CHAPTER 29

Organizational Change Management

D. ALLEN YOUNG, PMP, PM SOLUTIONS

“Change management” can mean many different things to different firms and the people who work for them. To the software developer, it usually means managing version control and scheduled promotion of new or modified software components from a test, quality assurance, or the staging platform to the production environment on the “go live” date. To the project manager, it typically means managing scope, and having a solid scope change management process in place to evaluate the schedule and budget impacts of scope change requests to the project, including review, approval, and re-baselining steps, to help prevent “scope creep.” While those types of change management are important, when implementing process or technology changes at the cross-functional department or enterprise level, the application of organizational change management (OCM) practices and techniques is essential for success. I would argue that, without OCM, the probability of failure lies somewhere between 50 and 75 percent, and in some cases it could be as high as 100 percent! This is based on my experience, but validated by some of the top management research firms.¹

What exactly is OCM? In its raw form, it is a means of assessing the sponsorship, cultural resistance, maturity, and capacity of the organization to embrace and absorb the change over time, and, where weaknesses are identified, employing best practices and techniques to correct the weaknesses to an acceptable level, thereby significantly increasing the likelihood of successful adoption and utilization of the change.

That stated, OCM should not be conducted in isolation; it should be incorporated into whatever implementation methodology is used for the change initiative. To the people being affected by the change, the practices and techniques should simply appear as part of the overall implementation—tasks that naturally belong within the major phases of a project schedule. Organizational change management is not a phase unto itself. Each project phase should have OCM-related tasks within it.²

SPONSORSHIP

If you take away nothing else from this chapter, know that sponsorship is the first priority; without it, your change initiative will assuredly stall, and it will fail eventually. There are various levels of sponsorship that the change agent should be aware of.

Authorizing Sponsor

This is the person (or group, in some cases) who is championing the change, has the funds to pay for it or can obtain them from those who have them, has a sufficient level of line authority within the organization to lead the change, or has sufficient referent power to influence others outside of his or her direct line of authority to adopt the change. At the enterprise level, this ideally should be a C-level executive—CEO, CFO, COO. Validation of sufficient authorizing sponsorship should be one of your first tasks during the initiation phase of the project. If you do not have a true authorizing sponsor, stop the change initiative now if you can, because it will never fully get off the ground. Sponsorship of enterprise changes at the grassroots level almost never works.

Cascading Sponsorship

All of the line managers in the organization who are impacted by the change are potentially reinforcing sponsors. It is incumbent upon the authorizing sponsor to ensure that all affected managers have bought into the change. This should be confirmed before the initiation phase is completed. If an affected manager is not on board, there are various techniques that can be applied to correct the weakness, depending on the situation. Sometimes a stronger business case is needed to convince the affected managers that the change is in their best interest. Sometimes the affected managers need to be included in the decision-making process concerning the change itself (how much, how soon, to whom, etc.). Sometimes the affected managers need to be told by their superior that it is a requirement, and what the repercussions will be if they do not get on board. In some cases, the affected managers and their unit might be able to defer when they must comply with the change, or perhaps they can be “grandfathered” indefinitely.

Once all affected managers have become reinforcing sponsors, it becomes their responsibility to help communicate, promote, and enforce the change across their part of the organization. Their job becomes one of rewarding desired behaviors (adopting the new), and discouraging undesirable behaviors (continuing to adhere the old).

In some cases, the reinforcing sponsors may also be change agents, or champions, of the change, meaning that they not only have the responsibilities of a reinforcing sponsor, but are also very much an active proponent and endorser of the change.

Sustaining Sponsorship

Authorizing and reinforcing sponsors must embrace the concept that active and fully engaged sponsorship not only needs to exist throughout the change initiative, but also needs to continue after the initiative has completed. Once the change is live, the project team that implemented the change will disband, and the resulting new processes and tools will be in place from that point forward.

All sponsors are responsible for ensuring adoption by a specified cut-off date, and ongoing utilization thereafter. This should include shut-down/removal of the ability to conduct business the old way, and possibly even changes to formal job descriptions whereby people are evaluated in part on their utilization of the new way of doing things. If those steps are not taken, old habits will die hard, and the change will never be fully adopted.

