How can you make the business case for change and engage the team in delivering it?
You’re a change agent – in HR or as an advisor. You know that change is needed, but the organization hesitates. Why? And what can you do about it? This article deals with two aspects – the rational case for change, and the practical methods of delivering change.
Rationally, you may get asked for a business case. So this article sets out how to make the tangible (cash-based!) business case for the organizational change. But you also need to explain the practicalities: how the change will be delivered. So practically, this article shows how to involve the people who are affected in the organizational change.
Finally, this article does not cover the “why.” this other element, the purpose of change, will have to be the subject of another article.
The rational argument: why change now?
When a management team discusses re-orienting its organization, one important question is why now? Your discussion is likely to bring out some very human tensions: desire for clarity vs. uncertainty, desire for safety vs. change, desire to avoid risk vs. reward.
Waiting would be great, but as Andrew Marvell, a poet, said long ago, time’s winged chariot is always hurrying us on. An automotive executive I recently spoke with gave a more contemporary version: ‘once the action needed is unarguable, it’s already too late.’
If the pressure comes from time and opportunity, the fear comes from risk and the pain of change. It’s sometimes said that people would rather carry on being good at doing the wrong thing than learning something new, even if it’s the right thing. As a 3-time former CEO said to us “Why don’t people move? They’re afraid.’
Yet people love new things – the photo rearranging itself from portrait to landscape on an iPad, the fact that an electric car out-accelerates a petrol-fuelled one, even that they can pause live TV! So novelty isn’t the problem. As Peter Senge said, it’s not that people dislike change, they dislike being changed.
So how do we make the business case for change at the rational level and the human method for delivery at the practical level?
The value of time and the time to value
For top management, two themes help to bring focus on the need to change. We talk about the value of time and the time to value. To take an example:
A major bank going through a change program faces a lot of added program costs: internal change team, contractors hired in, special project management software, external advisers, meeting rooms, expenses. Here’s a rough estimate:
Value of time (a) – out of pocket costs:
- For every 10,000 employees involved in change, assume 30 people on the change team for a year: 10 internal staff, plus 10 contractors, plus 10 external advisers.
- 30 people at an average cost of €166k (some of those advisers are costly) = €5m per year.
- If this project can be completed 1 month earlier, the value of time is a little over €400k per month
Value of time (b) – cost savings planned:
- Assume the bank, facing intense competition, and moving to automated banking, plans to reduce its headcount by 10% (1000 people).
- It expects to save €100k per person in headcount reduction per year. For 1000 people, that is €100m per year.
- If this project can be completed 1 month earlier, the value of time is €8.5m per month
Adding these together, the value of time is significant: some €9m per month for delivering a major change program quicker.
Time to value (c): revenue impact
In addition, we have to think of how long it takes to get to Value. Assume that the bank is making changes not just to reduce its cost base, but strategically – to bring something new to the market. The quicker it can deliver its new products, its new services, its new customer offering, the more new customers it can win. Even at 1% of turnover, the value of earning revenue 1 month sooner in the market can be calculated:
Cost base = 2.5 x employee cost = €2.5bn
Revenue base = €2.5bn (banking is not so profitable at the moment)
1% increase in revenue = €25M… so 1 month faster is an extra €2.1M. of revenue.
So putting all this together, the value of time and the time to value makes 1 month worth:
|Project cost saving (a)||€ 0.4 M.|
|Cost base saving (b)||€ 8.5 M.|
|Revenue growth (c)||€ 2.1 M.|
|1 month faster is worth||€ 11 M.|
We have shared this story with executives. We seek to focus them on the top-down story of change: why it makes sense for shareholders, and why it makes sense to do things quickly, to ask why it’s not possible to accelerate all the data gathering, data cleaning, modeling the future and communicating it to the organization. Time is value. That is the rational case for cost reduction and revenue growth.
The practical and emotional arguments: changing, and not being changed
The practical delivery story is also crucial. A change imposed from above will not stick; the best change stories are Gemba stories. They involve going and seeing, getting involvement from the people who know the business, who know the customer and who do the work.
So how do you involve people in change from the bottom up, addressing both the urgency to change and the fear of change? The best ways that I have seen have had a clear strategic direction, a commitment to the people in the room: purpose-led, performance guided and people-focused. This approach is described in Bob Chapman’s brilliant book ‘Everybody Matters’, describing the engineering company Barry Wehmiller’s successful integrations of over 80 acquired companies (‘not one sold’).
To give an example of the practical approach to delivery, I recently supported a bottom-up planning exercise for new roles in data protection. European GDPR changes require new roles, with responsibilities both to the business and to external regulators. What should be in these roles? What activities and what skills? How do you size the work, how do you get clarity both on what is their responsibility and what is not? The head of the Data Privacy Office, in this case, fulfilled the first two requirements by being clear: the strategic direction was set, and the people in the room were the ones to take it forward. Then 18 people spent 8 hours working through options and implications.
The challenges: different starting points in multiple markets; different structures and existing roles; different future requirements from customers. However, it was remarkable how much that group of front line people could do. In only 8 hours, spread over 2 afternoons, they:
- Reviewed, updated and agreed on an improved taxonomy of existing activities
- Allocated their time to existing activities
- Compared notes to get perspective on differences by country, region, and role
- Assessed the value to the business of each existing activity
- Identified the primary recipients of each activity
- Reviewed the results, to make sense of where they were spending time
- Set dimensions on activities – to identify work that naturally fell into categories
- Re-allocated work in the future, ending up with a new view of how the work will be done
- Created a specification for their future role, with all the sections they needed for the new job description
The image above shows a sample of their process mapping after 4 hours and the image below shows how they rolled up FTE for each existing activity to understand where the work is now (categories and numbers have been changed).
I found it remarkable that a group had the openness, the ability and the commitment to work together and deliver so much insight in such a short time. The group identified as much as 40-50% of their work that could be simplified or handed on to other roles – a radical change for their work, and a large potential saving for the organization. Highly capable resources could move away from transactional work to much more valuable activities. A clear rational case, but one which needed the engagement of the team to make it real.
The group inspired me to believe that with the right strategic context, and the right commitment to the success of the people in the group, real bottom-up change can be achieved at pace, and with concrete results. We plan to meet again in 6 months and review progress and ongoing plans.
For me, this was an example of a group finding & delivering real value, and being unafraid of change, partly because they were not being changed, it was they who were driving the change.
Delivering change needs a combination of methods. The ‘why’ of change is crucial, and our assumption is that wise management teams will think deeply and express clearly what the organization is for, and why the change works for all parties.
This article focused on two other key aspects. The business case for organizational change at pace highlights the costs that will be saved in transition and the cost and revenue benefits of getting to the end state quicker. The practicalities of organizational change were addressed in our description of simple planning methods that you can use to involve teams in delivering change at a real pace.
This blog is written with our thanks to our participants in org design, role design and change workshops in the last 3 months.