Managing Change:
A Proven Path to Business Success

For years, companies have been using a variety of management techniques to generate breakthrough ideas about how they can increase revenues, lower costs or serve customers better. For most, the greater challenge has always been in implementing changes and new organizational designs. Today, greater proficiency in managing change is contributing to the way many organizations plan and implement their strategy.

"Organizational agility" is a contemporary term that refers to a company's ability to implement change. To many market-driven organizations, the concept represents a genuine competitive advantage. In most of our consulting engagements, we are helping businesses make a strategic transition of some kind. For example, our clients may want to update information systems, redefine their organizational structure or management control principles, reengineer business processes, or change their corporate culture.

This issue of Innovations is about managing change and includes many of the lessons that we have learned as change consultants, change agents and change managers during the past twenty years. In this issue, we cover the basics of successful change management. These include identifying a clear case for action, creating a vision and direction, and providing a process for change. If you would like to talk with us about managing change or making strategic transitions happen in your own organization, please contact us.

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How do large organizations perform successful transformations of their processes, systems, culture, or other parts of their operations? How do they manage around the resistance and roadblocks that seem to appear whenever the long-standing status quo is threatened? How do they get people motivated, involved, and "on board" with a change program? In our experience, we have found there are three fundamental attributes included in any successful change program. The first is a case for action. The next is a vision or a blueprint for the change. The last is a clear process for change. This article details these three attributes, their common pitfalls and how they support change.

Case For Action

Executives from a consumer products company attend a high-energy, offsite meeting. After marketing analyses are presented and many opportunities in new segments are identified, the executives "brainstorm" about how to capitalize. By the end of the meeting, exhausted but excited about the prospects, the group has generated a new marketing and organizational restructuring plan that will position the division to take full advantage of the opportunities to come. Months later, the executives are puzzled by the division's failure to mobilize around their initiatives, and an apparent "if it ain't broke, don't fix it" attitude...

Managers often find that having a vision for the future, including great untapped opportunities, does not create sufficient momentum to change. Where a great vision, by itself, can fail to motivate the organization, a strong case for action can help. A case for action is a documented communication that provides compelling, irrefutable reasons to change. It often describes the ramifications and perhaps impossibility of continuing to do business according to the status quo. A good case for action contributes to any change or change program because it helps to "push" the organization out of its current state.

A well constructed and well communicated case for action incorporates various sources of information to provide a genuine sense of urgency. Typical sources of this type of information may include:

Beyond financial analysis, including revenue and cost projections, many of the most compelling reasons to change come from outside the organization. They include talking to customers, suppliers, even competitors, perhaps gathering key testimonials, and analyzing what they think about the organization's products, services or operations.

It is also important to look at the current business processes and measure how well they perform. Organizations need to investigate their current operating procedures, and determine whether they can continue to yield the levels of efficiency and effectiveness required to remain competitive. Good cases for action often include a benchmark or best practice study that looks outside the organization to see what others are doing. Included in any comprehensive case for action is an examination of the underlying technology infrastructure and an evaluation of how well it's supporting the business.

Good cases for action are quantitative rather than qualitative. They are fact based. They deal with the cost, service, quality, time and capital requirements of a business.

Business change may have a profound impact, both inside and outside of the organization, on a variety of individuals or groups. We refer to these individuals or groups as "stakeholders," because they own a "stake" in the outcome of the change. Stakeholders often include management and staff members within the organization, but also may include customers, suppliers, or other outsiders.

Often each stakeholder group will have different stakes in the proposed change. For some, a change might mean more or less control or responsibility. For others, the proposed change may impact their budgets or earnings potential. Some may perceive the change as a threat to their job. Loyal customers may see a change as a threat to current service or pricing levels.

With so many stakeholder groups involved in a typical business change, no single case for action may appeal to all groups. Cases for action may be needed, each tailored to a particular stakeholder group that needs to hear the reasons, with a different perspective, about why a particular change must happen.

Common Errors in Developing a Case For Action

The case for action is ignored entirely. A visionary manager or executive committee expects that the sheer brilliance or common sense of the strategic plan or vision will carry the day, and thus does not invest any effort in trying to convince the rest of the organization that the status quo is not sufficient.

Organizations assume that a simple imperative statement by a senior manager will suffice. We have seen organizations issue a one page memo exhorting the organization to change and vaguely sighting market, customer and employee needs to change. Such cases for action are not compelling and do not move an organization to change. Without thorough explanation, they may trigger rumors and speculation, and actually engender resistance.

