The 2011 winners are. . . .

By David Lee, Consultant, MSS Technologies, Inc.

Today’s environment, more than anything, is characterized by change. It is a recognized constant. Change occurs in an infinite number of forms depending on the situation, the organization, and the timing; and while some organizations are proactive about change, many are not. In fact, studies show that over 50% of change initiatives are a response to an event that drove the change such as:

• A merger or acquisition
• A shift in senior leadership
• New products or innovations
• A new competitor or substitute product
• The gain (or loss) of primary customer
• A substantial drop in customer satisfaction
• Implementation of new technologies and systems
• Reduced employee satisfaction or labor issues
• Increased government regulation
• A major economic shift that impacts demand

Due to exponential changes in technology, information, and knowledge management; organizations that develop a competency for managing and even driving change gain a distinct advantage. Yet, even with an enlightened view of change, a 2008 survey of senior executives who had conducted change initiatives found that 75% of all change initiatives fail to produce their intended results. Driving change is therefore inherently risky for leadership requiring highly visible investments that may only result in process break downs, rejection by stakeholders and employees, insurmountable IT issues, hidden costs, and customer complaints with little or no improvement to the business.

Among the 25% of initiatives that are successful, the most important factor named was a clear Organizational Change Management (OCM) program. The clinical definition of OCM “is a structured approach to shifting/transitioning individuals, teams, and organizations from a current state to a desired future state.” What this means is creating a competency that manages change end-to-end, using proven tools and practices to achieve the desired results and reducing the risk of failure.

Of course, OCM in practice is nothing new. It has existed since people began to assemble to accomplish goals and then decided to improve their approach. Only in the last few decades has OCM advanced into its own as a distinct practice of management. Modern OCM is a convergence of industrial engineering, psychology, economics, communications, sociology, business management, and even advantage mathematical theory.

The need for OCM arises from the growing complexity of doing business. In a 2008 survey, executives who had implemented change programs listed “underestimating complexity” as the primary reason for program failure 35% of the time. This is second only to lack of a structured OCM program.

Organizational complexity is created in many ways. Some common elements are:

• An exponentially growing number of product offerings and variations
• An increasing number of market segments and customer categories served
• The breadth of geographic locations where business is done
• The layers of business processes set up to support products and customers
• The number of technological systems that need to be integrated
• The variety of business cultures that are joined
• The management structure and number of competing agendas

In the Complexity Crisis, John Mariotti describes the increasing issues of complexity in modern companies. Complexity creates hidden costs that are hard to identify, difficult to manage and erode the profits of growing companies. As such, complexity not only becomes a catalyst for change, but an impediment to change.

The result of complexity is, quite simply, more. More stakeholders to address, more business processes to be reconciled, more people affected by the change, more business units impacted, more communications requirements, and more risk.

The result? More time, energy, and resources required to successfully affect change coupled with a greater risk of failure; and therefore, a greater need for a structured OCM approach. The difference created is what we will call the Complexity Gap.

Choosing a Simple Approach to Complex Change

Determining an approach in a complex environment can be very difficult as many issues and concerns cloud the decision. Most literature on OCM will state key success factors for managing change including gaining full executive alignment, transparency, a sense of urgency, and a culture of change. While we agree with all of this in concept; the reality is, not all change is the same nor is it convenient.  As a result, there is no single strategy for managing complex change that works in every circumstance. Organizations must select an approach based on their readiness, their culture, and the urgency for change.

To create some clarity on where to start, we have developed a simple model based on two concepts: 1) the need for “Hard” change vs. “Soft” change, and 2) the organization’s predisposition for “Continuous” vs. “Discontinuous” change.

Hard vs. Soft Change

As illustrated on the continuum below, “Hard” change at one extreme is radical with a significant and immediate impact to the business. It comes with a sense of urgency and may be driven by a specific event, crisis, or issue. Hard change requires clear milestones and reaches a definitive point in time when implementation must occur.

“Soft” change by comparison is gradual. The urgency is measured by political, cultural, or other considerations. It is implemented in bits and pieces and the impact may only be noticeable over time.

An example of a Soft change may be a shift in a company’s strategy, perhaps from a product provider to a solutions company. Such a shift may require not only substantive changes in business processes and infrastructure, but also a shift in the way that people view their jobs and their contribution to the business. This kind of change offers added opportunity for resistance and reversion.

