Andy West looks at the difficulties of change management and offers advice on how to deal with it.

We live in a changing world. Technology, governments and legislation change frequently. Companies merge with or acquire other companies and bring out new products and services. There is pressure on organisations to be better, bigger and faster. Failure to respond to the imperative of change tends to lead to disaster – but so too does managing change badly.

As many as 37 per cent of IT projects fail¹, according to a study by project management consulting company PM Solutions. The study identifies five top causes of troubled projects ranging from unclear requirements, lack of or badly managed resources, unrealistic schedules, poor planning and finally poor risk management with key risks missed or inaccurate assumptions made. The report, Strategies for Project Recovery, covers 163 companies of all sizes. On average, respondents manage $200m worth of projects each year, of which approximately 37 per cent are deemed to be ‘at risk’.

A 37 per cent failure rate in IT projects begins to look digestible compared with a reported 70 per cent failure rate² in wider change management projects that was uncovered by KPMG. It identified reasons for failure – ranging from the gap between the strategic vision and successful programme implementation; resistance to change; and critically, failure to take full account of the impact of the changes on those people who are most affected by them.

Change is important, but clearly many organisations are not doing it effectively. They may not be making the right changes or they may be late or over budget. Too often, changes are not linked to the organisation’s strategic direction. A utilities firm as part of developing improved project management practices discovered that 20 per cent of projects ran at that point did not have a business case and had not been justified financially – these projects could have been a waste of time and money even if they worked.

Most change is elective. Change, with the exception of that mandated by legislation and regulation, is about development, opportunity or growth. Taking advantage of the latest technology is also a choice. Some organisations choose not to be leading-edge, rejecting the associated risks, but instead tick over, picking up the scraps of the market. Of course, as W. Edwards Deming said: “It’s not necessary to change. Survival is not mandatory.” The reality is that all businesses must change to survive but they choose the pace of change and when and what they change.

First steps

Too many organisations launch initiatives, programmes and projects to change processes and people without analysing what they already have in place. Yet the organisational context for change is crucial.

The first step is to get a clear understanding of where the business is at the moment. You would not change a building structure without first understanding the architecture of that building. You would not generally make a change in IT unless someone had first taken a look at the technical infrastructure. Part of change management analysis must be to assess where you are starting from.

Usually, organisations are led from the top. A visionary leader has an idea and pulls everyone behind them. This can be a good way of motivating people, but often it does not take account of where everybody else is at that moment. Not everyone may be in the same place as the person who has come up with the vision. For example, a privatised utility company had a very clear vision that it needed to become a smarter commercial organisation, look to the future and take some balanced risks. But the staff, many of whom were from three generations of families who had worked for the company, had a strongly held view that ‘this is how we have always done things’. There was a major gap between the vision of the MD and the perception of most employees.

[pullquote]The need for change had to be addressed at grassroots level with the right language[/pullquote]. The privatised firm was saying ‘we are now privatised and need to make a profit out of all the things we do’. Workers were saying ‘we are a public service – it doesn’t matter what we spend as the focus is on providing a public service’.

The resolution was to change the message from senior management. In this case, the message changed to ‘we are a public service organisation but in order to invest in this public service we need to make a profit’. This encompassed the perception of the staff to make the message work. That change in messaging was one of the most important stepping stones to begin the process of change.

It is vital that organisations ask the right questions to establish if they have the skills and insight to create the desired change or whether they need to buy them in. While it is easy to bring in outside consultants, this needs to be done appropriately and with care, managing any resistance to external consultants telling people within the company that there is a better way of doing things.

Organisations might decide to deliver change themselves. Yet these days, enterprises are so lean that if they take somebody out of a department to deliver a change then that department will be in difficulty because there is no spare capacity. There is a conflict between keeping day-to-day operations running effectively and making essential changes. Organisations have to do both – keeping routine operations going supports the current business, while making changes means there will be a future business.

Productivity dip

The harsh reality is that when you change things there is always a dip in performance or a loss of staff. It is a natural part of change. After a successful change, things will improve and be better than ever, but there is a need to be realistic about how long and how big that productivity dip will be and whether it is balanced by the projected benefits.

Organisations are under huge pressure not to allow productivity to drop – so much so that it is not unknown for people to cancel change projects as they feel they can’t afford the loss in performance during change. Yet the longer change is delayed, the longer the company is failing to respond to external drivers for change, putting it at greater risk.