The case for action is based on limited and hasty internal studies. Significant and wide spread organizational change requires a deep, well thought out and fact-based case for action. Superficial internal studies that do not address what is happening in the marketplace with customers or with competitors often fail to provide the rationale needed to initiate lasting or significant change.

Organizations create a case for action once, and then forget about it. A case for action is a continuous process that validates and reaffirms that change must happen. Without continuous reaffirmation of why the change must take place, a change effort can lose momentum and the organization can backslide into old ways of doing things. The continuous nature of a case for action is missed or omitted by many organizations.

The case for action fails to deal with remaining in the status quo. A case for action must address remaining in the status quo and demonstrate why doing so is not a viable option. The commonly held belief or argument that the status quo is "good enough" has stymied countless change efforts.

Vision and Blueprint

Senior managers from a struggling chemicals manufacturer reflect on their worst year ever. Sales are down. Costs are up. The future looks bleak. Determined to turn things around, the managers decide to make an appeal to the entire workforce. In a company-wide meeting they present a hard look at the company's position and charter "empowered" task forces to look for ways to turn things around. After months of task force investigations and reports very little real progress has been achieved and the teams seem to be floundering...

In order for a successful business change to occur, a detailed vision of the work environment is needed to "pull" the organization towards a desired future. A good vision provides stakeholders with a comprehensive description of how the organization will look and feel after the desired change takes place. A detailed vision is important because it helps key stakeholders to understand what is being asked of them as the change program moves forward. Providing a clear description of how things will be provides people with an opportunity to evaluate, lend support, or raise and confront issues or implications that may have been overlooked.

A good vision includes a robust description of the organization's future mission, fundamental strategies, goals, target markets and customers. The vision should also describe in increasing detail the organization's future operating environment. To encourage a cohesive, disciplined, comprehensive view of future operations, a framework, such as the "Business Diamond," is often a helpful tool. The Business Diamond framework (see figure) categorizes any organization into five major areas: business processes; management principles; organization, jobs and skills; information and systems; and culture, values and norms.

Figure 1 - The "business diamond" or business operating model

Business Processes. A description of the operating environment includes the business processes which the organization uses, including horizontal or ÒlineÓ activities (e.g. product development, production, customer service), "staff" or support activities (e.g. financial, human resource, and information systems), and other "strategic" activities (such as strategic planning or organizational renewal). At the earliest stages of the change program, discussion of business processes may involve a simple identification of which processes the organization will renovate. Later, as the change program moves forward, the vision gains greater detail as processes are mapped and new rules for work are set.

Management Principles. Early in the change process, a careful examination and explanation of how people in the organization will be managed, incented, compensated, and developed is necessary. Management principles need definition early in the change process, because they provide the context for more specific decision making (around employment contracts, succession planning, benefits, etc.) that will need to happen as the change program proceeds.

Organization, Jobs and Skills. A good vision describes the future structure of the organization, as well as the types of jobs and the skills that will be needed to succeed. Initial vision work may tackle issues of centralization vs. decentralization of certain activities, divisional responsibility, and core competencies. As the change process proceeds, the vision is continually augmented and refined with discussions about reporting relationships, accountabilities and responsibilities, positional competency models, and training, skill building and recruiting programs.

Information and Systems. When building a vision, it is important to describe how information will be utilized, managed, disseminated, protected, etc., throughout the organization. Stakeholders need to understand any changes to the use and value of information, first from a business perspective ("What information do I need to run my business?") and second from the standpoint of how future systems will be implemented. Similar to management principles, information technology principles (and their implications) need to be drafted and widely discussed. Consensus around these principles set guidelines for answering key questions such as:

• Who will own and have access to certain types of data?
• What types of applications will be developed, or bought?
• Which platforms and vendors will be used?
• Where will responsibilities for information systems management lie?

Culture, Values and Norms. It is also important to describe the type of culture that will be necessary to succeed in the future. Stakeholders may need to hear that the organization is going to be more (or less) "nurturing" to its employees, or that there will be a change in emphasis from revenue growth to service. Organizations must identify cultural alternatives, choose those that best fit with the change that must necessarily occur, and describe how it will feel to work in the new environment.

