PART ONE
Why change?
01
The need for results from change
Right now, somewhere in the world another change initiative just died. It was probably introduced with enthusiastic fanfare â a new IT system that would make the business more efficient and employeesâ and customersâ lives easier or a new process that would streamline operations and improve productivity. The news of the impending change initiative was probably not met with quite the same enthusiasm from those affected as the person responsible for leading and implementing the change (change agent). And to be fair itâs hardly surprising.
Most of us who have worked in an organization anywhere in the world will have experienced some new change initiative or another. Some of us may even have some memorabilia to prove it â a T-shirt with the project name on the front and âWe did itâ on the back (that no one wore because âwe didnât do itâ) or a âMission Igniteâ coffee mug where someone scored out âIgniteâ and replaced it with âImpossibleâ with a permanent marker! We can probably all remember the initiative âthat started so wellâ but ended so badly or just petered out. Even those that seem destined to deliver, with clear objectives and detailed implementation plans, can so easily derail and all that is left to prove it was ever started is the implementation document that is now used as a hefty bookend.
In 1995 John P Kotter, the renowned change management thinker, revealed in an article for the Harvard Business Review that only 30 per cent of change initiatives are successful (1995). He later went on to publish what many regard as the seminal work in the field (1996). In 2002 David Miller reported in the Journal of Change Management that 70 per cent of change programmes fail. In 2005, Malcolm Higgs and Deborah Rowland reported in the same industry magazine that âOnly one in four or five change programmes actually succeed.â In 2006 McKinsey & Company surveyed 1,546 business executives from around the world to ascertain the new updated statistics for successful change implementation. Lo and behold only 30 per cent of change initiatives were considered a success (Isern and Pung, 2006).
Incredibly, all the independent research into the effectiveness of change initiatives over the past several decades, whether from the Gartner Group, Harvard Business School or McKinsey & Company and beyond, consistently illustrates the ironic truth that change doesnât actually change that much (Keller and Aiken, 2008). All the time, money and energy poured into change initiative after change initiative doesnât actually matter most of the time. It should matter, otherwise why start the change process in the first place? Even though we have known these dismal figures since the mid-1990s the failure rate of change initiatives is still stubbornly stuck at 70 per cent (Leonard and Coltea, 2013). In fact, Towers Watson bumped that figure up to 75 per cent when the ability to sustain change was factored in (2013).
And the changing pace and complexity of business mean that the situation is only getting worse. According to IBMâs 2008 Global CEO Study 83 per cent of CEOs and senior leaders expected substantial change â up from 65 per cent two years earlier. Unfortunately those reporting they had successfully managed change in the previous two years rose only 4 per cent, up from 57 per cent to 61 per cent. This âChange Gapâ or the disparity between the expected change and the ability to manage it nearly tripled between 2006 and 2008 (IBM, 2008a, 2008b). The same study two years later identified the escalating complexity of operating in an increasingly volatile and uncertain world as the primary challenge. And a surprising number of CEOs reported that they still felt ill-equipped to succeed in this drastically different world (IBM, 2010). In 2012 the challenge was still change â how to adequately manage and capitalize on the convergence of the digital, social and mobile spheres, connecting customers, employees and partners to organizations and to each other in new ways (IBM, 2012).
Today the challenges are even more pressing. We live in a VUCA world â volatile, uncertain, complex and ambiguous. Change is a constant and increasingly permanent aspect of modern business â and we are not adapting quickly enough. Too few of us possess genuine change capability and so are struggling under the weight of escalating change initiatives and expectations.
The pressure on CEOs and senior leaders to continuously deliver shareholder value is relentless. For most businesses that pressure means a necessary preoccupation with short-term results and a continuous drive for growth and elevated performance. Indeed it is this drive for better financial results, either increased revenue or cost savings, that is behind most change initiatives.
There is little doubt that modern business is encountering more change than ever. Research collaboration between the Association for Talent Development (ATD, formerly ASTD) and i4cp found that only 17 per cent of business and learning professionals surveyed rate their organization as highly effective in managing change initiatives. Thatâs not very encouraging when most organizations are facing a minimum of three major changes per year (ASTD, 2014).
Essentially what all this means is that not only is our ability to successfully implement change notoriously poor across the board but our need to implement more change successfully is escalating at an alarming rate. Clearly we need a solution.
But before we unpack that solution in more detail itâs worth getting a handle on just how urgent the need for answers really is.
The cost of failed change
There are three main costs when it comes to failed change initiatives:
- financial cost;
- human cost;
- competitive cost.
Financial cost
Think about the last change initiative you were involved in⌠consider all the meetings, analysis, and presentations you were privy to. Think about the various options that were explored before a decision was made to opt for one change initiative over another. All this took time and therefore money. And that was before any change was even announced. Whether you are installing a new database or order system or moving premises or instituting a new quality initiative, change is always expensive.
Dr John McManus and Trevor Wood-Harper showed that the estimated cost of IT project failure across the European Union was a staggering âŹ142 billion. Professor Chris Clegg of the University of Sheffield conducted research into the same area and discovered that as much as ÂŁ58 billion is wasted in IT-related change in the UK every year (McManus, 2004).
An investigation by the Independent found that a significant number of IT change initiatives undertaken by the UK government suffered severe delays, ran millions of pounds over budget or had been cancelled with the total cost estimated to be ÂŁ26 billion. Parliamentâs spending watchdog described the projects as âfundamentally flawedâ and blamed ministers for âstupendous incompetenceâ in managing them (Savage, 2010).
In 2005 the US Air Force initiated the Expeditionary Combat Support System to assist in resource planning. Despite costing $1.1 billion, no significant capabilities were ready on time and it would have cost $1.1 billion more just to get a quarter of the original scope. Needless to say the project was cancelled.
It almost seems unfair to call out these examples â in truth there is no shortage of war stories about the epic waste of money caused by failed change initiatives. Often IT changes are easier to quantify and therefore get more media attention but failed change of all types is financially costly. But unfortunately itâs not just the financial cost thatâs so frustrating.
Human cost
If 7 out of every 10 change initiatives fail then a huge number of people may only have experienced failure. That has serious repercussions on employee morale and engagement. Itâs hardly surprising that the mere mention of any change initiative is universally met with heavy sighing and copious eye-rolling along with veiled mutterings of âOh no, not againâ.
Failed change is soul destroying. And if we look at Gallup employee engagement figures there is little doubt lack of engagement is a problem for many organizations. During 2010â2012 Gallup conducted a comprehensive study into the US workforce and discovered that just 30 per cent of the 100 million full-time employees were engaged, 52 per cent were disengaged and 18 per cent were actively disengaged. This means that some 70 million US workers are ânot engagedâ or âactively disengagedâ and are emotionally disconnected from their workplaces, which makes high performance and productivity unlikely. In fact Gallup estimates that these actively disengaged employees cost the United States between $450 billion and $550 billion every year in lost productivity, stating disengaged workers are âmore likely to steal from their companies, negatively influence their co-workers, miss workdays, and drive customers awayâ (Gallup, 2013a). And, in case you are reading this and thinking, âOh, thatâs OK, I live in Australia, UK, EuropeâŚâ according to Gallupâs 142-country study into global workplace engagement North America and Canada are at the top of the list! Australia and New Zealand come in second with engaged employees accounting for 24 per cent of the workplace, while only 14 per cent of Western Europeâs workforce is engaged. According to the report, âCurrently, 13 per cent of employees across 142 countries worldwide are engaged in their jobs â that is, they are emotionally invested in and focused on creating value for their organizations every day. As in Gallupâs 2009â2010 global study of employee engagement, actively disengaged workers â ie those who are ne...