both in terms of increased performance and enhanced respect for management.

What is Change Management?
It is normally a consulting-style intervention designed to positively alter the prevailing practice and operating philosophy of an organization to allow it to accommodate or exploit a strategic opportunity and achieve the expected return on the initiative or opportunity.

Excellent Change Management = Outstanding Return
A McKinsey study (1) of 40 organizations found the return on investment differed greatly depending on the degree of change management employed for significant change projects such as enterprise software initiatives or mergers and acquisitions. When a comprehensive change management program was integral to the initiative – the return on investment averaged 143%. The return on investment for projects was 35% which employed either no or poor change management.

Apply the McKinsey findings to a million dollar technology deployment and the difference in derived value would be just over $1M ($1,080,000). If the organization spent an additional $200,000 on excellent change management services the ROI would be 440%! – (880,000/200,000*100). A compelling return, but what is involved in comprehensive change management?

Here are the four elements:

Culture
As a first step, any large-scale initiative must be actively shaped to reflect and reinforce the beneficial aspects of the existing culture. If not, even a well-intentioned project can be misinterpreted and/or resisted by those whose support will determine its success or failure. This shaping goes beyond merely inserting a slide in the overview presentation and extends to making adjustments to how the project is managed and conducted. As leaders concentrate on the project and implementation tasks, it is easy to forget that the existing team worked with pride to create the present state and can react defensively to descriptions of its limitations, especially by ‘outsiders’. They are aware of the current state’s deficiencies but need to see a respectful depiction covering both the hard-won gains as well as the obvious weaknesses. The entire project should be shaped to respect past efforts, not blame contributors, and invoke continued support. We evaluate six culture dimensions to ensure a new initiative is seen as a logical extension of the organization’s history, values and mission.

Strategy
The change initiative must be framed within the organization’s overall strategy to show how it complements and enables the strategy to be achieved. This ‘business case’ justifies and summarizes the common behaviors required to support the initiative. Most organizations spend the majority of their energy developing a comprehensive strategy presentation and corresponding numeric targets. Comparatively few make the effort to consolidate and describe the common aspects required to support the strategic initiative.

Numeric targets garner executive attention and create clear pressure to deliver but if there are too many, they can conflict with each other and foster behavior counter to the organization’s overall goals (e.g. discouraging inter-business unit cooperation on critical projects as units shield resources for their own initiatives).
Even a well thought out set of numeric targets aren’t today’s complete answer as less-measurable and more-observable support behaviors are unaffected by targets (e.g. interactions between a manager and a direct report). These observable actions must also be guided.
In addition, here are two overlooked reasons why the strategy-initiative presentation often fails to produce the desired change in professional behavior:

1.   Talented employees lack freedom not understanding. Most professional behavior arises out of the organization’s prevailing policies, procedures, and perspectives which influence what people do and how they do it. Professionals hear a ‘rational’ argument for change, understand, but are not really free to alter their behavior. Nothing has really changed for them since everything in the organization continues to reinforce the current activity set.

2.   Talented employees need us to communicate in their time-frame. One manager complained the organization’s strategy dealt with issues out three to five years, while their department struggled without any practical guidance to sort out what should happen in the next three to five months.

To effectively portray the change initiative requires a consolidated view of what’s required to support the initiative expressed through a presentation as well as Practice and Tactics.

Practice
Many organizations mistake process for practice. While describing the necessary revisions to operating processes is definitely an important component of practice, more is involved. Practice also involves understanding and adjusting the policies, procedures, and preferences which influence professionals’ operating decisions.
Most organizations do an adequate job describing the required process changes but stop there assuming the setting of numeric targets alone will be sufficient to motivate people to change their operating decisions. This assumption is only partly true. Numeric targets and milestones are important but don’t alter the existing mechanisms which reinforce ongoing tactical decisions.
Managers and professionals often voice frustration over their inability to resolve opposing targets and policies. Talented professionals lose respect for management when these no-win scenarios are created then ignored.

I’ll never forget a conversation with two VP’s from the same organization. A VP-level incentive had been naively created to improve a specific outcome. They each complained, “When I make decisions to maximize my bonus, I reduce my colleague’s bonus and vice versa.” They personally struck a compromise while both looked for new positions outside the company.

Practice involves evaluating and adjusting the relevant processes and the influential policies, procedures, and preferences to give people the information and freedom to support the initiative.

Tactics
Use tactics to communicate the strategic initiative. This change management element represents the highest return in terms of delivering concrete support for an initiative. Professionals expect management to describe strategy as actions. In the words of one incredibly talented manager, “Until [actions are suggested] the strategy isn’t real, it’s just a slide deck.”

Think about the last strategic presentation you gave to your team. Isn’t one of the first reactions from your managers, “I heard what you said, but what do you want me to do [differently]?”
Convert the ‘three to five-year’ strategic initiative into sets of actions which model initiative-support and match their decision-horizon. Professionals do not expect nor want every aspect of their role to be scripted, but they do want us take the time to illustrate initiative support using practical suggestions.

Some might say that line managers could (should) provide this translation. In most cases, they cannot. Managers, by virtue of their position, are subjective and focused on departmental and shorter-term issues. Strategic initiatives span the entire enterprise and require objective implementation (e.g. would a manager eliminate his/her department?).

Greater ROI Requires Greater Experience
A practice review is required to allow the generation of role-suitable actions. Conducting the practice review and generating actions requires extensive operational experience over and above the communications expertise held by a typical change manager. Due to the additional expertise and review effort required, this element is not included in typical change management programs. It also helps to explain why typical programs often fail to deliver expected results.

