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:

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.

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.

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.

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.

2 thoughts on “High ROI Change Management

  1. MR

    Is there a more recent update/study of “Change Management That Pays,” McKinsey Quarterly, 2002