STEP TWO

Assess the Impact of Change

There is nothing wrong with change, if it is in the right direction.

—Winston Churchill

Assessing the impact of an organizational change helps identify available opportunities and existing threats. By assessing the impact of change, organizations can set priorities for what to address. The assessment process gives an idea of an organization’s preparedness for dealing with change and of the odds for success. Knowing how to analyze the impact of change allows the organization to best distribute and utilize its resources.

Though it can be difficult, assessing the impact of change is important because it makes a difference in how the change is viewed and addressed. An organization may take a proactive approach to change and look for ways to improve, or it may need to change because its way of functioning has been threatened by external changes. It is important to know what is changing as well as why and how. Some organizational factors to consider include customer needs, competition, finances, the state of the economy, technology, and internal capabilities. Table 2.1 illustrates these environmental factors, possible reasons for change related to each factor, and ways in which the organization can respond.

TABLE 2.1

Environmental Factors, Reasons for Change, and Potential Responses

What is Driving Your Change?

Often, organizations jump into a change effort without fully understanding why or the end goal. The first question to ask is, “Why are we making a change? Is it in response to something going on around us, or are we looking to come up with something new and better before someone else does?” If you are reacting to things going on around you, such as competitors becoming more aggressive, you need to assess the impact of their practices on how you currently operate, what your options are, and what action to take. In reacting to changes occurring around you, some questions to ask include the following:

• What change has happened that affects what we do? 
• How does that change affect us and our competitive position?
• What is the level of impact: critical, serious, partial, minor, or none?
• Based on the level of impact, what do we need to look at (for example, customer relationships, core business processes, product/service mix)? 
• What are our options?
• Looking at our options from the perspective of time, cost, and level of difficulty to accomplish, what action makes the most sense to take?

If your organization intends to come up with something new and better, taking a proactive approach, it needs to look at not only the competitive marketplace but also its internal capability to make change happen. In taking a proactive approach to change, some questions to ask are the following:

• What opportunities exist to make things better?
• What is the value of each opportunity?
• What resources (internal) do we have that can help us take advantage of the opportunities?
• What other resources (external) do we need that we do not have access to?
• How difficult would each of the opportunities be to accomplish?
• Based on our analysis, how are the opportunities prioritized?

Fixing Symptoms or Solving Problems

In making change happen, it is important to know what problems exist and how to address them. Unfortunately, often individuals identify and focus on addressing symptoms rather than on getting to the root cause of the problem. This happens for a number of reasons: symptoms are easy to identify, they generally don’t take much effort to fix, and it is easy to show the symptom has been taken care of.

The issue with fixing a symptom is that it is temporary, like taking aspirin for chest pain. A person may temporarily feel better, but he or she may really need treatment for a more serious heart condition. The consequences of just treating the symptom could be fatal. To address this, try the “Root Cause Analysis” approach:

1. Identify the problem—The example we will use as the problem is that a major city is plagued by an increasing crime rate. Robbery and theft in particular are increasing.
2. Determine how you would address this problem—Hire more police [potential answer].
3. Ask if this is the solution to the root cause of the problem—If the city hires more police, will it slow down the increasing crime rate? Maybe, but reconsider the problem for underlying issues. Asking why robbery and theft are increasing uncovers that young people hang out on the streets at night with nothing to do.
4. Determine how you would address this problem—Set a curfew [potential answer].
5. Ask if this is the solution to the root cause of the problem—If the city enforces a curfew, will it slow down the increasing crime rate? Maybe, but reconsider the problem for underlying issues. Asking why robbery and theft are increasing and, additionally, why young people are out on the streets at night, further uncovers that young people cannot find jobs; therefore, they are out on the streets at night, and they rob and steal to get money.
6. Determine how you would address this problem—Help young people find jobs [potential answer].
7. Ask if this is the solution to the root cause of the problem—If the city helps young people find jobs, will it slow down the increasing crime rate? It’s possible.

Continue this process until you find the root cause of your problem. In this case, implementing the first answer (“Hire more police”) would have addressed a symptom. The third answer (“Help young people find jobs”) would have shown you that jobs, not necessarily more police, are the solution. Another way to look at this issue is presented in Table 2.2.

Asking questions related to certain areas can help determine the specific impact they have on the root cause of your problem. How does each of the following—money, people, process, technology, knowledge, competition, or laws—affect your problem? Some questions to ask in seeking ways to address the problem include:

• Whose help or support do we need?
• What would it take to get the commitment of those needed to support us in solving the problem?
• If we fixed the identified problem, could there still be issues? What would they be? Whom would they affect?

TABLE 2.2

Root Cause Analysis

Repeat this process until the lowest addressable level has been identified and addressed. From there, make an evaluation as to the cost/benefit trade-off.

Once you have identified the root cause of a problem and the areas affecting it, the next step is to determine what it relates to: skills of individuals, a lack of funding, technology, processes, or something else. Change involving each of these can have a different cost and time frame. For example, if the root cause of a problem is a lack of trained personnel working on a project, adding more people to the change initiative will only create more untrained individuals whose necessary training may take even more time away from getting the job done. See Table 2.3 for internal factors that could affect your position and possible actions to take.

