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Digital Transformation

The Importance of Context in the Change Management Decision

shutterstock_233016961_350Context is critical for any big decision, and Change Management is no different. In fact, context is more important for Change Management decisions than many others in business today. One of the biggest struggles that Change Management practitioners face is getting the buy-in from senior leadership that Change Management efforts are worth the investment.

Let’s face it – Change Management isn’t always cheap. It’s not necessarily going to be a $20,000 bolt-on to a $1,000,000 project. To compound this challenge, there’s not a Change Management “product” at the end of the day that can be sold to generate revenue. It can be a hard sell in today’s climate where companies are fighting for every decimal point in the margin calculation. If I told you that the Change aspects of an initiative were going to cost $250,000 on top of the technical and project management aspects, would you do it? Out of context, probably not!

So why should we then invest in Change Management? Ultimately, if we have a competent IT staff or partner, I’m pretty sure they’ll deliver solid, if not outstanding, technical components. Where most projects fail (and more than two-thirds of projects do fail, per a commonly cited IBM Global Services study), is with user adoption, or lack thereof. The investment you make in Change Management may actually be the most important money spent!

In the $1,000,000 project example I mentioned above, let’s say the organization’s leadership is expecting a 3x return on that investment (ROI), or $3,000,000 year-over-year (YOY). The question becomes, “How much of that $3MM is dependent on users actually engaging with and using the new tools effectively?” Typically, the answer to this question is 75-80% (there are ways to calculate this). There may be some value in having the new system in and of itself (e.g., lower maintenance costs, regulation/penalty avoidance costs, etc.), but the real value in the system will be the result of people interacting with the system well.

OK, so if we say 75% of the ROI is achieved with appropriate user engagement, then we’re looking at about $2,250,000 ROI YOY that is dependent on people being ready, willing, and able to engage with the new tools. Said another way, our operational risk is $2.25M! That’s a huge number, and I don’t know too many senior executives who will sleep well at night knowing that this kind of risk is looming on a project they are responsible for. Is there an answer?

Of course there is. Oversimplified, many look at Change Management as an insurance policy to protect their investment. Change Management programs focus on the users, getting their buy-in early, communicating the right messages at the right times to the right audiences, and providing training in the new tools, ultimately ensuring readiness at go-live. Projects with effective Change programs are 95%(!) more likely to be successful than those that don’t (Prosci 2013 Best Practices in Change Management). Without this focused effort, projects are at a severe risk of not generating the required returns because the people will fail to be productive at the desired levels when the switch to the new system occurs, and there are all sorts of side effects to this (low morale, poor customer service, etc.).

Spending a large amount on Change Management out of context is a hard decision to make. However, when looking at the same spend in context, especially financial context, where a solid Change effort will allow you to reap the benefits of the project where you are making a significant investment, it makes all the sense in the world.

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David Chapman

David is the General Manager for Perficient's Organizational Change Management practice, part of the Strategic Advisors Team. He has over twenty years of consulting experience and resides in Charlotte, North Carolina. Be sure to also check out David’s personal blog. It focuses on collaboratively building the breadth and depth of our collective change management knowledge based on insights and experiences shared to help one another grow.

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