Change Management

the People Side of Change

An introduction to change management from theeditors of the Change Management Learning Center

www.change-management.com

DEMO version only

Advance praise for Change MManagement:the PPeople SSide oof CChange

“Great book! This book takes the sometimes overly academicwork around change management and makes it easy, under-standable and actionable.”

Laura Roethe, Change Management Practice Leader,CUNA Mutual Group

“The principles illustrated in the book are timeless and appro-priate to any condition where things are not static. In fact, theyare based upon great quantities of common sense – so much sothat their utilization is not common.”

Kim A. Kennedy, General Manager,Industrial Operations, Blue Diamond

“This is a must read. Recognizing the need for change and effec-tively leading the correct changes may be the most importantleadership role for today's executives. In today's competitive anduncertain economic environment, change competency may be thekey to success.”

E.H. (Gene) Sherman, Founder and CEO,Baynard Cove Group

“Great book on change management – especially the ideas pre-sented on integrating the organizational and individual elementsof change management. The book has forced me to look at changemanagement in a new way!”

Susan L. Schleusner, Project Manager,Storage Technology Corporation

“A wonderful primer for change management. Every organiza-tion, both public and private, should view this text as requiredreading before implementing major change.”

Dr. James Johnson, Adjunct Faculty, Regis University

“Change Management is a great book to read if your boss ‘talks’about change management, but can't explain what change man-agement is or how to go about it. This book will give you the foun-dation you need to manage change and get the results you aretrying to achieve.”

Melissa Dutmers, Process Architect,Agilent Technologies

“Change Management is like a driving school for change agents.It teaches you the basic principles and rules for safely navigatingchanges and offers you insight into the minds of other ‘drivers.’This book allows professionals to manage change so that what-ever change ‘vehicle’ your company chooses to drive, you will beable to efficiently and effectively get to wherever your companywants to go.”

Michelle Wiginton, Information Technology,University of Oklahoma

“What impressed me the most in the book is the concept ofchange competency – the idea that change becomes business asusual. This opened my eyes to the fact that business and processchanges must happen fast and are continuous.”

Linda Colston, Process Development Specialist,Nokia

“By far the greatest strength is in the integration of the changeprocess on two levels: the individual and the organizational(business). Far too often, publications have emphasized one atthe expense of the other, leaving the integration to change man-agement students with no guidance.”

Norma Sutcliffe, Ph.D., Assistant Professor, DePaul University

Change Management

the People Side of Change

An introduction to change management from theeditors of the Change Management Learning Center

www.change-management.com

Jeffrey M. HiattTimothy J. Creasey

Prosci Learning Center Publications

Copyright 2003 by ProsciAll rights reserved.

First edition

Printed in the United States of America

Library of Congress Control Number: 2003111671

Hiatt, Jeffrey M., Creasey, Timothy J.Change Management: the People Side of Change

p. cm.

ISBN 1-930885-18-0 paperbackISBN 1-930885-19-9 hardcover

1. Organizational change - Management 2. Projectmanagement 3. Psychology - Change. I. Title

HD58.8 2003658.4’06--dc20

Prosci ResearchLoveland, Colorado, USA

Cover design by Larissa Carlson

All rights reserved. No part of this material may be reproduced or transmitted in any form or by any means,electronic or mechanical, including photocopying, recording, or by any information storage or retrieval systemwithout written permission from Prosci, except for normal reviews and quotations.

The paper used in this publication meets the requirements of the American National Standard for Permanenceof Paper for Printed Library Materials Z39.49-1984.

Volume discounts and direct orders are available from Prosci Research by calling 970-203-9332 or by visitingwww.change-management.com

Contents

Chapter 1 - Why manage change? 1

Chapter 2 - Theories and principles 13

Chapter 3 - Individual change management 45

Chapter 4 - Organizational change management 61

Chapter 5 - Change competency 83

Chapter 6 - Conclusion 91

Appendices

Appendix A - Change management resources 97

Appendix B - ADKAR worksheets 107

Appendix C - Highlights of best practices 123

Appendix D - Frequently asked questions 137

1

As editors of the Change Management Learning Center,we have analyzed research data from more than 1,000companies involved in large-scale changes. We talk dailywith project leaders and managers. We write weekly arti-cles and tutorials on managing the people side of change.We review new books in this field of study. What weobserve more than anything else is the need for easy-to-apply concepts and practical guidelines for managingchange. Yet, up to now, a straightforward introduction tochange management has not been available.

