CHAPTER 1
Faster, Easier Changes: The Business Case for Change Management
It is not the strongest of the species that survives, nor the mostintelligent, but rather the one most adaptable to change.
—Commonly misattributed to Charles Darwin
Chances are excellent that if you are reading this book you have alreadyexperienced a "bad" change experience—perhaps something akin to one of thefollowing situations:
The Consultant Rumor. One day, a consultant team arrives and beginsasking questions. You're told they're here to "identify operational efficiencyopportunities." You and your peers begin to compare notes on the questions beingasked. Senior management isn't providing clear answers.
One of my earliest work experiences was with a project called C 90. It wasrumored that this project was designed to cut costs to 90 percent of currentlevels. One employee had heard of a project called C 90 in another company thatwas doing exactly the same thing. Communication from senior management was sopoor that there was nothing in writing on the project. The biggest surprise wasthat the project was actually called See 90. It was about identifying key areasthat the company should focus on in 1990. Total costs weren't going to be cut.
The Surprise. Four days before Christmas, the company announces that itis offering a voluntary separation package to many people. If the company doesnot receive enough voluntary acceptances, involuntary cuts will begin as soon asMarch. People are given eight days to decide to accept the offer. People areshocked because the company was just finishing a fantastic year.
What nobody had communicated was that the company was preparing for a largeincrease in raw material costs. Management offered the voluntary program atyear-end so the company could pay for it with the great earnings of the currentyear rather than the expected poor earnings from the upcoming year. Nobody had agood holiday season.
The Ill-Conceived. A company made an acquisition, and as part of theacquisition, it decided to consolidate operations in another city. Thissurprising news was shared with all employees on a Monday morning. "Many of youwill be given the opportunity to move, but this facility will be closing."Certainly this news was a surprise, and the situation was one that could not beavoided.
The ill-conceived side of this announcement was that there was a second businessunit colocated in the facility that was to be closed. Nobody had bothered tothink about what would happen to the second business unit if the first one wereto close. Nobody in the second unit had even been told of the acquisition. Thegeneral manager of the second business unit found out at the same time aseverybody else in the building.
The Killer Information Technology Project. The IT group works for monthswith a small group of users to design new processes to roll out with a newsystem. They have an inspiring project name and a newsletter that comes outregularly.
The project starts to slip, however, and the training schedule gets shortened.Much of what is taught in training becomes "how to perform a transaction" in thesystem. There isn't time to explain the overall process and when the transactionis to be used. When the launch, or go-live, occurs, in theory people could pressthe right buttons to do work in the new way—but no one's been told why andhow to! Mistakes and frustration mount. Customer orders aren't being shipped.Vendors aren't getting paid. Even worse, employees aren't being reimbursed fortravel expenses. Credit cards are being shut off by the card provider.Productivity completely disappears.
The variations on the "bad change" stories are endless. I like them because theyhelp me make the case that change management is not only a little tinder youthrow onto a project. Change management is the fuel that makes a projectsuccessful, and doing it well requires planning, resources, and execution.
Changing the "Change Curve"
Think about any major change that you've personally gone through. How much timedid it steal from you being able to get your "real work" done? Think not onlyabout the time you had to spend learning what was going on and getting trainedin new policies, procedures, or equipment—but also the time you weredistracted by gossip, fears about the future, and concerns for yourself and yourcoworkers.
Now add to that the impact on every other employee affected by the change: thetime they spend learning about and coping with the change they can't spend ontheir "real work." No wonder that productivity invariably drops when a change isintroduced (Figure 1-1).
When a change is introduced, people must spend time learning what is going tochange, developing new skills, installing new technology, defining newprocesses, and so on. Plus there is usually a lot of mental energy that goesinto worry about the future. That's why productivity always drops immediatelyafter a change is introduced before it begins to rise. The hope is that thechange will lead to an even higher level of productivity as people eventuallygrow comfortable with and competent in the new methods.
The goal of change management is to shift this impact curve—lessen thedrop in productivity, raise productivity faster, and achieve an even betteroutcome (see Figure 1-2).
It surprises me that so many companies give change management short shrift. Theytend to muddle through their change efforts, barely communicating and thinkingthat people will soon come around. What this "cross our fingers and hope"approach ignores is the significant economic opportunity cost that is introducedby the turmoil of transformational change.
To illustrate this point, think about this hypothetical scenario. Let's say1,000 employees, each of whom costs an average of $80,000 per year, work in abusiness that generates $330 million in revenue per year. The cost of labor inthis organization is $80 million. We can conclude that the value created by eachemployee is $250,000 per year (see Table 1-1).
