Organizational Change Management And Cost-Benefit Analysis

Cultural Shifts

• Strategic planning enables businesses to establish clear objectives and formulate a plan to achieve them. Whilst the majority of business owners or managers are able to identify broad business goals this does not always equate to an effective business strategy. Companies who undertake strategic planning generally have a better understand of where the business currently stands and what changes it can implement in order to reach its goals. Strategic planning differs from business planning as it is not focused on specific issues such as the introduction of a new product or the launch of a new service but focuses more on the business as a whole. The strategic planning process is far broader than traditional business planning and identifies the organisation’s ethos, value and goals. By assessing the industry as a whole, experts can help company management teams to recognise the organisation’s current position within its sector and establish realistic and attainable objectives. Specialists then assist clients in determining how best to reach their goals and help implement the necessary changes. By taking a precise and pragmatic view, strategic planning professionals can help companies turn business ambitions into attainable and measurable objectives. By engaging a team of strategic planning specialists who have an insight into the company’s industry ensures that the company has access to expert advice which is directly relevant to their company.

The organisational changes that are required for aligning with the organisational goals are as follows:

• Expansion of the business in local areas for increasing the market share
• Upgrading the distribution management with the help of technologies like GPS and PDAs
• Developing and maintaining the cohesive and motivated workforce
• Politics- A potentially contentious, yet extremely important subject to consider when it comes to your company strategy is the political climate, This embodies everything from intellectual property laws to zoning restrictions to antitrust laws to employee and consumer protection regulations. There are practically zero aspects of business that are not directly impacted by the politics of where the business is located. Political forces can alter the playing field physically, through things like zoning/infrastructure and housing developments, or economically, through changes in tax laws, minimum wages, and permitting fees. 

Cultural Shifts – The society we live in and its culture dictate our personal values to a large degree, and these values are what drive our day to day decisions – including the types of products we buy, the places we go, and the services we use. Shifts in culture, therefore, drive the demand for new gadgets, clothing, food, clothing, music, and even business systems.

Changes due to business opportunities:

• Economic trends.Look at the economy in your area.
• Market trends.Your target market could be driving new trends that could open doors for your business.
• Funding changes.Think of donations, grants, or other sifting revenue streams that aren’t within your control.
• Political support.Consider changes in political ties.
• Government regulations.Think of regulations that are changing that might afford you new opportunities.
• Changing relationships.Consider shifting relationships with vendors, partners, or suppliers.
• Target audience shift.Your target market might be expanding, aging, or shifting.

Changes due to threat:

• The appearance of new or stronger competitors
• The emergence of unique technologies
• Shifts in the size or demographic composition of your market area
• Changes in the economy that affect customer buying habits
• Changes in customer preferences that affect buying habits
• Changes that alter the way customers access your business
• Changes in politics, policies, and regulations
• Changes due to loss in market share
• Loss in efficiency and longer delivery time and poor distribution systems.

Changes due to management decisions:

• Greater focus on metrics and measurement
• Access to much more information
• Increasing value of broad input

While some models of organizational effectiveness go in and out of fashion, one that has persisted is the McKinsey 7-S framework. Developed in the early 1980s by Tom Peters and Robert Waterman, two consultants working at the McKinsey & Company consulting firm, the basic premise of the model is that there are seven internal aspects of an organization that need to be aligned if it is to be successful.

The 7-S model can be used in a wide variety of situations where an alignment perspective is useful, for example, to help you:

• Improve the performance of a company.
• Examine the likely effects of future changes within a company.
• Align departments and processes during a merger or acquisition.
• Determine how best to implement a proposed strategy.

The McKinsey 7-S model can be applied to elements of a team or a project as well. The alignment issues apply, regardless of how you decide to define the scope of the areas you study.

The McKinsey 7-S model involves seven interdependent factors which are categorized as either “hard” or “soft” elements:

Hard Elements	Soft Elements
Strategy Structure Systems	Shared Values Skills Style Staff

“Hard” elements are easier to define or identify and management can directly influence them: These are strategy statements; organization charts and reporting lines; and formal processes and IT systems.

“Soft” elements, on the other hand, can be more difficult to describe, and are less tangible and more influenced by culture. However, these soft elements are as important as the hard elements if the organization is going to be successful.

Each of the elements specifically are:

• Strategy:the plan devised to maintain and build competitive advantage over the competition.
• Structure:the way the organization is structured and who reports to whom.
• Systems:the daily activities and procedures that staff members engage in to get the job done.
• Shared Values:called “superordinate goals” when the model was first developed, these are the core values of the company that are evidenced in the corporate culture and the general work ethic.
• Style:the style of leadership adopted.
• Staff:the employees and their general capabilities.
• Skills:the actual skills and competencies of the employees working for the company.

