Change Management
Change management is a natural part of running any organization; the fact is, most companies will undergo a major transition or adaptation at some point. While some plan ahead for this reality, others only realize they need this function when a crisis requires a rapid response. Building the necessary workplace skills ahead of time can pay dividends, especially in such emergencies.
What Is Change Management?
Change management is a methodical approach for implementing new procedures, reforms, hierarchies, and strategies. Any organizational change requires an effective change management process, which itself relies on a wide range of skills. These skills are applied to ensure that employees at all levels understand why change is occurring, how it will impact their work, and what their role will be during and after the change.
What Leads to Change?
There are many triggers that can drive a company towards change. Over the last century, the biggest changes were the integration of computers into business and the shift away from paper to electronic records. Each change, or reason for change, represents a shift in the way the organization works, and so requires the ability to drive the proper adoption of the change by all employees. A successful change management plan depends on employees committing to the change, and learning how to adapt to the new shift. Some common examples of organizational change include:
- New technologies
- Competitive threats
- A culture of constant improvement
- New products
- Significant failures
- Updated strategies
- Mergers and acquisitions
- Managerial turnover
According to Harvard Business School, organizational changes can be separated into three categories:
Adaptive / Developmental – These are smaller or incremental changes, such as adding a new payment method to an e-commerce site or adding a chatbot to the company website to help reduce customer support or prospect inquiries.
Transformational – These include large-scale changes that signify a dramatic and sudden departure from old business practices. Examples include launching a new product or business division and deciding to pursue a strategy of international expansion.
Transitional – These are changes that lie somewhere between adaptive and transformational, for instance, when a company moves from being a partnership to a corporation, or purchases additional office space.
It is important for a company to understand what kind of change it is experiencing. Obviously, a transformational change demands intense efforts from practically the entire organization. But even seemingly minor updates can have widespread effects. For example, moving to an agile methodology for software development might influence business practices throughout a company, including in the human resources department, and speed up production considerably.
The overall future consequences of modifications that are about to happen should be considered in today’s change management models and skills gap analyses. No company wants to enter a period of flux without first implementing employee development strategies that enable the necessary skills to handle changes efficiently.
Why Is Change Management Important?
According to Gartner, a typical organization can expect to implement five major changes within three years. As we’ve mentioned, there are numerous triggers that lead to these adaptations. For example, today’s pace for the introduction of new technologies is faster than ever before; change seems to be inevitable for any company that wants to survive. And that means being proactive in order to implement desired skills related to a change management strategy.
Yet the rate of failure for change management initiatives indicates that many organizations do not properly follow best practices. WTW reports that 70% of change management strategies fail. Aside from being a waste of resources and frustrating for employees, a failed change management process means that there is now a competitive risk to the organization. Perhaps, in the case of a developmental change, this can be a minor setback. But for more drastic adaptations, the survival of the company might be on the line.
Why do organizations rarely succeed during the change management process? In this article by Forbes, the top reasons given are:
- Lack of employee understanding of the reasons behind a change initiative
- Reluctance by lower-level employees to undertake tasks that are difficult
- A failure by business leaders to discuss organizational weaknesses
- A company culture that attracts employees who are averse to risk and disruption
In many ways, each of these factors can be addressed through professional development initiatives. Challenges to the success of change management often involve high-level skills, such as communication and teamwork. But even here, L&D programs offer a solution in the form of coaching and mentoring. Businesses must take the appropriate steps to ensure that organizational growth is backed by the right change management skills.
The Steps of a Change Management Plan
Before we get into the skills involved in making effective organizational change, it’s essential to understand the steps of a change management plan. There are many types of change management models that have anywhere from three to seven steps, while the five-phase plan is endorsed by Harvard Business School.
Realization
Upon identifying a challenge and/or opportunity, leaders must decide to design a change management strategy. Even before choosing practical steps, it is essential for company culture to be in a state where it will accept and cooperate with the new strategy. This is because, as cited by the previous Forbes article, lack of employee understanding and the wrong culture are major contributors to failed change management plans. An organization’s leaders must have the mindset to speak up when they realize that the company is headed in the wrong direction.
Planning
This phase starts with “high-level” goal-making that outlines major objectives. Stated simply, planning tries to address the problem of “what do we do now?” Once the various major issues have been defined, and potential solutions created, leaders need to translate those concepts into practical steps to be taken throughout the company. We’ve outlined the basic top-down approach for the planning phase:
- Strategy – What is the challenge, and how do we address it?
- KPIs – How do we recognize success, and where do we stand today with regards to those metrics?
- People – How do we perform the necessary change activities without disrupting regular operations, who will lead these activities, and who will provide approval upon completion?
- Activities – What are the steps that each employee needs to take to implement the strategy, and by when should they be completed?
- Revisions – How can it be recognized if the plan is not working, and what should happen then?Preparation
Once a course of action is decided, it is vital for stakeholders, particularly employees, to understand the nature of the change program. But this is not a one-way flow of data. Obviously, management will inform workers about new tasks that must be performed. But it is also true that employees should be given opportunities to contribute. They will be in a position to know if top-down orders are practical, and if not, what steps can be taken instead.
Implementation
This phase is the main step of a change management process and the point at which it will succeed or fail. There will inevitably be setbacks, either due to poor performance or unexpected developments. Like during the preparation phase, the proper handling of these issues will depend on managers who see problems and create solutions while facilitating employee feedback and advice. In short, employees must work as a team both to recognize barriers and to cooperate while resolving them.