It is vital to factor in the cost of managing change. If you take someone away from their department to help manage change, that might result in higher than usual overtime payments for the remaining staff. There may be an impact on customer response times and customer retention.

Centralising for economies of scale and efficiencies is a common change but often organisations do not plan properly for the impact on workers, who may choose not to participate in the change and leave their jobs. Relocation projects should thoroughly research expected levels of staff retention and adjust them for factors such as asking staff to move a long distance or from a low cost housing area to a higher cost area.

Test assumptions

One firm planning to centralise staff from a Northern city to an area close to London expected 50 per cent of its employees to relocate. This was not a viable assumption. Of 130 people, it planned for 60-70 to relocate. In the end, about 10 people relocated. All that knowledge and experience left the business and led to productivity dropping through the floor. The firm had allowed for a six-month dip in productivity – it was still struggling to get back to previous levels of productivity three years later.

Staff turnover had stabilised in recent times and there was an assumption of staff loyalty that would translate into willingness to relocate. In fact, it was more likely that people were staying on with the firm because there was a recession on. The assumption was flawed. This is why it is important to ask the right questions – if you don’t ask the right questions you have to log any assumptions and validate them.

Organisational context

Change management is more successful when change in the organisation is broken down into its impact on the organisation as a whole and on individuals. The concept of social architecture, allowing people to interact and operate together effectively to make things work and change happen, is important in the organisational context. There are many change models available. Kotter’s 8-step model for change, for example, works well for top-down change in organisations that are process-driven and machine-like. Gareth Morgan’s organisational metaphors define nine models of organisation, ranging from a machine to an organism where everyone works together and change is driven upwards as employees identify the need to do something different.

Organisations that fit the ‘machine’ model are most likely to experience resistance to change from staff as they may feel that change is being imposed on them. Dealing with people’s reaction to change becomes key and there is a recognised cycle that may include denial and anger, despair and then acceptance. If people are successfully engaged with the change they may still experience some of these reactions, but the speed with which they pass from denial to acceptance is much quicker. For successful change in companies that fit the organism model, individuals have to feel empowered to change so that they know they can do different things and try out ideas.

Individual perspective

Of course, organisational, team and individual contexts for change are interrelated. Successful change comes from asking individuals the right questions about what needs to change and getting their buy-in. A top-down change process might include asking people, what does your department do, what do you create and who is your customer – internally or externally?

Organisations planning to drive through change internally need to ask whether it is possible for individuals tasked with managing change at project level to step back from their function or department to see how things work and how that relates to how the organisation works as a whole. Notably, bigger strategic change at programme or organisational level demands leadership from individuals operating at a level that allows them to step back from the entire business and see the context of the organisation’s history, development and current culture of behaviour. It can be difficult to be honest about an organisation that employs you. However, this is not about being critical, it is about being aware. It is not labelling something as ‘wrong’, it is about describing the organisation.

Feedback failure

Change management often stands or fails on communication. Frequently, a real effort is made to communicate the change but a vital element is missed out – communication must be two-way. When people are just delivering messages about what will change and have bypassed a two-way consultation process that is when projects stand to fail. More consultation has a clear correlation with less resistance to change.

One organisation wanted to introduce a new centralised procurement system that would bring bulk-buying savings of £10m a year. The system was launched on time and on budget and everybody was trained in it. However, the new solution required managers to load and approve orders themselves, however, most managers had long since delegated procurement to somebody in their team. They did not want to take back that work and most of them found a way to not use the new system. If the company had asked the managers how they worked then a more appropriate system would have seen a much greater buy-in.

Organisations also fall into the trap of consulting perhaps just once and then delivering something that people are not expecting, perhaps for a good reason. Furthermore, if there has been a failure to provide feedback on suggestions or to share issues that have arisen since the initial consultation, for example, then employees will feel they were asked for their input and then ignored – a situation that is arguably worse than not consulting in the first place.

A vision for change

While consultation is important, vision and direction is critical. It is not always necessary or possible to get everybody onside but they need to know that change is going to happen. Just because change may be difficult is not a good reason for organisations not to do it. Beyond the pain of change lie the rewards that will flow from a modernised, viable organisation.

A fully-referenced version of this article is available on request.