2%

2%

4%

15%

20%

23%

33%

0 10 20 30 40 50 60 70 80 90 100

Don’t know/Not applicable

Other, please specify

Sufficient funding

Employee buy-in

Effective communication

Clearly defined milestones andobjectives to measure progress

Commitment of senior management

Bill HendricksonEVPCelerant Consulting

Changing Your Business For Good

Celerant Consulting recently sponsored an Economist Intelligence Unit survey, “A Change For the Better; Steps for successful business transformation”. The survey polled more than 600 senior executives in the US and Europe across in a myriad of industries including: manufacturing, telecommunications, energy and natural resources, chemicals and automotive. In-depth interviews with experts on the subject of change management were also part of the findings report. Below, Bill Hendrickson, EVP at Celerant Consulting outlinesthe significance of the survey’s trends and offers insightful guidelines for completing a successful business transformation in today’s uncertain times.

Many business leaders today are executing Change Management programs as an immediate and direct result of the uncertain economic environment. According to a recent global survey conducted by The Economist Intelligence Unit (EIU) and commissioned by CelerantConsulting, nearly two-thirds of senior executives are currently instituting Change Management programs. Despite their recent popularity, a successful change management program is still a rarity - 58% of respondents admit that half or fewer of their initiatives have been successful over the past five years. This is a significant and worrying trend, but what many executives don’t realize is that there are a few specific steps which, if followed, can be integral to the success of business transformation.

Survey respondents indicated that the three key success factors in change management are leadership, planning, and communication. So, what do companies need to do to rapidly convince employees of the benefits of change? None of what is required is rocket science, but it is important to get things right. See Figure 1 below.

Figure 1: For the change management initiatives that worked for your organization in

the last 12 months, what was the single most important factor in determining success?

“When dealing with significant

change, organizations have to

understand that timely execution is

critical. A corporate leader today

gets about 18 months to execute a

plan. Given today’s economic

situation, that is shrinking to 12

months, and one day soon, nine to

12 months will be the norm.”

-- Bill Hendrickson, EVP, Celerant

Let’s take a closer look at each.

1. Effective leadership is critical. The best leaders of change are not ones who dictate their plans, but those who bring vision; inspire people with a sense of urgency; and then help them to bring their own creativity to the project. When asked the single most important factor for successful change management programmes at their organizations in the last year, the clear leader was “commitment of senior managers”, cited by 31% of respondents. It is revealing that respondents who did not belong to the C-suite ranked it far ahead of all other choices, while those at C-level actually put it second. Companies are looking to executives to take them through change.

2. Projects need to be effectively planned. This involves not only the basics of knowing where you are going—lack of clearly defined milestones was a leading cause of failure at 24% of companies—but also the psychological elements of bringing people along. People like to win, to know they are making progress. Lay out a detailed map, then measure the milestones and celebrate forward motion. Thorough planning is essential to success, yet, according to our survey, it is often overlooked. “Lack of clearly defined and/or achievable milestones and objectives to measure progress” was the most common factor in the failure of change initiatives at respondent companies in the last year (cited by 24%). When developing a road map for change, companies need to be honest about where they are starting from. While it may take courage to own up to current failings, if the starting point is incorrect, the plan is more likely to fail. Elements of the roadmap of change are crucial to gaining and maintaining support.

3. Good communication is an essential element. At nearly one in five companies, good communication was a leading cause of success in change management. The message need not just be how the change program is progressing—important as that is—but that the company and leadership are still committed to the change program, and that it matters whether people continue to take the change seriously.Fully 19% of respondents listed effective communication as the single most important reason for successful programs in the last year, and the same number pointed to its absence as the cause of failure. The key message in motivating people to endorse change is often not how the company is doing on a chosen set of metrics, but that the change program still matters. This points back to leadership. Getting across the ongoing commitment to change by the top executives is essential.

Interestingly, money to fund these initiatives does not seem to be an issue. On average, companies spend just 0.1% of annual revenues on change programs and only 8% consider a lack of funding an important reason for their failure last year. Moreover, the most cited reason for change programs is cost cutting, which should improve the bottom line whatever the initial outlay.

20%

1%

14%

6%

10%

24%

25%

0 10 20 30 40 50 60 70 80 90 100

Don’t know

If you know the specific amount please enter here

Over $20m

$10 to $20m

$5 to $10m

$1m to $5m

Under $1m

The average company in the survey spent $8.7 million over the past twelve months on such initiatives. Bigger companies – those with annual incomes of over $1.0 billion – spent a lower proportion (0.09%) and the smallest businesses – those with income under $1 billion –noticeably more (0.4%), but still not enough to break the bank. See Figure 2 below.

Cultural differences and challenges were cited by 27% of respondents as a leading difficulty for their change initiatives. Interviews for this study, however, indicate that recognition of cultural issues – both differences in culture within companies and in the national cultures in which various parts of a business sit – is more even important than these numbers suggest. Winning over the hearts and minds in part involves understanding not just individuals but the cultures within which they operate. Also, the effectiveness of diverse styles of leadership, planning, and communication certainly vary across cultures.

Amid the shifting challenges of the modern business environment, an ability to manage change effectively gives strong competitive advantage. Ironically, external crises help drive change in organizations and the current economic slowdown is providing a “burning platform” for change. More companies are planning more change and planning to spend more on it. Unfortunately, too many of these change initiatives will fail. Companies are devoting sufficient money to the problem, but too often find it harder to win over the hearts and minds of their people. Leadership, planning and communication must make the case for change successfully, harness the capabilities of the entire company, and keep employees motivated over the course of the change initiative and beyond.

Business is a human endeavor and companies are populated by people with interests and emotions. Change management is about leading people to change. Processes and procedures can help, and certain tools are indispensable, but ultimately this is art, not science.

NOTE: This article is based largely on the Economist Intelligence Unit’s research report “A change for the better: Steps for successful business transformation” and the findings associated with the more than 600 senior executive interviews. The report was commissioned by Celerant Consulting and was completed in May 2008.

Figure 2: Approximately how much did your company spend ($US) on change

management initiatives over the past twelve months?