During a change effort, you know you're losing some percentage of their time.For the purpose here, let's assume that they are only 90 percent productiveduring this period. This means a 10 percent loss. Over the course of a 12-monthinitiative, you would forgo the creation of $25M in value for your company.
Before you reject the underlying concept here, note that the forgone value maynot be easily seen. Sure, it's easy to see the loss of value when costs increasebecause employees have to go to training. But think of the hidden costs. Whatabout a research scientist who is worried about losing his or her job in areorganization? As a result of not working as hard, the scientist developssomething several months later than he or she might have. Think about thesalespeople who are gossiping about the change program instead of calling oncustomers. The value disappears like heat leaving a drafty house. You know it'sleaving, but you will never find all the cracks.
Suppose you could shorten the time frame (see the "faster" column in Table1-2) or have less of a drop, say only 5 percent (the "better" column), or,ideally, both. You can avoid millions of dollars in opportunity costs. In thisscenario, being able to do a change just 1/12th faster and by cutting theproductivity loss to 5 percent, this organization would capture $13.5 million inopportunity costs.
Even if the numbers for your company differ from this scenario, the concept isthe same: effective change management enables your organization to avoid missedopportunities to create value, and it does so by increasing productivity andquickening the pace of change.
Change Management Isn't Rocket Science
For a lot of people, hearing that they've just been assigned to lead a change intheir area of responsibility is considered bad news—likely because they'vehad some of the bad change experiences described earlier.
And now you've just been asked to play a major role in a change effort, perhapseven lead it. You've been told, "This is a great career opportunity for you ifyou succeed." Having lived through poorly managed change efforts, you are wellaware of what it means to fail.
A mentor suggests your best bet is change management. "Great," you think."Another complicated, mumbo-jumbo program thought up by consultants. Worse, itcould be something thought up by the folks in human resources or corporatecommunications." You research the topic and find a description something like "Astructured approach to move people from a current state to a future state in aneffective and efficient manner." Your day has gone from bad to worse.
But there is good news. Change management isn't rocket science. Changemanagement is a combination of three things: strong leadership, goodplanning, and an investment of time.
In fact, change management is so easy that I bet you're already using it athome.
Almost Everybody Uses Change Management at Home
Yes, you really do use change management at home. Let's look at a "major change"in a family and discuss what would likely happen. Suppose, for example, thatyou've decided you want your family to live a healthier lifestyle.
One option is to simply impose these changes on your family. Change your groceryshopping list, stop the take-out trips, force the spouse and children on hikesor bike rides every day. I bet you know exactly what you'd get from thisapproach: a lot of resentful, rebellious people living in your house! Childrensnacking behind your back, a spouse who stops off for a burger before cominghome from work, people who disappear at the "exercise hour." With a lot ofyelling and nagging, you may ultimately see some change, but it will be a hardslog with questionable results.
No, if you were serious about the change, imposition would not be the way to goabout it.
If you were serious, you'd have to be more thoughtful and deliberate in how youapproach this change.
* You'd have a clear vision for your change, in this case, a healthierfamily.
* You might read up on nutritional and exercise guidelines so you'd have a basisfor making decisions. You'd think about your food budget and whether you couldafford new exercise or sports equipment, or fees if a family member wants tojoin an organized sport team. (Let's call this the scope of effort.)
* You'd want to shape a framework that will help you deal with all yourfamily members so they embrace the effort.
* You'd want to educate them (in an age-appropriate way if you have children).
* You'd want to work with your spouse so you're in full agreement on how to makethe changes. For example, you could replace food rewards with other activities,such as playing miniature golf.
* You'd want to get your spouse and children involved in preparation of healthymeals.
* Before talking about the changes with the full family, you'd want to havespecific plans in place for the execution: actions you will start takingimmediately to implement the changes.
Change Management in a Business Context
Once you understand these basic components, it's easy to translate them into abusiness context (Table 1-3).
I expect that some of the terms in this table (such as the ASPIRE Model) are newto you. Don't worry. The core of this book is structured around thesecomponents:
* Vision: Chapter 3
* Scope: Chapter 4
* Framework: Chapter 5
* Execution: Chapters 6 to 10
There is a brief detour in Chapter 2, where I talk about some basics ofhow people react to change that you will need to keep in mind as you plan andexecute the change. Plus there are two final chapters that address broaderissues around implementing a change management plan.
What Does and Doesn't Affect Change Management
This book is designed to give you a road map through the change process. As yourguidebook, it is meant to cut years off your learning curve. Right up front,however, you should know the following:
The nature of change does not vary based on industry. I have seen change inplaces as varied as a candy company, an iron foundry, an insurance serviceprovider, a telecommunications company, and a global accounting firm. In theend, people drive change, not industries.
