CHAPTER 1

Faster, Easier Changes: The Business Case for Change Management

It is not the strongest of the species that survives, nor the mostintelligent, but rather the one most adaptable to change.

—Commonly misattributed to Charles Darwin

Chances are excellent that if you are reading this book you have alreadyexperienced a "bad" change experience—perhaps something akin to one of thefollowing situations:

The Consultant Rumor. One day, a consultant team arrives and beginsasking questions. You're told they're here to "identify operational efficiencyopportunities." You and your peers begin to compare notes on the questions beingasked. Senior management isn't providing clear answers.

One of my earliest work experiences was with a project called C 90. It wasrumored that this project was designed to cut costs to 90 percent of currentlevels. One employee had heard of a project called C 90 in another company thatwas doing exactly the same thing. Communication from senior management was sopoor that there was nothing in writing on the project. The biggest surprise wasthat the project was actually called See 90. It was about identifying key areasthat the company should focus on in 1990. Total costs weren't going to be cut.

The Surprise. Four days before Christmas, the company announces that itis offering a voluntary separation package to many people. If the company doesnot receive enough voluntary acceptances, involuntary cuts will begin as soon asMarch. People are given eight days to decide to accept the offer. People areshocked because the company was just finishing a fantastic year.

What nobody had communicated was that the company was preparing for a largeincrease in raw material costs. Management offered the voluntary program atyear-end so the company could pay for it with the great earnings of the currentyear rather than the expected poor earnings from the upcoming year. Nobody had agood holiday season.

The Ill-Conceived. A company made an acquisition, and as part of theacquisition, it decided to consolidate operations in another city. Thissurprising news was shared with all employees on a Monday morning. "Many of youwill be given the opportunity to move, but this facility will be closing."Certainly this news was a surprise, and the situation was one that could not beavoided.

The ill-conceived side of this announcement was that there was a second businessunit colocated in the facility that was to be closed. Nobody had bothered tothink about what would happen to the second business unit if the first one wereto close. Nobody in the second unit had even been told of the acquisition. Thegeneral manager of the second business unit found out at the same time aseverybody else in the building.

The Killer Information Technology Project. The IT group works for monthswith a small group of users to design new processes to roll out with a newsystem. They have an inspiring project name and a newsletter that comes outregularly.

The project starts to slip, however, and the training schedule gets shortened.Much of what is taught in training becomes "how to perform a transaction" in thesystem. There isn't time to explain the overall process and when the transactionis to be used. When the launch, or go-live, occurs, in theory people could pressthe right buttons to do work in the new way—but no one's been told why andhow to! Mistakes and frustration mount. Customer orders aren't being shipped.Vendors aren't getting paid. Even worse, employees aren't being reimbursed fortravel expenses. Credit cards are being shut off by the card provider.Productivity completely disappears.

The variations on the "bad change" stories are endless. I like them because theyhelp me make the case that change management is not only a little tinder youthrow onto a project. Change management is the fuel that makes a projectsuccessful, and doing it well requires planning, resources, and execution.

Changing the "Change Curve"

Think about any major change that you've personally gone through. How much timedid it steal from you being able to get your "real work" done? Think not onlyabout the time you had to spend learning what was going on and getting trainedin new policies, procedures, or equipment—but also the time you weredistracted by gossip, fears about the future, and concerns for yourself and yourcoworkers.

Now add to that the impact on every other employee affected by the change: thetime they spend learning about and coping with the change they can't spend ontheir "real work." No wonder that productivity invariably drops when a change isintroduced (Figure 1-1).

When a change is introduced, people must spend time learning what is going tochange, developing new skills, installing new technology, defining newprocesses, and so on. Plus there is usually a lot of mental energy that goesinto worry about the future. That's why productivity always drops immediatelyafter a change is introduced before it begins to rise. The hope is that thechange will lead to an even higher level of productivity as people eventuallygrow comfortable with and competent in the new methods.

The goal of change management is to shift this impact curve—lessen thedrop in productivity, raise productivity faster, and achieve an even betteroutcome (see Figure 1-2).

It surprises me that so many companies give change management short shrift. Theytend to muddle through their change efforts, barely communicating and thinkingthat people will soon come around. What this "cross our fingers and hope"approach ignores is the significant economic opportunity cost that is introducedby the turmoil of transformational change.

To illustrate this point, think about this hypothetical scenario. Let's say1,000 employees, each of whom costs an average of $80,000 per year, work in abusiness that generates $330 million in revenue per year. The cost of labor inthis organization is $80 million. We can conclude that the value created by eachemployee is $250,000 per year (see Table 1-1).

During a change effort, you know you're losing some percentage of their time.For the purpose here, let's assume that they are only 90 percent productiveduring this period. This means a 10 percent loss. Over the course of a 12-monthinitiative, you would forgo the creation of $25M in value for your company.

Before you reject the underlying concept here, note that the forgone value maynot be easily...