Application of model for change:

Step 1. Identify the areas that are not effectively aligned

During the first step, your aim is to look at the 7S elements and identify if they are effectively aligned with each other. After you’ve answered the questions outlined there you should look for the gaps, inconsistencies and weaknesses between the relationships of the elements.

Step 2. Determine the optimal organization design

With the help from top management, your second step is to find out what effective organizational design you want to achieve. By knowing the desired alignment you can set your goals and make the action plans much easier. This step is not as straightforward as identifying how seven areas are currently aligned in your organization for a few reasons. First, you need to find the best optimal alignment, which is not known to you at the moment, so it requires more than answering the questions or collecting data. Second, there are no templates or predetermined organizational designs that you could use and you’ll have to do a lot of research or benchmarking to find out how other similar organizations coped with organizational change or what organizational designs they are using.

Changes due to business opportunities

Step 3. Decide where and what changes should be made

This is basically your action plan, which will detail the areas you want to realign and how would you like to do that. If you find that your firm’s structure and management style are not aligned with company’s values, you should decide how to reorganize the reporting relationships and which top managers should the company let go or how to influence them to change their management style so the company could work more effectively.

Step 4. Make the necessary changes

The implementation is the most important stage in any process, change or analysis and only the well-implemented changes have positive effects. Therefore, you should find the people in your company or hire consultants that are the best suited to implement the changes.

Step 5. Continuously review the 7s

The seven elements: strategy, structure, systems, skills, staff, style and values are dynamic and change constantly. A change in one element always has effects on the other elements and requires implementing new organizational design. Thus, continuous review of each area is very important.

Cost benefit analysis:

The cost-benefit analysis for change management is not unlike other cost-benefit analyses – you are attempting to show the relationship between what it costs to manage the people side of change and the benefits of applying a structured approach to enabling and encouraging employees to adopt a change. You will only receive the buy-in and investment necessary to apply change management if you can “tip the scale” by showing that the real and tangible benefits of change management outweigh the costs. 

Research findings on the cost of change management are presented below and are fairly straight forward. The benefits side of the equation is where the discussion can be tricky. To enhance the cost-benefit analysis, five specific benefit perspectives are presented that can be drawn upon to make your case for change management: 

• Benefit perspective 1: three people-side ROI factors- faster speed of adoption, higher ultimate utilization and higher proficiency; change management drives project ROI.
• Benefit perspective 2: cost avoidance- poorly managing change is costly to the project and the organization; change management is a cost avoidance tactic.
• Benefit perspective 3: risk mitigation- individuals, the project and the organization are all put at risk when change is poorly managed; change management is a tool to mitigate risks.
• Benefit perspective 4: benefits realization insurance- consider how much of the value of the project ultimately depends on people doing their jobs differently; change management provides benefits realization insurance.
• Benefit perspective 5: probability of meeting objectives- data shows that projects with effective change management in place are more likely to meet objectives, stay on schedule and stay on budget; change management increases the probability of meeting objectives.

Cost benefit analysis

Total cost= $(15000 +450) = $15450

If the revenue generated from the training of the employees is more than the overall cost then it can be said that the project is feasible otherwise if the revenue generated is less than the cost then it is not feasible.

For example:

Suppose an organization is launching a product and the overall cost of marketing and promotion is more than the lifetime revenue that can be generated from the consumers, it implies that the cost of acquiring the consumers is more than the revenue that can be generated from one customer. Thus, the strategy of the product launch is not feasible for the organization.

Changes due to threat

Associated risk:

The main risks with change can be summarised as:

• People
• Benefits
• Processes
• Management

People

Being able to manage the aspirations of individuals and groups of individuals is the single biggest challenge of a change project, this is where strong leadership is required.  Mapping out Stakeholders and where the fall in relation to the change project is essential to the ‘people’ aspect.  Identifying their concerns, needs and wants against perceived benefits and actionable outputs of a change project is essential.

Benefits

Detailing the perceived benefits and using this as the reasoning behind any investment in a change project will present its own unique sets of risks, issues and problems. This is where you have hung your hat to say ‘if we do this then the benefits that we will see will be’. However if the benefits do not materialise then you’re in trouble. Mapping out primary and then secondary or even tertiary benefits is a useful task, this allows the change manager to map out his benefits realisation time line and have a benefits management strategy right from the start which can be then used to firstly justify the change project and then used to brief senior management on progress. It has the benefit of being a tool that can be used to keep a change project on track.

Processes

As with any change the way that business activities are conducted will change. It is essential that business processes are modified and updated to keep pace with the change. This is a boring task but without it any benefits will be quickly lost as the ‘people risk’ aspect of a business goes back to what they were used to and were more comfortable with. Consider downloading our white paper on boosting productivity for your business to find out more.

