Developing new strategies or operational initiatives is the most important way companies renew themselves, by helping to preserve their competitive advantage and stimulating platforms for long-term success. Changing the existing way a business is run can be beneficial, but, it can also introduce a lot of risks. When it comes to making big changes executives know that the wild card is their employees’ capacity to adapt to a new order. Most people do not like change, especially when it comes to changes in the way they do their job on a daily basis. Preparing the company for a change by making any level of the organisation better able to deal with it may be as important as the details of the project. User adoption and business processes changes must be addressed in the change management plan. Fortunately, when companies attempt to manage people change, a little improvement goes a long way.
There are two components involved when managing a successful business transition and changing how people interact and accept those changes. Without considering both, the change initiative will most likely fail.
(1) Organisational change management focuses on the people side of change: how people’s behaviours influence operational changes, and how changes impact the intended audience.
(2) Operational change management focuses on the physical aspect of a change, for example, infrastructure, software, hardware, or environmental changes.
ROI Case For Effective Change Management
- 58% of the companies failed to meet their targets;
- 20% captured only a third or less of the value expected.
- 42% of companies gained the expected returns or exceeded them (by as much as 200-300%).
For the more successful companies in the study, effective change management engaged at every level: senior and middle managers and frontline employees were all involved, responsibilities were clear, and the reasons for the change were understood throughout the organisation.
- On average 143% more of the returns they expected.
By contrast, in companies that fell short of expectations, we found a lack of commitment from or follow-through by senior executives, defective project-management skills among middle managers, and a lack of training for and confusion among frontline employees.
- On average only 35% of the value they expected.
So what happens without change management?
This is very well illustrated taking a scenario from the McKinseys study that juxapositions the two hospital experiences both implementing a similiar change program but, applied very different methods. The contrast is quite stark and compelling for companies to ensure effective change management is integrated with their projects. At one hospital, the executive team communicated their bold expectations for the initiative, and stakeholders at every level were involved throughout it. At the other hospital, the executive team did not mandate the change and were described as ‘invisible’ during implementation, middle managers did not know who made the calls and frontline staff had no clear understanding of the new business changes or, of the reasons for complying with them.
The first hospital exceeded its expectations for the initiative (125% of the business case) in less than a year, while the second gained barely half of the expected savings. If any single level of the organisation of the second hospital had been better primed to implement the changes, it could have realised a better return on its change initiative, they would have had a much better outcome.