When finished with this book, you will have a basiccontext for change management, know why it is importantand understand how it is used. As a business manager, youwill be more effective as a change leader and sponsor ofchange. Specifically, you will be able to prevent and man-age resistance to change, minimize productivity loss,avoid unnecessary turnover and increase the probabili-ty that your business changes produce the desiredresults.

CHAPTER 1

Why manage change?

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Why manage change?

Whether you are an executive, supervisor, coach, consult-ant, project team leader or manager of any type whereyour job is to manage people, you likely have experiencedresistance to change from employees. However, you maynot recognize the role that you can play in preventing thatresistance and leading change. Most managers do notmake this connection until they have personally experi-enced failure in an important change project.

“I should have communicated better.”

“Next time I will involve more people.”

“If the CEO had just been more public in hissupport.”

“I was undermined by managers who felt threatenedby this change and did not understand the vision.”

These common reflections by business leaders after anunsuccessful initiative have one common theme: each rep-resents a failure to manage the people side of change.They are not alone. In a general study1 of companiesimplementing major business changes, 327 project lead-ers, consultants and managers answered the followingquestion about their project overall:

"If you had the chance to do it again, what would you do differently?"

The most common response was:

Chapter 1 - Why manage change? 3

"Utilize an effective and plannedchange management program."

Surprisingly, these study participants did not emphasizedesign or technology issues. They did not say they lackedvision or an understanding of the marketplace. The mostcommon barrier to success was a lack of change manage-ment. They fell short when managing the people side ofchange and encountered:

1. Managers who were unwilling to assign the neededresources to the project or would not allow their representative adequate time to participate

2. Managers who filtered out important messages orstarted negative conversations about the change

3. Employees who became distracted and lost interestin their current work responsibilities thereby impacting overall productivity and customers

4. Valued employees who left the organization

5. More people taking sick leave or not showing up forwork

6. Unforeseen obstacles to the change that seeminglyappeared from nowhere

7. A lack of funding for the change

In other words, things did not go exactly as planned. Theunexpected happened. Not managing the people side ofchange impacted their success and introduced risk into

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their projects. Change management can not only mitigate these

business risks, but in many cases avoid them entirely.Business leaders have the potential to not only manageresistance once it appears, but to prevent it in the firstplace. Unfortunately, many business leaders and projectteams do not appreciate their role in managing the peopleside of change until after resistance impacts the successof their change.

Two case studies show the potential consequences ofnot managing the people side of change. These case stud-ies were selected because they highlight two commonleadership mistakes: first, believing that change manage-ment is someone else’s job; second, ignoring the peopleside of change until major resistance stalls a project orcauses the project to fail.

Case Study 1 - The Reluctant CEO

To reduce cost and improve customer service, an insur-ance company wanted to consolidate its customer contactcenters across several divisions. A consultant was hired tosupport the effort and to prepare implementation plans.The project no more than began when rumor spreadthrough several departments that this organizationalchange was not good for the company. Supervisors andkey managers in the existing customer care centers beganresisting the change. In some cases they would not showup for design reviews or miss key decision-making meet-ings. Information requested by the consultant and thedesign team was withheld or half-complete. At breaks andaround the coffee pot, employees complained about poten-tial leadership changes. Both employees and managers

Chapter 1 - Why manage change? 5

were distracted from their day-to-day work and produc-tivity suffered. Key managers were rumored to quit if thechange was implemented. The consulting firm met withthe CEO, repeatedly warning that this resistance wouldundermine his change and would ultimately begin toaffect customers. The CEO, however, was reluctant tobecome personally involved. He believed that changemanagement was the job of his project team and the con-sultant, and not the responsibility of the head of the com-pany. After several months of difficulties and delays, theconsultants finally declared the consolidation in jeopardy.

With the project at a stand-still, the CEO requestedan emergency briefing with his leadership team. To pre-pare for this status report, the consultants conductedinterviews with key managers throughout each depart-ment. They quickly identified a director in an existingcustomer care center who viewed his job at risk with thepotential change. Negative conversations initiated by thisdirector were spreading throughout the ranks. His super-visors were the same people who were presumably threat-ening to leave the organization.

Even armed with this information, the CEOremained reluctant to take definitive action. The onlyrecourse at this stage was reassignment or termination ofthis manager. Both options could have negative fall-outfor the company and the affected manager. The CEO wasfaced with a stalled project and a potentially lose-losedecision for a long-tenured manager.

In this case, the CEO made two mistakes that are com-mon in major changes. The first was to assume thatchange management was someone else’s responsibility. Ina change management benchmarking study with 288companies,2 the number one research finding related to

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an executive’s role in change is active and visible spon-sorship at every phase of the project. The second mistakethe CEO made was not managing resistance when it firstsurfaced. Resistance to change can spread like wildfirewhen not managed effectively. Waiting, in this case, onlyresulted in a more difficult situation later on.