SPONSORSHIP METHODS

Can the sponsors simply dictate what will be changed, and push it down through the chain of command in the organization to make it happen? Sometimes the answer is yes, but not necessarily in all cases. There are three basic methods sponsors can utilize to overcome resistance: command, compromise, and collaboration. Each one has its own merits, depending on the situation:

• Command: Sometimes a “command and control” approach works best. As the year 2000 approached, all mission critical systems needed to be tested to ensure that they would operate without any hiccups when the clock rolled past midnight on December 31, 1999. Individuals may not have enjoyed spending the extra time, but top management realized it was essential for business survival.

• Compromise: This method works best when the sponsors are willing and able to vary scope or cost based on recommendations from the targets. The goal is to find a solution that works for the majority. For example, sponsors want to bring in a project management methodology by a given date, but give the targets leeway to determine which product to purchase.

• Collaboration: The most democratic of methods, this rarely works well in its purest form for changing organizations because it is rare for everyone to agree on everything. A modified approach is for management to set boundaries, including time limits, for coming up with the best solution. When no solution is reached or stalemates occur, the issues are escalated to management to make the decisions.

CULTURAL RESISTANCE

Without OCM, when change confronts culture, culture always wins! In order to get the culture of a firm to embrace and institutionalize a significant change, several factors come into play that, depending on how they are handled, will affect the success or failure of the change effort. Generally speaking, every individual impacted by the proposed change is a member of the “target” population. That includes the sponsors, champions, change agents, and resistors. In most cases, the total number of targets represents a bell-shaped curve; a small fraction (5 to 15 percent) represents the champions who are for the change, another fraction of roughly equal size represents the resistors who are against the change, and the rest make up the targets who have not yet decided which side they will choose.

If possible, it will be advantageous to identify the resistors along with the champions. You will want to work with the champions and change agents to help sway the undecided targets to favor of the change. The last thing you want to do is intentionally agitate the resistors, because that increases the likelihood that they will recruit the undecided targets to join their ranks instead. The stronger the resistance, the more sponsorship intervention will be required to make the change happen. How do you deal with resistors?

• Leverage the sponsors and change agents to get everyone on board by target grouping. This should be done while understanding and appreciating the targets’ frame of reference and highlighting what’s in it for them. Target grouping might be done, for example, by department, job level, business vs. technology sides of the house, and so forth.

• Invite key resistors to join the project team, so that they are brought closer to the initiative and have a say in the final result. This often helps convert resistors to champions or change agents, or if not that, at least a nonresisting target.

• Bypass the resistors (with sponsor permission).

THE “VALLEY OF DESPAIR”

Every significant change that affects the culture of an organization goes through a life-cycle curve that looks more or less like Figure 29-1. This is normal and to be expected. The key to managing resistance is to keep the “Valley of Despair” dip—where skepticism, blame, denial, disbelief, and hopelessness thrive—as short and as shallow as possible. If it lasts too long or gets too deep, the change usually fails. To avoid this, the change initiative should be planned like a formal project. The project plan should include specific OCM tasks by phase to address the inevitable resistance that will surface throughout the life of the change—including beyond the point where the project ends, all the way through to the end of the useful life of the change. The end milestones of each phase of the curve should also be tracked in the plan. Once you get past the resistance stage, you are more than halfway there, and have a realistic chance of implementing the change.

FIGURE 29-1. THE IMPLEMENTATION SUPPORT CURVE

THE TIPPING POINT

This is often referred to as the “burning platform”—the point at which the pain induced by the current state is perceived to exceed the level of pain that changing to the future state would invoke. The “burning platform” analogy is based on a real-life example documented by organizational change guru Daryl Connor about an oil rig in the North Sea off the coast of Scotland that exploded and caught fire one night in 1988. One of the supervisors jumped out of bed, ran to the edge of the platform, made the decision to jump, and became one of only a handful of workers who survived. He made the decision to jump because he perceived that he’d die for sure if he didn’t. He jumped, believing the future state of potential hypothermia or burns from burning surface oil was less painful than remaining on the platform.