TABLE 2.3

Internal Factors and Possible Actions to Take

It may come down to deciding how your strategy (see Step 5) positions your organization and what changes you need to make. For example, is your organization known for being the low-cost provider, providing the highest level of customer service, or being the most innovative organization in the field? Given external changes, how does your organization internally need to change its people, processes, and technology?

Identifying the Type of Change

The type of change your organization is going through will set the direction for the talents and skills necessary for members. As explained in Step 1, change can be seen as continuous (incremental) or discontinuous (transformational). One way to look at the context is to ask questions related to the change and use the information retrieved to categorize the type of change faced by your organization.

Questions to ask in identifying the type of organizational change include the following:

• Is the change organization-wide or within a subset of the organization?
• Is the change incremental or transformational?
• Does a plan for change exist or need to be developed?
• Has your organization been through anything like this before, and if so, what did you learn?

Answering questions related to the type of change helps classify the change and the patterns that the change may follow. It also allows for planning and building an appropriate change approach.

The environment in which your organization operates should also be analyzed. An organization’s environment can be driven by any of the following:

• Competition—How many competitors are there? How strong are they compared to your organization? In the minds of the consumers, how does their position compare to yours? How well are they positioned? Will it be easy to get customers to switch from competitors’ products and services to yours?
• Innovation—Is the environment one where things constantly change, such as the software or computer industry, or is it more stagnant, as with the utility industry?
• Market characteristics—How narrowly defined is the market you are in or work with? Are there many things to look at or only a few? How do you prioritize them?
• Customer expectations—How important are you to the customers you serve in your market? Are you a key part of their operation—meaning without you, they would no longer exist—or are you easily replaceable? What are the alternatives for the products and services you provide, and how easy are they to find?
• Business partners—To what extent do you depend on others to provide your products and services? What would happen if they went away?

In the end, it is important to understand your operating environment. If additional costs due to rules and regulations are incurred, make sure you incorporate them into your change plans.

Assessing the Impact of Change

Understanding the impact a change will have on your organization will help determine its level of importance and help you prioritize what resources (money, people, and time) must be engaged to deal with or take advantage of it. What will the change do for your organization? Will the change drive growth and help it increase in size, gain market share, or increase profitability? If your organization chooses not to change, will the impact put it out of business, cost it market share, or simply eliminate a minor part of the business?

If you are leading the change initiative, you have not only the change issues to deal with but also the people issues. You need to get people to understand and see the vision for change and what it will bring. You need to let them know how you are counting on them and what is in it for them. If individuals in the organization feel they are doing well and they are happy with the status quo, you need to show them why their current practices will no longer work. Addressing the changes around them—in regard to innovation, changing customer needs and wants, and competitor moves—can help get their attention and commitment.

Here is an example demonstrating the importance of adaptability and the effects of change. 

Less than 20 years ago, Blockbuster video stores were opening on every other corner. Customers loved the concept. They could go into a local retail location, pick out one of the newest video releases at a reasonable cost, and take it home to watch in comfort. Investors drove the stock price up, customer segments grew, and employees had great benefits and what they thought were long-term, secure jobs. There was no reason to look at changing. Then along came changes in technology (DVDs) and innovations (mailing capability), both of which allowed a company called Netflix to come up with a more costeffective business model. Customers liked what they saw, and their loyalty shifted. They no longer had to go to the store and worry about a video being out of stock. This convenience, along with more flexible return terms, allowed Netflix to capture a significant amount of Blockbuster’s business. In a short amount of time, Blockbuster’s once great business model was no longer relevant. Stuck in its ways, the company eventually declared bankruptcy. But again, it’s important to remember that change always continues. Netflix needs to be able to deal with changes in technology, which now allows customers to immediately download videos without having to wait. The point is that you have to continuously monitor your environment and be open to change. Examples like this can help you, as the change manager, convince individuals of the need for openness and change.

Getting individuals to understand the motivation for change is one thing. Actually affecting them directly is another. A great feeling arises when an organization is growing; current employees have new opportunities, and new employees are needed. In other cases, change will bring a reduction in human resources. Individuals will be anxious and wonder who will be cut. Often those who remain have “survivor’s syndrome” and become unproductive, wondering if they will be the next to go. The culture of the organization deteriorates, and individuals become unmotivated. The best way to deal with the uncertainty that comes with change is to communicate. You may not have all the answers, but being open and treating people fairly gives you credibility. Set a regular time for communication— on a weekly basis or even more frequently; even if there is nothing new to share, it shows your openness. Open communication also gives individuals a chance to provide you with information and feedback you can use to help others. Being fair is key.

I personally have been with organizations that have handled reductions in force well and those that have not. It does make a difference. If an organization takes the time to communicate with individuals and help them move on (for example, by providing job leads, networking, and even separation funds), individuals tend to remember and help, or at least not hurt, their former organization. Organizations that call people in, tell them it is their last day, and immediately escort them out the door tend to set a tone of rejection and animosity. Chances for any future support are slim, and considering the ability to communicate quickly through technology and the Internet, word can quickly get out and negativity can spread.