Review and Reinforcement
Assuming that the implementation phase went smoothly, the final step of a change management strategy is to ensure that the change is complete and permanent. This requires additional monitoring of the KPIs set in the planning phase. Companies should also conduct a process review to understand what should be improved for the next time that change management is required. Because culture is such a critical aspect of performance, you will need to make sure that employees do not relapse into the behavior that led to the need for change in the first place (if it arose due to a threat).
A Note on Change Management Models
There are multiple frameworks that can help during a change management process. Among the most popular are:
Which Skills Are Needed for Change Management?
When identifying the relevant skills, it can be helpful to consider the stages of organizational adaptation. Some skill sets (such as communication, for example) can be useful at various stages.
Realization
Typically, an organization will decide to make a significant shift when it recognizes that a problem and/or an opportunity are pending. The ability to identify the need for change is a result, in part, of critical thinking. A critical thinker will see how the organization’s current path is not optimal and move to improve it. In this way, they are acting as a “change agent”, i.e. an action-oriented leader who uses certain leadership skills to anticipate disruptions and contribute to a change management plan. Preempting the types of problems that lead to forced change management is a function of organizational development.
Planning
At this point, it’s essential to have a skill such as problem solving. In small organizations, problem solving might be the task of the CEO, who needs to rely on creativity and analytical thinking to derive a set of potential solutions. In larger companies, problem solving tends to be a group effort, depending on brainstorming and teamwork activities that generate ideas for solving a crisis or seizing an advantage. Yet, even in this setting, the quality of the resulting change management model will benefit from the contribution of an employee with a leadership style that makes the most of the team’s talents.
Preparation
Communication skills are essential for employees at all levels to discuss the feasibility of important organizational shifts. Perhaps just as important is the attitude that allows workers at any level to give an opinion, an ability that can be enhanced through leadership skills. On the other hand, managers should develop active listening skills along with the self-awareness that allows them to act professionally if they are criticized.
Implementation
There are many skills related to this stage, and they depend on the nature of the shift. For example, implementing a technology might require training in a new programming language, while participating in a merger could demand wholesale layoffs, new production lines, a different marketing strategy, and so on. Additionally, it is always a good idea to stay organized with tools such as project management software. When it comes to soft skills, at the very least, implementation requires many of the skills that come under the umbrella of teamwork:
- Organization
- Time management
- Creative thinking
- Critical thinking
- Professionalism
Review and Reinforcement
Although this stage is mainly administrative and involves those chosen to manage the process, there are still important skills that can help during this step, including organization, conscientiousness, and thoroughness.
Case Studies in Change Management
Many of the most successful organizations in the world reached their height as a result of effective change management strategies. To illustrate, here are some examples of well-known corporations and the smart adaptations that they made.
General Electric
GE was already a powerful company when it hired a new CEO, Jack Welch. Welch realized that the organization risked becoming a “dinosaur” due to reliance on its old products and practices. To make GE more competitive, he implemented a “Six Sigma” transformation program, the goal of which was to eliminate troublesome areas of manufacturing. This allowed GE to reduce product defects, and through a process of continuous improvement, create efficiencies worth $10 billion. At the same time, GE changed its hiring procedures and company culture to be more entrepreneurial. In all, GE’s improvements increased the company’s market value from $12 billion to $280 billion in only 17 years.
Domino’s Pizza
Domino’s was just one of many pizza chains that operated via physical stores and phone orders. But in 2008, as the internet became increasingly popular as a method for placing orders, Domino’s realized that it had found an opportunity. It was the first pizza chain to enable orders through the internet, which increased customer convenience and differentiated the brand. As new media developed, Domino’s kept pace with such changes and is now available through social media, smart TVs, and virtual digital assistants. Moreover, the company understood the value of customer data, which it uses to adapt to consumer trends (for example, by introducing new menu items) and support a loyalty program.
IBM
Like General Electric, IBM was a veteran company with years of success behind it. However, as the personal computer market grew in the 1980s and 1990s, IBM lost significant ground to companies like Microsoft and Apple. This trend only continued into the 2000s as other organizations were first to market with technologies for internet and cloud computing. But IBM was able to turn this situation around with a focus on major industry developments in the 2020s such as artificial intelligence and blockchain. This was accomplished through a complete rebuilding of IBM’s business model and culture, including the implementation of extensive L&D programs.
Starbucks
Starbucks achieved major success in the 1980s and 1990s. But, after this period, it faced increasing competition from other major players such as Dunkin’ Donuts and McDonald’s. In addition, due to their rapid expansion, Starbucks lost its innovative spirit, which translated into poor customer service and product quality. To reverse the situation, Starbucks underwent an extensive program consisting of:
- Implementing extensive L&D programs for customer-facing employees
- Closing underperforming branches
- Redesigning menus, store layouts, and branding
- Introducing technology-oriented programs such as loyalty plans and mobile ordering
It also began an initiative called “My Starbucks Idea”, which encouraged customers to exchange ideas about service improvement directly with the company. As a result of these many innovations and change strategies, Starbucks grew significantly, as illustrated by the increase in stock price, which went from approximately $4.50 in 2008 to approximately $60 in 2015.
Time to Change to Growthspace
The extent to which change management will be successful is determined in large part by the level of proficiency in related skills. Too often, companies neglect these skills until they reach the point of dilemma.
That’s why so many major organizations and human resources teams are turning to Growthspace. They are discovering how Growthspace’s precision skill development platform identifies skill gaps and connects them with top experts to provide the most effective, customized L&D programs. In this way, organizations can be prepared for unavoidable and drastic shifts in operations and strategy.