In the less death-defying world of organizational improvement, of course, the perceived intensity of pain will vary from person to person, by department, and even within the management ranks. For example, the desire to replace a desktop project management tool in favor of one with a central database might be popular with the project management practitioners, but top management might be reluctant to spend the money unless they also see value in it. The universal law is this: if the pain of the status quo is accepted by all constituents of the culture to be greater than the perceived pain of change, the change is much more easily accepted without significant sponsor intervention.

MATURITY

Determining maturity’s impact on a change initiative is more art than science. Even after the scientific assessment work is done, it still takes experience and expertise to judge how much a lack of maturity will slow the change process, and thus just how much change you can introduce and how quickly it is likely to be absorbed.

CASE EXAMPLES

Here are real-life examples of how maturity impacted the speed of implementation—or in some cases stopped the project before it even got off the ground:

Major Hardware Retailer

A major hardware retailer wanted to implement earned value (EV), which it believed would help it get a better grip on its projects in terms of time and cost overruns, and give it the ability to make course corrections sooner and faster. While EV can certainly do that, I was initially concerned with whether or not the company had the foundational components in place. Earned value is a more advanced concept for most companies, especially in the private sector. I soon learned that the company’s basic project scheduling practices—including a work breakdown structure (WBS), resource and cost-loaded tasks, baselining, consistent application of actuals, rescheduling, and formal scope change control—were very immature, which meant the company had no concept of schedule or cost variance, never mind more sophisticated EV measures such as schedule or cost performance indices (SPI/CPI). While the company had solid sponsorship and a “burning platform” for change, its current project management maturity level was too low for us in good conscience to recommend moving forward with an EV implementation. I suggested to the company that it would gain significant improvements from putting some of the foundational components in place, such as a project management methodology and some key metrics, run with that for a few months, and then see how the company was doing. It might still want EV, but I strongly urged the company to consider it as a release 2 or release 3 component.

“A Fool with a Tool”

In another example, many firms make the plunge into enterprise project portfolio management (PPM) tools without considering their PM maturity level or the organizational change impact such tools usually have. Tools are rolled out, only to find that:

• The majority of the project managers didn’t understand project scheduling fundamentals (and had to be hastily trained after the fact).

• The organization had never done timekeeping before, but was expected to use it for capturing actuals on projects (timekeeping is also a potential cultural resistance issue, especially in high-tech outfits that hire primarily younger engineering types, who don’t like “big brother watching them”).

• There was no governance in place to be able to effectively take advantage of the tool’s portfolio management capabilities (no project scorecard, no project list, no steering committee, no portfolio management process, etc.).

In almost every case, the sponsors who made the decision to buy the tool did so believing that their project management problems could largely be solved by a technical solution—a “silver bullet”—only to realize afterward that things got worse instead of better, so they would blame the tool, replace it with another vendor’s tool, and repeat the same mistakes all over again.

Small Federal Government Agency

In contrast to the above example, a PPM tool implementation for a small federal government agency employed several tactics to help make the implementation a success, including a project management maturity assessment, an assessment of the history of the two prior failed implementations, a sponsorship assessment, an OCM chart, a communications plan with a marketing plan built in, and a training plan that included educating everyone affected by the tool at every level. At first the agency did not see the value in these activities (“This isn’t project planning . . . we don’t want to pay you for this!”), but it became apparent to the staff as the project moved forward the value that OCM added.

The project management maturity assessment showed that we needed to deploy the tool’s functionality in four releases: (1) basic scheduling and timekeeping, (2) advanced scheduling and reporting, (3) portfolio management, and (4) EV—which was what prompted the agency to buy the tool in the first place.

CAPACITY

Like maturity, capacity does not always come up as a significant factor in OCM discussions, but it is equally as important. Capacity actually has to be considered from two perspectives: individual and organizational capacity. Neither is typically ready for change.