Case Study 2 - Stripes and Tar

The president of a business association had facilitiesmaintenance as part of his overall responsibilities. Theassociation included multiple businesses that each hadcondominiums in a single large office complex. The presi-dent of the association decided that the parking lot need-ed resurfacing and new striping. He arranged for a localcontractor to do the work.

One day the construction company showed up at theoffice complex and started blocking off the parking lot.The contractor was getting his equipment ready and wastrying to clear the lot of cars when disgruntled businessowners confronted his workers. The business ownerswanted to know what was happening, why it was hap-pening and who authorized the work. Not happy with theuninformed answers from the contractor and the immedi-ate demands to remove the cars from the lot, the businessowners instructed the contractor to pack up his equip-ment and leave. Since the president was not on site toresolve conflicts, the contractor had no choice but to aban-don the job.

Even when the president finally intervened later inthe day, enough business owners were upset about theunknown financial impact and the disruptive process thatthe contractor never returned to resurface the parking lot.

Chapter 1 - Why manage change? 7

In this case, the association president knew what neededto be done, took charge and moved ahead. The change wassmall, and in terms of maintenance, he was doing theright thing for the association. However, the presidentneglected to make the business owners aware that the lotneeded resurfacing as part of normal maintenance. He didnot communicate the financial benefit to the associationand therefore the financial benefit to each businessowner. Finally, the president did not inform the businessowners about how and when the work would be done, andwhat the business owners needed to do to support theproject. The result was resistance from the business own-ers, who, in this case, had sufficient authority to stop thework. The association president simply ignored the peopleside of the change and the project failed.

Both complex and simple changes can fail. Withmany projects, the evidence of failure from not managingthe people side of change is not as black and white as theabsence of new blacktop with freshly painted white lines.Failure can come in many forms including project delays,loss of valued employees, significant declines in produc-tivity and customer dissatisfaction.

In Case Study 1, the CEO did not think that manag-ing change was part of his job. It was not until a crisisemerged that the CEO became involved. In Case Study 2,the association president viewed the change as small andsimple, a change that he did not think required changemanagement.

Why do many business leaders believe that managing thepeople side of change is not their job? At the onset of anew change, managers are typically focused on issuesbesides change management. Executives want the changeto happen as soon as possible. Their focus is on results.

Change Management8

They are aware of the business issues facing the organi-zation and are accountable for financial performance.When a change is needed, they want action quickly. Theirprimary concerns are:

• What is the required investment?

• How will this change impact our financialperformance?

• What is the return on this investment?

• When can the change be completed?

• How much improvement will be realized?

• How will this change impact our customers?

If the answers to these questions are favorable, then thedirective to a project manager or project team is typically"let’s get it done." The executive’s focus is not on changemanagement.

The perspective of front-line employees (and in manycases their supervisors and managers within the organi-zation) is very different. They generally do not havedetailed insights into the business strategy and financialperformance of the business, nor do they share the sameaccountabilities as business leaders. Many employeescannot connect what they do everyday with the perform-ance of the company; therefore, it is difficult to convincethem to change based only on company performance.Their focus is on the day-to-day job. Serving customers,processing orders, getting their work done – these aretheir primary areas of interest. When a change is made,

Chapter 1 - Why manage change? 9

their primary concerns are:

• What will this change mean to me?

• Will I have a job?

• Do I have the needed skills and knowledge to succeed in the new environment?

To complete the picture, consider the consultants or proj-ect team who encounter both of these different perspec-tives yet have the job to design and implement thechange. They are accountable to the business leaders thatauthorized the change, yet must work with employees toimplement the change successfully.

Employees, the project team and executives have dif-ferent priorities, different knowledge sets and differentmotivations. Change brings these different priorities,knowledge sets and motivations together in a potentiallyvolatile mix. Employees feel threatened. Executivesexpect results. The project team is caught in the middle.The business enters a period in which the risk of produc-tivity loss, customer dissatisfaction and employeeturnover increases dramatically. It is at this critical junc-ture that change management plays a crucial role forbusiness success.

To survive in today’s marketplace, a business mustconstantly examine its performance, strategy, processesand systems to understand what changes need to bemade. At the same time, an organization must also under-stand the implications of a new business change on itsemployees, given their culture, values, history and capac-ity for change. Employees ultimately perform the newday-to-day activities and make the new processes and sys-

Change Management10

tems come to life in the business. Change management isabout managing people in a changing environment so thatbusiness changes are successful and the desired businessresults are realized.