Continuous vs. Discontinuous

As presented by Richard Luecke (Harvard Business Essentials Managing Change and Transition, 2003) ‘Discontinuous’ change takes place over one or a few initiatives separated by long periods of consolidation and reestablishment of order. Discontinuous change is generally broader in scope and has a higher impact; therefore, the change is more complex and is likely to impact multiple functional areas, numerous products or services, and more business processes.

Meanwhile, “Continuous” change is incremental, occurring over smaller but frequent periods with little time between initiatives, if any. Efforts are isolated to a specific business unit or function and, as a result, have less complexity requiring less investment per initiative. Companies pursuing a continuous approach often have a strong culture of change and are better equipped to absorb the impact on performance.

Strategic Change Model

By combining these two views, we can cut through much of the complexity and pinpoint an approach that will work best.

Discontinuous/Hard Change: This approach applies when a high sense of urgency exists and the risk of not changing is great. The organization sees the need for immediate and drastic change and leadership is determined for it to occur over a short period. This approach cuts through complexity due to the sense of urgency. Organizations focus on what matters most. Dedicated OCM is a necessity in this category to reduce risk.

Continuous/Hard Change: This is an approach where a series of changes may be required and the timing of the changes is important. This approach can be utilized for business process improvement where one change leads to another and leaders drive the goals. Many companies take this approach to institutionalize change management as a discipline and manage through complexity. Under these circumstances, OCM often becomes a permanent part of the organizational structure.

Discontinuous/Soft Change: This approach applies to situations where leadership consciously manages a specific change initiative to be implemented gradually. Often this strategy is applied when cultural or political sensitivities are paramount and the potential for rejection is high. Good communication and stakeholder engagement is key to reinforcing the need for change and maintaining a sense of urgency. OCM techniques are important, but should be introduced subtly.

Continuous/Soft Change: Company’s utilizing this approach create an environment for change that is intended to be organic. Groups and individuals are empowered to make change and leadership simply sets the general direction. This is a highly evolved approach that is only effective in companies who have created a culture of continuous change management. The role of OCM in this situation is to prevent organizations from slipping into complacency.

Implementing Change in a Complex Environment

When considering OCM, practitioners tend to emphasize the psychodynamics of human behavior (Kubler - Ross/Satir) or strategic models such as Freeze Phases (Lewin), Eight Steps (Kotter), or Planned Change (Bullock & Batten). These models focus on the leadership role of instigating change, managing cultural issues, and motivating the organization. The importance of these issues should not be dismissed.  On the contrary, they are essential. Yet, as discussed in The Hard Side of Change Management; the equally important, more substantive issues of planning, implementing, and measuring change are largely ignored. In a complex organization, it is precisely these capabilities that will do the most to close the complexity gap.

In A New Framework for Managing Change, J.S. Oakland and S.J. Tanner emphasize the ability of an organization to create detailed plans, identify and consolidate the work streams and manage change as a series of integrated projects. Looking at complex change from this perspective, MSS has identified four key work streams that, managed effectively as integrated projects, and can help ensure a successful result. They are:

• • Communication: the process of how the change is conveyed to stakeholders from management to employees to customers and suppliers.
  • Training: the process by which the organization is educated on the change, its benefits and the impact on their work efforts.
  • Customer Engagement: the process with which the change is rolled out to stakeholders, receives input and feedback and creates buy-in across the organization. Customers in this case, are any resources, internal and external, affected by the change.
  • Knowledge Management: the process of capturing, preserving and making accessible information related to the change program.

Communication

Communication is what people often think of when they refer to OCM. It includes promoting the benefits of change and informing the broader organization of the timing, impact and details of the change. As the project plan for the change takes form, the communications plan then identifies what key message are to be delivered, the audiences to receive them, and the timing of the communications. In a complex organization, managing communications as a detailed project becomes essential as individuals, teams and even departments can get lost. The more complex the organization, the more each part of the organization needs to be accountable for the change. Otherwise, customer groups are forgotten, suppliers are informed too late and the business is put at risk.

Training

Training is integral in preparing the employees for impending change particularly when the change will directly affect the day-to-day work efforts of numerous employees. In addition to providing them the skills necessary for change, it reinforces the need for the change and provides them a channel for voicing questions or concerns. On the flip side, training provides OCM management a way to measure the organizational readiness and adjust. In a complex environment, training can become an almost insurmountable challenge. The greater the number of products and services, customized business processes, and geographic locations; the more training tracks, courses, and modules needed. The effort and resources for creating and managing the training escalates and the costs of training skyrockets. In the short term, managing training as a primary work stream and creating a detailed work plan will help ensure greater success.