At the individual level, most people reach a level of proficiency that, over time, becomes a comfort zone. Preferences become habits that are hard to break. Likewise, organizations are generally not built for change. Once written and unwritten rules are established and procedures, tools, equipment, and trained personnel are in place, the organization’s preference is to go into production mode and stay there. This is because changes that impact people, process, and technology simultaneously are usually disruptive and significantly reduce productivity. Publicly traded stock exchange companies, which have to report profits every quarter, are especially sensitive to this.

Individual Capacity

Measuring an individual’s capacity involves assessing his/her stress level, work load, and skills. Of these three measures, stress level is the most critical. If the stress level is relatively low, the individual will be more willing to take on additional work or disruptive changes and learn new skills. When stress levels are high, getting people to commit to change becomes an arduous task. Stress levels can be gauged both by formal assessment and informal observance.

A formal assessment—the science—can be in the form of an online questionnaire, where individuals rate themselves on stress, workload and skills. You can tally the results of all staff who will be affected by an upcoming change, and quickly get an idea of how much resistance you are likely to encounter. Informal observance—the art—takes some patience and practice. I can always tell when not to ask my wife to do something extra for me because she wears her stress load on her face. Even if she’s not really overworked, if she’s had a high-stress day (usually the combination of her high-stress job plus dealing with family issues), I’ll do it myself or save it for another time. Every person handles stress differently, so you have to learn how to recognize the cues. Individual or small group interviews are often a good way to gauge stress levels. Observation can also help you determine workload levels, but be aware that there are usually differences between what is considered high workloads in the private versus public sectors, and in different industries.

Organizational Capacity

Organizational capacity should also be assessed before change is implemented. This can also be done via formal surveys or questionnaires. The key questions to consider are the following:

• Does the organization have employees who can be dedicated to the change initiative? If the answer is no and it is expected that consultants alone will usher in the change, a huge red flag should go up and a critical risk added to the risk register. Changes implemented by third parties where the company itself has no skin in the game will most likely not be adopted.

• Does the organization have the right people with the right skills to support the change? If not, it may mean bringing in consultants in the short term, but sooner or later the firm will need to hire or train internal staff to carry on once the consultants leave.

• Will the change work in concert or be in conflict with the current organizational structure?

• What other changes are going on at the same time? In the workplace, too much concurrent change causes multiple projects to fail, bottlenecks to surface repeatedly, frequent escalations, a culture that becomes misaligned with corporate strategy, reduction in employee morale, and eventually burnout and resignations.

• Will the change affect the infrastructure of the organization? A Harvard Business School case study about Harley Davidson motorcycles provides an excellent example.³ Harley Davidson had strong brand loyalty for years, but when the quality dropped to the point that approximately one third of the bikes that came off of the assembly line were defective and had to be repaired, loyalty (and thus sales) dropped significantly and internal repair costs skyrocketed, to the point that it was on the verge of filing for Chapter 11. The company knew that it had to do something drastic in order to survive, so it brought in an entirely new way of manufacturing the bikes from Japan. This not only affected the people, but the entire production operation (process and technology). Harley Davidson gradually reclaimed its strong loyalty, and is now one of the top selling motorcycles in the world.

Which OCM tactic or deliverable is the most important? The tie between the sponsor assessment and the communications/marketing plan gets my vote. Without adequate sponsorship, you have no chance of success. Without the communications/marketing plan, you can’t promote the change and “win hearts and minds.”

REFERENCES

¹ Claire Schooley, “Avoid the 70% failure rate of change management initiatives,” Forrester.com blog posted August 31, 2011, http://blogs.forrester.com/claire_schooley/11-08-31-avoid_the_70_failure_rate_of_change_management_initiatives; see also Peter Cheese, “What’s so hard about corporate change?” Fortune.cnn.com blog posted May 20, 2013, http://management.fortune.cnn.com/2013/05/20/corporations-change-failure/.

² A table delineating all the OCM-related project tasks per phase can be accessed at http://www.pmsolutions.com/articles/OCM_Tasks_for_Project_Plans_by_Phase.pdf.

³ Josef Schinwald, “Case study: Harley Davidson, Enterprise,” Customer.com blog posted July 28, 2005, http://www.enterprisecustomer.com/case-study-harley-davidson-2005-07.