If the change occurs in response to environmental factor (competition, technology, laws, customer preferences, and so on), the best approach is based on understanding the factors and being able to respond to and overcome them. If the change is selfbased, originating with the goal of changing the environment, the approach allows for taking a lead and working through various scenarios involving the change and the industry in which the organization operates.

How will making or not making a change affect your organization? Will changing make it more successful? With the number and various types of changes, organizations need to be able to effectively assess the potential impact of changes they make and of those made by others around them. Some changes—for example, implementing a wireless network in an office—can save on costs and will have only a minor impact on productivity, while a change in laws, such as limiting acceptable accounting practices, can put an organization out of business if it is not prepared for the repercussions. 

To assess the potential impact of a change, look at these factors: 

• What is behind the change? Is your organization driving the change, or is change being forced upon it? How much control does your organization have over this change?
• Evaluate the best- and worst-case scenarios. What will happen if your organization does nothing? What will happen if your organization attempts the change and fails? What will happen if your organization succeeds in changing?
• How well prepared is your organization to undertake the change? Can the change be implemented without a problem, or will your organization be stretched to take it on? Where can other resources be found, if needed, and at what cost?
• What are your organization’s competitors doing? Are they making or being affected by the same change? Is something being forced on the industry (for example, government regulations) that competitors can partner with your organization to combat?
• How will the change affect your organization’s business practices and profitability? Does the cost of change outweigh the benefit?

Assessing the Organization’s Readiness for Change

Realizing the need for change and wanting to change in order to take advantage of an opportunity, or being forced to change due to threats and potential consequences, is just the beginning. The next step involves evaluating your organization’s ability—and its members’ desire—to take on the change initiative.

From an organization perspective, as the change leader, you need to look at resources:

• What funds are available to support the change?
• Which members of your organization can be part of the change team and help others through the change process?
• How will working on the change initiative affect existing day-to-day functions?
• What internal resources (technology, equipment, supplies) are available to use? Will your organization have to find resources? Identify who will approve and allocate.
• Will external resources be needed? How reliable are they?

The most important factor in assessing readiness for change is often the individuals in your organization and their motivation for making change happen. Going through their minds will be the following questions:

• What does this change mean for me?
• Is it the right thing to do?
• Will I feel good about doing it?
• What if I don’t do it?

Their thinking will show up in behaviors. Individuals will be asking questions, questioning proposed changes, talking to others to get their opinions, and eventually taking a stand to support or resist the change effort.

Understanding how individuals assess the change facing them helps an organization and its leadership understand the hopes, concerns, and fears of its members. Being able to address and respond to issues and foresee potential issues before they become major obstacles allows an organization to address individuals’ concerns and increase their readiness for change.

Stages in Assessing Readiness

1. Monitoring—Readiness for change starts by monitoring the environment, or looking for opportunities and threats that can affect how your organization functions. Looking externally for opportunities and having an idea of what internal areas could affect your organization allows for monitoring and evaluating potential changes. Looking at what interests and concerns your organization on a regular basis helps ensure it is not caught off guard by changes around it that can affect how it does business.
2. Assessing—After identifying potential impacts, your organization needs to gather data about how it may be affected. Whether it is the rate of inflation in the overall economy or the price competitors charge for their products and services, which directly affects what and how much they buy, it is important to continuously monitor data that can have an impact. The data can be gathered in a number of ways, some directly from those involved or through third parties such as industry organizations. The data will help project what changes or adjustments your organization may want to make in the future.
3. Analyzing—Along with gathering data, you need the ability to analyze and understand its potential impacts. Both quantitative and qualitative data can be analyzed. Looking at numbers such as revenue, cost of production, and profit helps from a quantitative perspective. Conversations with customers related to satisfaction and future needs can produce qualitative data, which helps organizations understand potential issues and opportunities that go beyond the numbers. Compare these numbers to current industry standards or to historical data to see what changes have happened over time. The goal is to be able to understand what the data means and how to analyze it to determine the best changes for your organization.
4. Action—Based on the analysis of data, your organization needs to decide what to do going forward. This is an important point because organizations often have the data and information in front of them but fail to act until it is too late. The best decisions are made based on what a change manager knows. You may have heard the term paralysis by analysis, which happens when organizations continually look at and analyze data but never do anything with it. The point is that organizations need to make decisions and take action as part of the change process. This is where change leaders can make a difference. It takes initiative to get things done.

Taking action once a decision is made involves lining up support from those who can affect how the organization changes. Lining up the resources and ensuring commitment is the first step in taking action to make change happen. Involving those who support the organization on a regular basis helps keep the momentum going.

Key Points to Keep in Mind

Being able to assess the impact of change helps guide what should be done to make it happen. You should:

• Know what is driving the change.
• Make sure you address the root cause of the problem, not just the symptoms.
• Know what factors are behind the change and identify ways to deal with each factor.
• Understand the readiness of the organization to deal with the change so you know what level of selling needs to be done to get individuals onboard.
• Know the stages of change and what should be addressed in each phase.
• Know what action to take, get ready to take action, and take action.

WORKSHEET 2.1

Assess the Impact of Change