Benefits In Addition To Increased Execution
Taking the time and effort to suggest tactics (within a change management program) conveys respect for professionals and their contribution – increasing engagement. Also, by presenting suggested actions, professionals also learn to think strategically improving the cognitive capacity of the organization.

1- “Change Management That Pays,” McKinsey Quarterly, 2002.

Organizational Culture 101

Every organization has one. Without conscious thought, organizations informally build up over time a pattern defining its typical or preferred operating state. No two organizations are the same – even divisions within a larger organization have distinct cultural elements. Like the grain within a piece of wood – culture gives beauty, texture, strength, and uniqueness to every organization.

Even though it is not expressly described, employees, especially new ones, easily sense the organization’s culture and feel its conditioning impact. Positively – as it communicates the importance of foundational activities and relationships key to the organization’s success. Negatively – as it extinguishes or hinders creative ideas due to pressure to conform to “the way we do things here”.

Culture: A Definition

An organization’s culture is the unique and prevailing pattern of behaviors, priorities, perspectives, values, and interrelationships that have been nurtured over time. Each leadership team leaves its mark on the emerging culture (like the growth rings within a tree). This includes not only its treatment of people and strategic decisions, but also the measurements, policies, and structures it leaves behind to shape ongoing employee activities. This prevailing pattern’s current form has been and is strongly influenced by three key components: Current Leadership, Past Dealings, and Organizational Structures.

1 — Current Leadership

Current leadership strongly affects culture by its ongoing actions, for example:

  • Accessibility – Is decision-making distributed or hoarded?
  • Trust – Are people treated with equity or are political concerns given more weight?
  • Vision – Is there conviction/clarity on the organization’s direction?
  • Feedback – Is communication with employees and staff only as needed or is it constant and broad-based?

Employees and staff react to Current Leadership’s actions (please note that I didn’t say speeches) and fold new information into their assessment. Their assessment is influenced by present management actions but is more strongly affected by past management actions.

2 — Past Dealings

Anyone who desires to make rapid organizational changes quickly discovers the weighting that individuals give to their past treatment. This is seen in one business owner’s perception after five years with his firm. A charismatic and ethical leader who cares deeply for the people who work with him, his outstanding behavior was immediately noticed by employees who welcomed his arrival after years of unethical and authoritarian management. He observed, however, that although he had behaved the same way from his first day on the job, employees didn’t start to believe and trust him until four years had past. They saw his good deeds and recognized his fairness, but they also remembered their poor treatment by previous management. They supposed that he, like the rest, would sooner or later reveal his true spots and treat them the same way. Only after several years of consistent behavior passed before their eyes were they finally able to trust him and wholeheartedly participate in the success of the company.

While not all employees are so jaded, many employees are cynical and wary of new efforts with familiar promises.

People’s reaction to leadership is then a moving average, giving some weight to existing management behavior while they strongly rely on their previous experience. This gradual building of respect and trust is critically important. Management should act at a speed that corresponds to the seriousness and urgency of the situation. Individuals must clearly be helped to understand the reasons behind swift changes or else management puts their relationship with employees into jeopardy. Changes made too rapidly can be perceived as coercion instead of common sense.

While many understand the impact of current and past leadership upon culture, fewer realize that the greatest contributor to the way we do things here is the effect of Organizational Structures that have been put in place over time.

3 — Organizational Structures

The values, goals and perceptions of those in management continue to influence employees even after individual managers may have moved on. How? The policies, performance measures, work practices, and assumptions about employee behavior currently in operation within your business are the cumulative result of all previous management’s values, goals and perceptions about how an organization should be managed. Each senior manager’s legacy becomes part of the intangible way we do things here and shapes employee activities.

A number of years ago, the city of Sunnyvale, CA was voted the best place to start a business in the US. David Vossbrink, Community Relations Manager, described their 10 year ‘customer’ process that continued to improve resident services while reducing the city’s operating costs. Sunnyvale’s program carefully selected performance measures, evaluated specific employee activities, and used both negative and positive incentives to encourage behavior. I asked if the city had a senior administrator champion during their 10 year evolution. His reply revealed the power of Organizational Structures upon employee behavior. He said, “Yes. What is more important, however, is that if the champion were replaced today by someone with the opposite point of view, it would take that person 10 years to undo the customer perspective that we have built into every performance measure, every policy, every thing we do.”

The impact of Organizational Structures is difficult to see. Once familiar, managers fail to explore and challenge the perspectives underlying existing policies and procedures and just accept their validity. The preceding viewpoint may have been contrary to management’s current vision for the company, or business situation changes have rendered the previous perspective no longer valid. A periodic, externally facilitated evaluation is often necessary due to familiarity and the powerful effect of these structures upon employee behavior.

Summary

Culture is a combination of Current Leadership, Past Dealings, and Organizational Structures.

  • Current Leadership is very important but as employees consider current leadership, they give stronger weight to their experience with previous management teams.
  • Past Dealings explains why rapidly shaping activities and attitudes is difficult for those without specific experience.
  • Organizational Structures are capable of withstanding significant pressure – negating the impact of speeches, banners, programs, and measures. In one organization, they repelled a three-year improvement effort leaving quality unchanged, and frustrating education programs designed to encourage individual leadership. Structures, because of their stealth, can make integrating newly acquired companies a significant challenge.

Over time, current leadership can overshadow the effect of previous management and make substantial changes if they recognize that employee behavior arises primarily from the structures that are in place. Managers, by ignoring remaining structures, can expend significant effort without any perceptible return. By changing the structures, however, senior managers can drive appropriate behavior and keep an organization aligned with a rapidly changing business climate – SMG’s unique approach drives full advantage from this principle.

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