The challenge for today’s leaders

These two views of change, the top-down executive’s viewand the bottom-up employee’s view, create two distinctchallenges for managing change. These two challengescan be referred to as organizational change management(from the manager’s perspective) and individual changemanagement (from the employee’s perspective). Both areskills that today’s leaders need for success.

Organizational change management is the perspec-tive of business leadership from the top looking down intothe organization. The focus is around broad change man-agement practices and skills that will help the organiza-tion understand, accept and support the needed businesschange. The emphasis is on communications, training andthe overall culture or value system of the organization.

Individual change management is the managementof change from the perspective of the employees. They arethe ones who ultimately must implement the change. Thefocus for individual change management is around thetools and techniques to help employees through the tran-sition. Managers and supervisors must provide the coach-ing required to help individuals understand their role andthe decisions they make in the change process.

Overall, change management is about helping peoplethrough change. It is the process, tools and techniques forproactively managing the people side of change in orderto achieve the desired business results.

Chapter 1 - Why manage change? 11

Getting up to speed

Change management is the application of many differentideas from the fields of engineering, business and psychol-ogy. As changes in organizations have become more fre-quent and a necessity for survival, the body of knowledgeknown as “change management” has also grown to encom-pass more skills and knowledge from each of these fields ofstudy. While this may be a good trend overall, the result formany business leaders is growing confusion about whatchange management really is.

The purpose of this book is to bring the meaning ofchange management into focus. Written for executives,managers and consultants, this book will provide you witha solid understanding of the principles and processesaround managing change in today’s competitive environ-ment. Case studies, examples and even a personal exercisewill help bring the concepts to life.

A different change management definition

The software and IT community have long used the term“change management” to refer to the processes and sys-tems of managing software and hardware revisions (alsoreferred to as change control). If you conduct a search onan internet search engine under the term “change man-agement,” you will find mixed listings. Some listings arefor change management as defined in this book. Otherlistings are for software and hardware change control.This is an unfortunate collision of two fields of studyusing the same terminology to refer to two completely dif-ferent topics. However, the IT community is ofteninvolved in major business change projects, and therefore

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as a practitioner you must be sure that your team under-stands change management as it is being applied for yourproject.

Moving forward

Before jumping into the models for individual changemanagement and organizational change management, wehave devoted a chapter to the principles and theories thatcontribute to the current thinking on managing change.These principles will provide a foundation for the modelspresented later in this book.

References

1. Prosci. (2002). Business Process Reengineering Benchmarking Report. Loveland, CO: Learning Center Publications.

2. Prosci. (2003). Best Practices in Change Management. Loveland, CO: Learning Center Publications.

13

Most change management models in use today are in theform of a process or set of steps. These processes or activ-ity lists were developed through trial and error, and arebased on experiences of experts in the field of changemanagement. In some cases these experts have created astandard process based on their consultancy models.These experts often use the same processes with theirclients that are published in their books, articles andtraining materials.

Unfortunately, the underlying lessons and principlesthat resulted in these change management processes arenot always clear. In many cases the principles are noteven discussed as part of the resulting model. In a sense,what you learn is the how but not the why. The years ofpractical experience and knowledge that formed the basefor these processes are not readily available to businessmanagers.

A story about a young man watching his mother pre-pare a roast illustrates the importance of this point. Eachtime his mother cooks a pot roast, she cuts two inches off

CHAPTER 2

Theories and principles of change management

Change Management14

each end of the roast.The son asked, “Mom, why do you cut the ends off?” “I don’t know,” replied Mom, “that is the way

Grandma always did it.”The son decided to investigate with a series of phone

calls first to Grandma, then to Great Grandma. Grandmasaid she did it just the way Great Grandma showed her.After talking with Great Grandma, the son discoveredthat she cut the ends off the roast because her oven andcooking pan were too small, and she had to cut the endsoff to make it fit.

Mom and Grandma knew the how – cutting two inch-es off each side of the roast – but not the why – becausethe original pan was too small. Ovens and pans are larg-er now and it is no longer necessary to shorten the roast.

Understanding the why makes you better at doingthe how. Change management is not a matter of simplyfollowing steps. Since no two changes are exactly alike,following a recipe for change management is not enough.The right approach will be specific to the situation. If youdo not understand the why, changes can fail even whenstandard processes are followed. Research with hundredsof project teams has shown that a one-size-fits-allapproach is not sufficient. To be effective at leadingchange, you will need to customize and scale your changemanagement efforts based on the unique characteristicsof the change and the attributes of the impacted organization.