The Business Diamond highlights the interdependencies of these five areas. The value of using any framework is that it provides structure and discipline to the visioning activity, and encourages a "big picture" look at the operating environment. Indeed, when using a framework to describe an organization, alignment between the different areas should be the most important, reoccurring point of emphasis and discussion.

Good visions must evolve and become increasingly more detailed descriptions or blueprints as a change program proceeds. It is critical to the momentum and success of the change program that key stakeholders continue to gain greater understanding and clarity of their roles, functions and responsibilities in the future organization.

Compelling visions include quantitative measures of business success. Specifically, they identify the absolute and relative performance levels that business must achieve if it is to be a success. These metrics are specific targets in terms of cost, time, quality, service and capital.

Like a good case for action, a good vision needs to be made specific and targeted to each key stakeholder. Just as a good case for action provides the organization with a "push" away from the status quo, a good vision provides a "pull" towards the new way of operating. Visioning requires work, discussion and buy in.

Common Errors in Developing a Vision

Managers assume that they will figure it out as they go along. A good vision needs to be well thought out and documented as part of the starting process. The undisciplined approach that typically begins with a senior manager or executive suggesting, "Let's move in whichever direction seems reasonable and see what happens," will most often fail. Good visions are planned, documented and then achieved.

The vision is limited to a short-term horizon. Many organizations equate their strategic planning process with their budget process, which often occurs in one year intervals. Thus, their visions and change plans for the organization only look one or maybe two years into the future. Many stakeholders require a longer-term perspective before they can commit their full support.

The vision is too similar to the status quo. If you are going to invest the time and effort to create a vision, create one that represents significant change for the organization! Making incremental improvements to existing processes often does not provide a large enough benefit, or "bang for the change management buck." Assuming that there is a compelling case for action, take advantage of it! Change the status quo, don't preserve it!

The vision is limited to only one small part of the change environment. We have seen executives provide visions that only describe a structural change, technology or a specific process. They fail to consider concurrent changes that are needed in other areas. For example, to improve customer service, a manager may envision a new information system that provides customer service representatives with instant access to information about customer orders. The manager's vision fails to include the cultural or skill changes that are demanded by the customer service representatives' change from managing a one-time transaction to managing an ongoing customer relationship. Visions are meant to be wide and inclusive of all the major elements of the business. The executives that make the most effective changes in the organization ensure that their visions cut across the entire organization and consider all of the ramifications of the change.

The vision does not support the "from-to" understanding of the change by those effected. In order for a vision to be the kind of "magnet" for change that managers would hope, it must enable the stakeholders to see and understand their roles, functions and responsibilities as they are today, as well as how they will be in the future. Fuzzy visions that do not support this clarity of understanding can not be well grasped and acted upon by the managers and staff of the organization.

The vision is based on a slogan. One of the most common faults we see with visions is that they are hinged on a vapid slogan that never gets further support. For example, a slogan that reads "Leaders in Aerospace Technology," by itself doesn't provide any insight into what is going to change or be different about future operations. Often conjured during an off-site meeting, these slogans are expected to be clear for all of the employees and managers of an organization. They arenÕt! Good visions need detail to encourage participation and understanding.

The vision is created without participation by key stakeholders. The last and most frequent error in creating a vision is the unwillingness of many managers to involve others in the development of that vision. Participation and contribution builds buy-in. Buy-in is crucial for successful change.

Process For Change

The third key element in a successful change program is a clear and well understood process for change.

A comprehensive change management program includes the activities that build understanding, create a positive climate, and build support for proposed changes in the organization. A good process for change ensures that there is readiness to change and continuing enrollment and acceptance among key stakeholders as the change program proceeds.

An important consideration when managing a change is to be clear about the participation and governance of the change program. Who will be involved and to what extent? Who is going to provide the sponsorship, leadership and direction to the team implementing the change?

It is also important to preview, well into the upcoming months and year, the steps that the change program will go through. Stakeholders need to know early where the process is going, what activities are planned, and what time and resource commitments will be asked of them.

The change process begins with an identification or acknowledgment of current conditions, so that all stakeholders are "on the same page" or beginning from the same assumptions. Included here is an identification of issues that pertain to the various parts of the operating model or business Òdiamond.Ó

A stakeholder analysis is critical element of the process for change. Such an analysis, performed early in the process and continually revisited throughout redesign and implementation phases, identifies each of the parties that may be significantly impacted by the contemplated changes to the organization and addresses how to manage their roles in the changes. A complete stakeholder analysis includes:

Similar to the case for action and the vision, we can see how the process for change begins with a high-level survey of the organizational landscape and gains greater definition and detail and as it proceeds. From the earliest, most preliminary stakeholder analyses, the change team begins to plan the activities and interventions that will eventually evolve into the detailed project plan and schedule for the change process.

