The price of adoption: the key considerations when planning for change
We know that effective change management can make or break a business transformation. A number of studies (most recently BCG, 2022) report that about 70% of transformation efforts fail to meet their objectives or deliver long-lasting enterprise value. One common theme across the research is that of the 30% that ‘win’ all list effective change management as key to their success.
The value of a business’s products and services is heavily impacted by the productivity of those soft and squishy things (also known as ‘people’). Payroll budget is often the most significant liability to a business…but what happens if we consider the payroll budget as a value-driving asset to be worked rather than a cost to be controlled? In this frame, effective change management becomes a massive competitive advantage.
So why is change management so often undercooked and under-budgeted in the planning phase of a business transformation?
Perhaps some insight can be found in how change management is positioned and costed during the business case phase of a transformation. There may be broad support for investment in change management, but under-budgeting or investing in the wrong resource mix will impact project viability and return on investment.
In our experience, organisations tend to underestimate the benefits and downplay the risk minimising value of change management, often resulting in a limited budget that does not meet the resource requirements.
In part one of our guide to planning for change management, we set out to share some of our insights and considerations on how to build a robust case for investing in change management. We also share a framework to quickly assess the scope and complexity of the change, informing resource and cost estimation.
The benefits of robust change management planning
There are significant benefits in taking the time to carefully plan out the change management effort required for a transformation and building a business case, including:
Creating a sense of urgency through a clear and compelling case for change and a vision of the future;
Helping the transformation program sponsor/s to appreciate the value of effective change management early and validate the investment required;
Making better choices about what resources are required, when they’re needed, and how to get them; and
Enabling leadership to make more informed choices when engaging with vendors, e.g., consulting firms and contractors.
Planning for change – so where do you start?
We recommend two key steps:
Start with what you know
Adopt a clear evaluation framework (i.e., show the method to the madness)
Step one: start with what you know
The process of estimating change management effort and resourcing is part science, lots of experience, and a dash of guesstimation. Building a robust budget estimation without detailed planning can be challenging; you won’t have all the necessary information, and the goalposts will move. However, some considered questions will help narrow things down and develop a strong case for investment in change management.
First things first, get clear on the expected outcome
For any transformation to be effective, you must first clarify the program’s desired results. What does ‘good’ look like once the transformation is completed? What’s at stake, and what happens if we fail?
Are there ‘people’ changes required to achieve the outcome? If you don’t need your people to do anything different, congratulations; then you don’t need change management.
However, any business transformation of substance, whether it be to address a change in your market, optimise cost, capitalise on an M&A event, or enable a change in strategic direction, will absolutely require changes to how your people behave at work.
So, if we acknowledge that there is a need to support people through change, then the question turns to how much effort and what the investment will cost.
Get clear on ‘what’ change management is and why it is valuable
It’s important to understand what ‘change management’ means to your leaders and show them what good looks like.
Undercooked and poorly funded change management has more to do with an immature understanding of what the business is getting for its money. Simply put, there’s little point getting granular with change scoping and planning if the business doesn’t understand how it adds value.
Understand how your business handles change
It is essential to understand your organisation’s capability to deliver change effectively. This insight will help you better assess how much effort is required to provide successful change management support. What can you learn from previous change management programs? What worked, what didn’t? If available, review historical performance against change management success measures/KPIs (e.g., change adoption, process efficiency, and ROI).
If you would like to learn more about using technology (including automation and machine learning) to capture and analyse change management data, we recommend you visit our friends at The Change Compass.
Step two: Adopt a clear evaluation framework (i.e., show the method to the madness!)
Change management business cases often suffer from a lack of clear reasoning behind the resourcing/cost recommendations. It’s important to ‘show your working’ by adopting a consistent approach to evaluate and cost change management efforts. Doing so will help align your leadership team, add considerable weight to resourcing and budget recommendations, and improve the overall chance of success.