Management

An effective risk management strategy set up and planned with risk management documentation is key. Even a simple risk scoring policy that allows risk to be prioritised is better than nothing. Ensuring that the correct level and fidelity of data made available to enable change greatly assists with the management and understanding of risk.

Change management risk assessment is based on the premise that “organisational risk” is the inverse of “change readiness”. In other words, the readier the organisation is to change, the lower the risk of failure of the change initiative. So, if we establish some useful means for defining and calibrating change readiness then we can take steps to mitigate the likely causes of failure.

Changes due to management decisions

The purpose of the Training Plan is to identify the appropriate training strategies and activities required to achieve the desired learning outcome during the implementation of each Project.  

The Training Plan provides a clear understanding of what must happen to meet the training requirements that have been defined, thus, end-users receive training in the knowledge, skills, and/or abilities required to support the new roles, business processes and/or technology.

This document is intended for use by:

• Project Manager
• Change Management Team
• Training Lead

Outline what the objectives for the Training Plan are:

• Ensure that all impacted staff receive relevant training to prepare them for any new working practices
• Ensure appropriate level of skill is reached in order to perform roles

The following bullets describe what is “in scope” for the project:

• Employees and managers who will need training on the new system and processes will be included “in scope” for the purposes of training development

The following bullets describe what is “out of scope” for the project:

• The adaptation of any training-related documents to individual teams will be “out of scope”, and will be the responsibility of the individual ministries  

The following assumptions apply to the Training Plan:

The Training Plan will be based on the training requirements gathered through meetings and workshops

Consideration will be given to the use of on-site and/or remote resources for the development of training material

Successful training is dependent on the availability of:

Access to business resources for input and review of the course outlines

Access to business resources for input and review of the training materials

Availability of training facilities including rooms, flip charts, whiteboards, etc.

The following risks apply to the training for the project:

End users want more training than required/feasible

Changes to project occur during development and delivery of training

Meeting minutes

Call to order

A meeting of [Organization or team name] was held at [Location] on [Date].

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Attendees included [list attendee names].

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Members not in attendance included [list names].

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Secretary		Date of approval

Training Plan

Overview

Introduction

Background and Scope

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Project References

Security

Glossary

Requirement’s traceability (optional)

Instructional analysis

Development Approach

Issues and Recommendations

Needs and Skills Analysis

Instructional methods

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Training Database

Testing and Evaluation

Training Resources

Course Administration

Resources and Facilities

Schedules

Future Training

Training curriculum

Employee feedback:

Collecting and analyzing feedback has three steps:

1. Listen to employees and gather feedback

Consulting model

It is important to follow-up with employees to understand how the change is working.  Many teams fall into the trap of completing their change management checklist without listening to what employees have to say.  The feedback you gather will be helpful in developing corrective actions and post-implementation change management activities.

1. Audit compliance with new process, systems and job roles.

Changes are successful when they are fully implemented and embraced in an organization.  Auditing performance ensures that the change is taking place and that the business is realizing the full benefit of the new improvement.

The way you audit compliance will be very specific to the change you are introducing.  The project team can define what these new processes, systems and roles look like and can specify the key metrics that will be measured after implementation.  Methods for measuring compliance include:

• Observation
• Performance reports
• System usage
• How often is the “old way of doing things” still used

1.  Analyze the effectiveness of your change management activities.

Analyze the input from feedback and compliance reviews.  This is the process of turning raw and disparate data into organized results and key findings.

Feedback and compliance show how well change management is working.  Analyzing these inputs and identifying key lessons provides direction for the corrective actions that are covered in module three of this tutorial series.

Change resistance:

• Do change management right the first time
• Expect resistance to change
• Address resistance formally
• Identify the root causes of resistance
• Engage the “right” resistance managers

Implementing Change:

1) Communicate the Rationale Behind the Need for Change

The first stage of introducing any change, however large or small, is to explain to employees why it is important for the change to occur and the intended benefits. This needs to be handled carefully and communicated to all affected parties. There should also be adequate opportunity for people to voice their concerns and contribute their thoughts, views and opinions.

Missing out on this stage of the process will almost certainly damage the change process before it has even properly begun.

2) Implement the Change in Phases

Change is usually best received when it is implemented in bite sized chunks, unless of course, this is impossible (as in the case of mass redundancy or bankruptcy). Most change can be broken down into phases that can be reviewed along the way.

Collaboration is key so, if circumstances allow, having a pilot group of employees to test the change before it is fully embedded is a good way to ensure that more people ‘buy in’ to what is happening and why.

3)  Evaluate, Review and Report on Change

Careful monitoring of the entire change process is essential in order to be able to measure its impact and evaluate its success. People need to be kept informed about how things are progressing, the results that are occurring and whether the change program has met its objectives.

An organization’s intention when it decides to embark on a change program is usually to make improvements. It is, therefore, important that employees understand whether the change has had the desired effects and what is to be done if further work is needed.