To accomplish this customization, an understandingof the psychology of change and key guiding principles isvital. You will then be able to work with many change management methodologies and adjust your approachaccording to the size and nature of the change, ultimate-ly making your change a success.

Chapter 2 - Theories and principles 15

Primary principles for change management

The guiding principles that will impact your change man-agement activities are shown in Figure 1. The overview ofprinciples and ideas presented here is not intended to bean in-depth psychological analysis. Rather, the focus willbe on the key insights from these principles that impacteffective application of change management. Case studiesare used to illustrate key messages including how onemillion dollars in cash served as a change managementtool.

Senders andreceivers

Authority forchange

Value systemsThe right answer is

not enough

Resistance andcomfort

Change isa process

Incremental vs.radical change

ChangePrinciples

Figure 1 - Primary change management principles

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Principle 1 - Senders and receivers

Every change can be viewed from the perspective of asender and a receiver. A sender is anyone providing infor-mation about the change. A receiver is anyone being giveninformation about the change.

Senders and receivers are often not in a dialogue atthe onset of a change. They often talk right past oneanother as shown in Figure 2. What a sender says andwhat a receiver hears are often two very differentmessages.

For example, if a supervisor sits down with an employeeto discuss a major restructuring project within the com-pany, the supervisor may be enthusiastic and positive.She may cover all the key messages including the busi-ness reasons for change, the risk of not changing and theurgency to change the organization to remain competi-tive. The supervisor may even emphasize that this is achallenging and exciting time. However, when the

Senders

Receivers

Business issues and need to change

Personal implications and risk

Figure 2 - Sender and receiver disconnect

Chapter 2 - Theories and principles 17

employee discusses this change at home over dinner, thekey messages to her family are often:

“I may not have a job.”

“The company is having trouble.”

The supervisor may spend 95% of the conversation talk-ing about the business and 5% talking about the implica-tions to the employee. At home, the employee is more like-ly to spend 95% of the time talking about the impact onher personally and 5% on the issues facing the company.

The consequence is that much of the key businessinformation communicated by the supervisor to theemployee in this first conversation is not heard. It is over-shadowed by concerns related to job security and fearabout change.

Many factors influence what an employee hears andhow that information is interpreted. Examples of thesefactors include:

• Other career or educational plans

• Situations at home or with personal relationships

• Their past experience with other changes at work

• What they have heard from their friends or workcolleagues

• Their current performance on the job

• Whether or not they trust or respect the sender

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Now multiply these factors by the number of employeeswho are the receivers of change messages, and add evenmore variables as each person could have a differentagenda. You can begin to appreciate the challenge facedby many businesses as they communicate the change totheir employees.

Preferred senders

Based on Prosci’s change management research studywith 288 organizations,1 employees prefer two primarysenders of change messages. Not surprisingly, they alsoprefer specific message content from each of thesesenders. Immediate supervisors are the preferred sendersof messages related to personal impact including:

• How does this impact me?

• How does this impact our group?

• How will this change my day-to-day responsibilities?

When it comes to personal issues, receivers want to hearfrom someone they know and work with regularly, name-ly their supervisor.

CEOs or executive leaders are the preferred sendersof messages related to business issues and opportunitiesincluding:

• What are the external customer and competitorfactors driving this change?

• What are the current issues facing the business?

Chapter 2 - Theories and principles 19

• Are there other marketplace drivers?

• What are the financial risks if we do not change?

When it comes to business issues and why the change isneeded, receivers want to hear from the person in charge.

The sender and receiver concept is very relevant tothe actions taken by change management teams, projectteams and business leaders in the change managementprocess. Typically, executives, project teams and supervi-sors are the senders of key messages. They follow a pre-scribed communications plan to share information aboutthe change. These communication activities are part oforganizational change management.

In some cases, however, managers do not assess whattheir employees actually heard, nor do they understandhow that information was processed. They merely com-plete a communication activity, check off a box, and moveon to the next activity. A poor assumption is that “employ-ees heard just what I said and understood exactly what Imeant.”

More likely, employees heard only a fraction of whatwas said, and their translation of that message will beunique to their personal situation. Some employees mayhave heard more than what was said, or will make upanswers to questions that they do not understand. Theanswers they make up are typically worse than reality.

Realizing that what receivers hear and what senderssay is not always the same is the first step to understand-ing that change management cannot be reduced to a set ofactivities or steps. Managers must not only be clear intheir communications, they must also listen to employeesto understand how their messages are being received.Change management communication is only effective