Customer Engagement

Customer Engagement is often the most important work stream for OCM. In this case, the term ‘customer’ is meant to reflect anyone who is affected by the change including employees, customers, and suppliers. In most traditional OCM models, Customer Engagement is only part of the other work streams. The Communications workflow would have tasks associated with stakeholder meetings while companies would rely on the town halls, conference calls, department meetings, and training to inform and gain feedback from employees, clients, or customers. Rather than embed the engagement activities in the other work streams, we recommend making Customer Engagement a separate, highly managed process.

Here again, this becomes especially important in organizations with greater complexity. In complex environments, the number of singular elements needed to perform (employees, managers, markets, processes, systems, clients, etc.) a predictable outcome becomes exponential and nearly impossible to mange directly. Leaders must engage at all levels to enable affective and positive change. Thus the importance of Customer Engagement multiplies.

Knowledge Management

Knowledge management is the fourth work stream essential to managing OCM in a complex organization. From understanding the initial business case and rational for the program to baseline stakeholder analysis, performance metrics, issues and opportunity logs, communications and messaging, and training content; a change program generates a great deal of information. Knowledge management provides the spine for OCM. Managing information can be vital for managing complexity for several reasons.

• Key people move on from the organization
• The change occurs over and extended period
• Metrics need to be captured and reviewed as performance indicators
• Daily or weekly logs catalogue issues and resolutions
• Rationale for decisions need to be reviewed or updated
• Key learnings are transferred efficiently throughout the organization
• Future change program utilized key learning, models, documents for new initiatives

The primary activity associated with Knowledge Management is a system for collecting, cataloging and making information accessible throughout the change program. It may include building databases, setting up shared networks or web resources, and making the information searchable. Knowledge management also means consolidating and transferring that knowledge as personnel transition into different roles or projects.

Conclusion

Studies have shown a structured approach for managing change through OCM increases the rate of success and reduces the potential risk of change initiatives. The importance of OCM grows exponentially the more complex the organization. The more products, business processes, geographic locations, etc. an organization has, the longer change takes and the more resources it consumes and the greater the risk - a situation we have labeled the Complexity Gap.

The first step to closing the Complexity Gap is to choose an approach that best meets the situation, urgency, and organization’s state of readiness for the change. Using a model such as the OCM Approach model described helps cut through the noise and define the position of the company.

Further action to close the Complexity Gap is to manage key work streams as integrated projects applying great attention to the planning and implementing with rigorous discipline. The four most important work streams in our experience are Communication, Customer Engagement, Training, and Knowledge Management. With the application of OCM techniques in these areas, complexity can be tamed.

Final Note

While we discuss managing complex change, we would be remiss if we did not emphasize the symptoms of complexity discussed may indicate an even more dangerous problem.  Organizational complexity creates hidden costs that can severely impact the health of an organization by slowly eating away at earnings. In the long term, these issues could be a sign the organization has reached an unsustainable level of complexity that needs to be addressed if the organization is to thrive.

References

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Cameron, E. and Green M. Making Sense of Change Management: Kogan Page Ltd., 2004.

Jorgenson, H.H. , Owen,  L., and  Nues A. Making Change Work, Strategy and Leadership VOL. 37 NO. 2 2009, pp. 38-44, Emerald Group Publishing Limited, ISSN 1087-8572

Luecke, R. Harvard Business Essentials: Managing Change and Transition: Harvard Business School Publishing Corporation, 2003.

Mariotti, J. The Complexity Crisis: The Platinum Press, 2008

McGreevy, M. Why Change Works Sometimes, Industrial and Commercial Training Vol. 41 NO. 6, pp. 305-313, Emerald Group Publishing Limited, 2009

Oakland, J.S. and Tanner, S.J. A New Framework for Managing Change: The TQM Magazine, Vol. 19 No. 6, 2007 pp. 572-589, Emerald Group Publishing Limited, 0954-478X DOI 10.1108/0954478071082842.

Sirkin H. and Keenan P. and Jackson A. Harvard Business Review: The Hard Side of Change Management: Harvard Business School Publishing Corporation, 2007.

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Wilson, S. and Perumel, A. Waging War on Complexity Costs, McGraw-Hill, 2010