Learn what you can about the nature of the change and what the impacts are
Before estimating and costing change effort, it is critical to understand the high-level impacts of the change, who the stakeholders are, what’s important to them, and the severity and complexity of the change. This will inform the required change management ‘treatment’ or a view on what support will be required to transition all impacted stakeholders from where they are to where you need them to be.
Start with your people
This step is about understanding your key stakeholders, sorting them into logical groups, and assessing the impact of the proposed change.
This isn’t a detailed change impact assessment; it’s about using what you know about the transformation and your people to form a high-level understanding of the change, what support your people will need, and what resources you have available.
Empathy is critical. People are constantly changing and adapting, whether they acknowledge it or not. Understanding their lived experience, preferences, and perspective will help you to develop a robust view of the required change effort.
Start by sorting ‘like’ stakeholders into logical groups (also known as stakeholder segmentation). Once this is completed, it’s time to assess how the change may impact them and what support they will need to adopt the required future state; this will help form a view of the overall change effort and costs.
Our approach to estimating the severity of change
At Levant Consulting, we have developed an assessment tool designed to support change management business case development. The tool assesses stakeholder segments on several dimensions. It produces an overall view of the size of the change (high/medium/low) along with a recommendation of the level of change effort required (low touch to high touch).
For example, if a stakeholder group scores ‘high touch’, they will likely need a dedicated change manager; a ‘low touch’ score would typically require change support on an as-needs basis.
We’ve provided a summary of our framework in the table below. Assessing key stakeholder groups against this framework will help you to build a view of the change impacts and inform decision-making around what change planning efforts and resources are required to support your people through your transformation.
Once you have a working view of the scope and complexity of the change, it’s time to estimate the effort required along with cost options. This step involves plotting the typical change/engagement activities against the overall transformation plan/milestones and estimating the effort needed to deliver. It’s ok if you don’t have all the details, the purpose of this step is to estimate the resources/costs based on available information and your team’s experience.
To complete this step, you will need a view of the critical transformation program milestones, associated delivery dates, and a list of typical change/engagement activities. But we’ll cover this in part two.
Story from the field- when change management fails
Some years ago, Levant Consulting was engaged by a large Australian FMCG business undergoing an operations transformation enabled by new technology. The business was part way through the program and was feeling the pain of not being able to transition to the future state.
What happened?
The transformation program assumed that ‘out of the box’ workflows of the new system would support different business units equally
Stakeholder engagement was lacking, with feedback indicating a lack of alignment around why the change was necessary, and the benefits of the future state
The program experienced low process compliance and considerable workarounds during the pilot stage
Go live was delayed due to a lack of stakeholder adoption of new ways of working and the inability to operate the new system effectively.
What was the impact?
Realisation of benefits was limited, significantly impacting ROI
Due to the criticality of the transformation, the business had no option but to make additional investment in change management
The financial impact of the delayed go-live dwarfed both the original and additional change management costs.
What did we learn?
Critical adoption risks would have been identified through robust change planning
Fit for purpose change management effort/investment would have enabled stakeholders to adopt the change faster and improve ramp-up time; with the outcome being the realisation of expected benefits, sooner
If change management can better show how it adds value to a transformation program, it can be very powerful and influential at the leadership table.
Conclusion
Both our experience and the research tell us that successful business transformations require investment in change. However, organisations tend to underestimate the cost/benefit of change management in the planning phase, undercook the budget, and increase the overall risk to program viability and return on investment.
Adopting a robust approach to evaluating change management effort and associated cost/benefit during the business case phase of a transformation will help align leadership, add rigour to resourcing and budget recommendations, and improve the overall chance of success.
Coming up in part two of "The price of adoption – the key considerations when planning for change”
Next time we will explore how to translate stakeholder insights into resource estimates, a method to estimate costs and some insights on what to consider before engaging vendors.
Get in touch if you have any questions or would like some more guidance on planning for change.
WILL MEEVE