National cultures, however, create variability in the way change is managed. Oneapproach might work in the United States, Canada, Australia, and the UK. Thesame approach definitely will not work in Germany, China, or France. How peopletypically interact with their leaders has more to do with how to manage changein their environment than industry classifications do.
Workforce dynamics play a huge role in managing change. People act differentlyin an Internet start-up versus a governmental agency versus a unionized heavymanufacturer versus a professional services organization in a right-to-workstate. A successful organization is frequently harder to change than a failingorganization.
The tactics you would use in a large organization are unworkable in a smallorganization. Layers of cascading messages would be appropriate in the largerorganization, where a smaller organization could just gather people in thecafeteria. That said, the leader needs to communicate to everyone throughout thecourse of the project.
Change Management Works
If you thought it was good news that change management is not rocket science, Ihave even better news for you: it works. Executing an effective changemanagement program does two critically important things:
1. It enables your organization to reach its goals more quickly and with greaterproductivity than it would under any other circumstances ("shifting the curve,"as I talked about earlier in the chapter).
2. It enables you to exhibit the kinds of skills that top leaders need to have.Top leaders know how to place their people first—and relish theopportunity to rest comfortably when the job is done well.
By paying attention to change management, you will not only help your companyachieve a transition more quickly and smoothly, but you'll learn valuableleadership skills. It's a win-win situation for all involved. Remember, seniormanagement expects you to deliver.
Manager's Checklist for Chapter 1
[check] Change management is not extra seasoning thrown onto a project. It isthe main ingredient that determines success.
[check] Effective change management requires planning, resources, and execution.
[check] The goal of change management is to alter the "change curve" bylessening the inevitable productivity drop and speeding up the achievement ofhigher performance levels than were previously seen.
[check] Change management isn't rocket science. Most of us use the basiccomponents in our daily lives. What it requires is strong leadership, goodplanning, and an investment of time.
[check] The nature of change is the same across industries, but it can beaffected by national cultures, social norms, and so on.
CHAPTER 2
Organizational Change Starts with Individual Change
When the winds of change are blowing, some people are building shelters;others are building windmills.
—Ancient Chinese Proverb
People of all walks have been dealing with change for at least as long as therehas been a written record. One of the oldest Chinese texts is the IChing, or Yi Jing, which literally translates as Classic ofChanges. Dating back to at least the third century BC, the Yi Jingis a means of gaining insight into a question using a standardized process ofthrowing coins and interpreting the results in one of 64 ways.
Although one might place a low value on the random nature of insight that wasgained, the ancient Chinese had perhaps a better understanding of change than wedo today. The Chinese character Yi refers to three aspects of change.First is that nature provides us with ongoing change. Births and deaths happen,the tides come and go, seasons change, and the sun rises and sets. Second isthat change follows rules. As an example, as the days become short, the weathergrows colder. We can always count on the sun rising in the east and setting inthe west. Third is that change becomes easy when one is able to see andunderstand that which is constant and that which is changing.
Sounds great: Change follows certain rules. Once you understand the nature ofthe change and that which remains constant, it will all be easy, and you willfeel peaceful.
This may sound like an alien way of thinking, but you can easily see it on apersonal level. Think about a movie in which a character has to explain to achild some form of major change. The dialogue would run along the followinglines: "Jimmy ... Mommy and Daddy love you very much, and we love being afamily. We love being a family so much we decided that we would like to make thefamily bigger, and Mommy is going to have another baby. You will have a brotheror sister. You will always be our oldest child, and we will always love you withall our heart, but we will soon be a larger family." The father has explained tothe child that change will occur, what the change is, and what will not change.
The concepts are the same in business. Think about an organizational changeyou've gone through. I'm sure you can think of an example when the change didn'tgo well. What was your biggest complaint? For many, the answer is "I wascompletely stressed out. I didn't know what was going on." You were stressed outbecause you didn't know what was going to change, how it would affect you, andwhat was going to stay the same. You also didn't know the rules or principlesthat were being used to govern the change.
The Biology and Psychology of Change
Think for a moment about your high school biology class. Remember the termhomeostasis? Homeostasis is the process by which an organism self-regulates its internal environment so that it maintains stability. For example,a single-cell organism might regulate its temperature or pH levels.
Now think about humans. It's a leap from a single-cell organism to thecomplexity of a human being, but homeostasis is an important part of ourbiological functioning, as well. My brother-in-law comes north to visit fromFlorida, and he is always cold on very nice days. When I travel south to visithim, I am always hot on days he calls nice. At a biological level, this is anexample of our bodies dealing with unexpected change.
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