An integral part of the process for change that grows out of the stakeholder analysis is a communications program. At the outset of the process for change, the preliminary communications program starts to answer important fundamental questions, including:

The answers to these and other basic questions provide the foundation for planning the major events and milestones in the change process calendar.

Along with a communications program, the stakeholder analysis provides the first step towards developing detailed education and training programs. Other change interventions, such as coaching and counseling, may also be required. Well conceived change programs use stakeholder perspectives to consider how to manage to a successful completion.

Common Errors in Planning and Implementing a Change Process

Change management issues are ignored entirely. Managers often choose to stick to the "hard" issues (organizational restructuring, process redesigns, and information systems analysis, redesign and implementation) and ignore the "soft" issues which address communication, education, participation, and buy-in. Ignoring the impact on stakeholders can almost guarantee failure in the change program.

One of the most commonly ignored change issues concerns the re-education of the people in the organization. Changes are likely to require new skills, attitudes, capabilities, or mindsets. While managers can hope employees will acquire the needed capabilities, history has shown that without direct intervention this neglected and often under funded area will sink any hoped for change effort. This area is so important that we have written another Innovations article on the subject. Click here to go directly to that article.]

Managers assume that the right steps will happen intuitively. Managers too often rely on their sensitivity to their people to ensure that they will address any points of resistance. Unfortunately, resistance to change is often passive or difficult to detect, and therefore doesn't become evident until after the change project has been hopelessly stalled or derailed. A good change process anticipates sources of resistance at the very beginning of the project, and takes proactive steps to manage them.

Concern about change processes and methodology dominate the change effort. The team responsible for the change process gets so involved in the "soft" stuff that they loose sight of the fact they are actually doing this to create some lasting economic business value. They overemphasize "team building"-type activities and let these features of the business change distract them from the drive for results. Accordingly, benefits can be superficial and lack true impact.

The change process is limited to training on new systems. We have seen several organizations who believe that the process for change equates to making sure that employees knew how to use new information systems. Good change programs go far beyond just training on new systems during implementation. They address the resistance and support points for each group of stakeholders, well before any redesign or implementation ever takes place.

Communications are limited to infrequent and top-down broadcasts. A good process for change has as its core a strong two-way communications program. While senior managers may be addressing the governance, goal setting and implementation of an aggressive change program, other staff must be involved and have the opportunity to challenge and ask questions about the changes being contemplated. Communications must be frequent, two-way and set in a variety of media with a variety of messages to support the change program. [Note: Communications are so important that we have written another Innovations article on this subject. Click here to go directly to that article.]

Middle management and other key stakeholders are ignored or scarcely involved. We have also seen change programs run by senior managers and focused on making front-line changes that fail to adequately involve middle management, who are the very personnel that must implement and be responsible for the successful operations of the new business environment. We have seen programs attempt dramatic change in the service areas of an organization, and yet fail to involve the customers in any kind of discussion or action until the results of the program are "sprung" on them. In some situations, the kind of response and backing that managers would hope for never materializes, and the program sputters or fails.

Top management is too distant. Another error is that top management does not provide active leadership and participation in the change program. Significant change requires senior managers that are highly engaged, visible, and "in there," addressing and knocking down barriers and providing the leadership and backing needed to implement change.

Summary

Change is managed most successfully when executives can answer in a clear and compelling way three basic questions:

The key to managing change is not simply being able to answer these questions once at the earliest stages of the change program. Rather, the key is being able to answer these questions continually, with ever-increasing conviction and clarity, as the change evolves and proceeds through its various phases.

It is also critical to realize that any significant business change will be experienced by a variety of stakeholders with a variety of perspectives. As a result, the answers to these three basic questions may need to be provided several times in several ways in order to achieve the widespread participation and acceptance needed to successfully transform the organization.

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Innovations is KCG's publication focused on organizational and technological change. Each issue of Innovations presents one or two case studies on a key topic as well as an approach or methodology relating to the situation. A recent issue is published below. We would particularly like to hear your comments about this issue and how you were able to use it in your company, or, conversely what you wish you could find in terms of subject material. See links to other articles at the bottom of this page.