October 7, 2015 | Written by: Tom Fisher
70 percent of organizational transformation efforts fail to meet expectations…
Here’s how you can avoid being one of those statistics
According to Dr. John P. Kotter, Konosuke Matsushita Professor of Leadership Emeritus at Harvard Business School and the Chief Innovation Officer at Kotter International, nearly 70 percent of organizational transformation efforts fail to achieve the expected results. Indeed, this is a sobering statistic for CFOs contemplating a transformation of their finance function.
Thirty years of Dr. Kotter’s research have shown that transformation failures often have little to do with the merits of the program goals, the thoughtfulness of the project planning or the skills of the professionals involved. At the core of any transformation are people and change – but all too often, change management and communications work streams are the very first project elements to be red-lined during budget negotiations. As the cliche goes, this is penny wise and pound foolish.
During transformation – particularly for organizations beginning at a low level of Finance function maturity – Finance will experience tremendous and accelerated change in these ways:
-Re-alignment of responsibilities among retained organizations, shared services and external service providers
-Changing management spans or layers
-Process changes leveraging ERP, planning, reporting and analytics technology
-Revised internal service level expectations
These changes will create concerns and anxiety about job security, career paths, job performance expectations and workload.
Large-scale finance transformation programs are costly, both in terms of direct costs and investment opportunity costs . And failure can have a significant impact on both organizational performance and executive careers. It seems prudent to structure transformation programs to maximize the probability of success. Here are a few recommendations that highlight why change management should be considered a crucial component of any transformation and what that might entail:
- Make change and communications practical, relevant and actionable – Change management and communications have gained a reputation for being somewhat “fluffy.” Ensure that the change management and communications strategy is specifically designed around the issues unique to a finance transformation such as specific process changes, job responsibilities, signatory approvals, workflows and activity level interactions among process participants.
- Conduct a change readiness assessment – Spend one to two weeks before the project plan is developed to better understand the willingness of key project stakeholders to embrace change and identify likely points of resistance.
- Integrate tailored change and communications into the project plan – Change management and communications cannot be an afterthought. Both must be tailored based on the results of the change readiness assessment and meaningfully integrated into the project plan with finance-specific activities and deliverables.
- Identify changes and mitigate their risk – Identify key changes occurring to the business (procedures, infrastructure, systems and processes) in advance. Articulate what these changes mean specifically and provide communications and / or training around them. Specific communication to both users and business leaders in advance of a transformation project helps garner support and prevent risks and issues to the project.
- Don’t assume effective communication will take place – We’ve all sat at an airport departure gate and fumed over slow or non-existing communications about the status of a delayed flight. Organizations are no different. During times of change, employees expect communication – and without it, they will assume the worst. At each phase of the project, communications strategies, content and channels must be defined and consistently executed. If you’re not in control of the message, employees will likely create and spread their own, which may not be aligned with what you want to convey.
- You can’t get everyone under the tent – Even the very best change management and communications programs cannot convert all skeptics. Continued efforts to manage chronic resistors are poor investments with negative marginal returns. Enlist the support of executive project sponsors and other internal supporters to manage these individuals and offset their project impact
- Don’t seek false economies – Many CFOs immediately red-line change management and communications efforts from the budget, despite the fact that an effective organization and change management work stream is often only 10-15 percent of total project costs. If the program budget is tight, this is not the place to economize.
An effective change and communication strategy can significantly improve the odds of transformation program success. Are you contemplating a transformation program? Are you facing the challenge of creating transformation plan that is also cost effective? Share your thoughts and challenges with us in the comments below, or email the authors below.
About the authors:
Tom Fisher – Partner, Strategy and Analytics Global Center of Competency, IBM Global Business Services (email@example.com)
Kaitlin Schramm – Senior Consultant – Strategy & Analytics, IBM Global Business Services (firstname.lastname@example.org)
Tara Sconzo – Senior Consultant – Strategy & Analytics, IBM Global Business Services (email@example.com)