“Change management” is no longer a vague process poorly understood by senior executives. The people side of business transformation—engaging employees at all levels in the design and implementation of a transition—is now widely recognized as integral to the success of any change initiative.
Nonetheless, change management remains more peripheral than it might be. It is evoked at times of transformation, rather than being central to what companies do on an ongoing basis. If businesses want to be truly adaptive, meeting the requirements of continuous change, they will need to work harder to establish the practice at every level of the enterprise.
That is the conclusion of a new report by management consultants at Booz & Company, based on a worldwide survey of 350 executives who have carried out corporate transformation programs.
The study finds that senior managers understand the need for clear and credible people initiatives better today than they did in the past. And they recognize that no transformation happens without the commitment of employees at all levels. Four-fifths (82 percent) of respondents said they now have dedicated “people work streams” to promote changes to employees’ skills, behaviors, and attitudes. More than half said the people side is more important than other aspects of a transformation program.
Research studies have shown that business transformations often fail because employees feel they are not part of the change and therefore don’t commit to it. The good news is that the greater attention being given to the people side appears to be paying dividends: Transformation campaigns are generally more successful than they used to be. More than four in five respondents said their change program had had a strong impact on business performance. Two-thirds said those programs were delivered on time and on budget.
Still, the executives were not above self-criticism. A large majority felt they could have executed certain aspects of the transformation process—for example, the establishment of learning initiatives, or the alignment of leadership with the needs of employees—more fully, and earlier in the process. The survey also revealed that resistance to change was most prevalent among frontline staff, and that managers in North America were less likely to resist change than those in Asia or Europe.
In the past, change management programs tended to be little more than communications plans—packages of letters sent to staff, customers, and other stakeholders, announcing a merger, restructuring, or new product line. This was communication after the fact, an add-on to a decision that had already been made. Tracing the history of change management, the report identifies the next stage as when companies tried to be more inclusive, for example by organizing more stakeholder events and communicating more effectively.
Today, companies are adopting a more programmatic approach that emphasizes executing every aspect of the transformation scheme in parallel—from involvement of those affected by the change to the alignment of systems to support behavior change. To be effective, any plan needs to be adaptable as it responds to individual, team, and organizational feedback.
The next stage of change management will involve a further leap forward, the authors of the report say. Instead of seeing transformation as episodic, leading organizations will develop ongoing in-house change capability, embracing change as a permanent part of business life. The requirements of modern business mean that companies must be much more flexible and responsive. Change management will be needed not only for major business transformations, but also for relatively common activities, such as new product or service development. Managers will have to place greater emphasis on experimentation and stakeholder participation in the design phase, for example, by committing to more action research and pilot programs than they did previously.
Moving toward this next stage of change management means focusing on three core areas, the report says.
First, an organization’s leaders need to understand the emotional component of change. The report notes that leaders often fail to comprehend that employees frequently respond emotionally, rather than rationally, to change. The survey showed that middle and line managers tend to be the least prepared to deal with nonrational responses, and would benefit from new skills, tools, and ways of working with employees.
Second, leaders need to drive change by engaging with and coaching staff, while acting as role models for the new ways of working. Executives can no longer decree change without engaging with employees in defining the new behavior, and motivating them to curtail inappropriate ways of working.
Finally, companies need to build change management capability into their HR systems and structures. Employment contracts, performance appraisals, and sales incentives all should be tailored to the goal of appointing and retaining staff capable of delivering change, the report says.
Change management has come a long way from the days of the simple communications plan, when managers treated the engagement of employees as an afterthought. However, the Booz & Company survey found significant room for improvement. The dynamics of modern business mean that organizations will need to change how they operate much more frequently than before. That means companies must not only improve their business processes, but also improve how they manage change itself.