While it is sometimes called the "soft" side of change, managing the people side of a corporate transition is often the most challenging and critical component of an organizational transformation. Take a merger or acquisition, for example. The technical side of the change - or the "hard" side, if you will - will most certainly be complex. Issues surrounding the financial arrangements of the deal must be worked out. Development will have to take place to integrate the business system. Decisions will be made about the physical arrangements of the newly formed organization.
However, it is the ability to get enterprise end users on board and to participate in any changes that will make the difference. Individuals will have to do their jobs differently, and it is the degree to which they change their behaviors and work processes that will make or break the merger or acquisition.
CHANGE MANAGEMENT is the process, tools and techniques to manage the people side of change to achieve the required business outcome. It does little good to create a new organization, design new work processes or implement new technologies if you leave the people behind. Financial success of these changes will be more dependent on how individuals in the organization embrace the change than how well you draw organizational charts or process diagrams. Therefore, change management is a systematic approach to manage employee engagement and adoption when the organization redefines how work will be done. Ultimately, this strategy focuses on how to help employees embrace, adopt and utilize a change to their day-to-day work.
Change management is both a process and a competency. From a process perspective, this method is comprised of a set of steps followed by a team member on a particular project or initiative. For the given transformational effort, it is the strategy and set of plans focused on moving people through the change. Prosci's research-based methodology includes three main phases: preparing for change (where readiness assessments help guide the formulation of a strategy); managing change (where five change management plans are created and integrated into the project plan); and reinforcing change (where compliance is audited and mechanisms are deployed to cement the change).
From a competency perspective, it is a leader's or manager's ability to "effectively lead my people through change." The notion of leadership competency is universal, but what that competency entails depends on a person's relationship to change. For senior managers, competency could mean being an effective sponsor of corporate change and demonstrating their own and the organization's commitment to such plans. In contrast, front-line supervisors see their competency as related to coaching direct reports through their own change journey. While the competency varies based on one's relationship to such adjustments, organizations are more effective and successful when they build change management competencies throughout their ranks.
Change management does not just entail communication or training; it is not just about managing hardware or software versions (although it has been used in this context); and it does not just address managing resistance. Effective change management follows a structured process and uses a holistic set of tools to drive successful individual change.
THERE ARE NUMEROUS reasons to employ effective change management on large-scale efforts, including mergers and acquisitions. It is easy to fall into the trap of approaching change exclusively from an organizational perspective. When one thinks about a merger or acquisition, the issues that come to mind are financial structuring, data and system integration and the physical location of the new company. However, organizational change of any kind actually occurs one person at a time, and it is the cumulative impact of successful individual change that results in an organizational transformation being successful. If individuals don't alter their day-to-day work, these corporate efforts will not deliver results.
There are countless consequences of ignoring the people side of a change: productivity declines become much larger and longer in duration; managers are unwilling to devote the time or resources needed to support the transition; necessary people do not show up to meetings; suppliers begin to feel the impact and see the disruption caused by the change; customers are negatively impacted by corporate reorganization, which should not have been visible to them; employee morale suffers, and divisions between "us" and "them" begin to emerge in the organization; stress, confusion and fatigue all increase; valued employees leave the organization; projects also suffer as deadlines are missed, budgets are overrun and rework is required in order to get the effort back on track; and in some cases, the project itself is completely abandoned after large investments of capital and time. All of these consequences have tangible and real financial impact on the health of the organization and the project. However, each of these consequences can be addressed and mitigated if a structured approach to the people side of change is utilized.
There is a growing body of data that shows the impact that effective change management has on the probability of a project meeting its objectives. Prosci's longitudinal benchmarking studies show a strong correlation. Data from the 2007 and 2009 benchmarking studies showed that 95% of participants with excellent change management met or exceeded objectives, while only 16% of those with poor change management met or exceeded objectives. In other words, projects with excellent change management were six times more likely to meet objectives than those with poor change management. A 2002 McKinsey Quarterly article found that projects with excellent change management delivered 143% of the expected return on investment (ROI), while those with poor change management delivered only 35% of expected ROI. Regardless of the change at hand, focusing on the people side of change increases the likelihood of being successful. Additionally, Prosci's research shows a direct correlation between effective change management and staying on schedule and on budget.
EFFECTIVELY MANAGING change requires two perspectives: an individual and an organizational perspective. The individual perspective is an understanding of how people experience change. Prosci's ADKAR Model describes personal transformation as successful, whether at home or at the office, when an individual has awareness of the need for change, desire to participate and support the change, knowledge on how to change, ability to implement required skills and behaviors and reinforcement to sustain the change. If an individual is missing any of the five building blocks, then the transition will not be successful.
The goal, then, in leading the people side of change is ensuring that individuals have awareness, desire, knowledge, ability and reinforcement.
The organizational perspective of change management is the process and activities that project teams utilize to support successful individual change. If ADKAR describes how individuals can adopt change successfully, then organizational change management is the set of actions to help build awareness, desire, knowledge, ability and reinforcement. While the change management resource on a project can work to develop the strategy and plans, much of the work of change management is done by senior leaders, manager and supervisors throughout the organization. Benchmarking data shows that in times of transition, employees have two preferred senders of change messages: a senior leader at the top and the person they report to directly. Change management practitioners are enablers of these employee-facing roles. And in times of change, it is the effectiveness of senior leaders as sponsors of corporate transformation and of managers and supervisors as coaches of change that will determine if a project succeeds or fails.
SO WHAT CAN YOU DO to become a more effective change leader? The bottom line is this: Begin applying change management on your projects, and begin building change management competencies in your organization. These are the first steps to ensuring projects deliver their intended results by taking care of the people side of change. Investing the time and energy to manage the people side of your organizational efforts pays off in the end - in terms of success of the effort and avoidance of the numerous costs that plague poorly managed organizational transformation.
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TIM CREASEY [tcreasey@prosci.com] is the director of research and development at Prosci, an independent research company in the fields of change management, business process reengineering and call center management.
