Category Archives: Change Management

The management of change leading to the realisation of benefits and value

Resistance to change is not new……

My last couple of posts on the subject of change and executive leadership generated a range of comments many suggesting if we did ‘better project management’ the problems would be resolved. Unfortunately for this to be true, the organisation still needs executive buy-in and leadership to support the process, in fact demand better project management.

An article in the December edition of ‘project’, the journal of the UK Association of Project Management (APM) by Martin Samphire, a committee member on both the APM Governance SIG and the APM Portfolio Management SIG highlights more project failures. This time the FiReControl project which was described by the House of Commons Public Accounts Committee as ‘one of the worst cases of project failure the committee has seen’, followed by a catalogue of fundamental failures; and the NHS Connecting for Health program which is beset by weak program management.

The UK industry and Government know how to deliver large complex programs, the work of the Olympic Development Authority is a world class example; it’s just that many other managements simply choose to ignore good practice, or more accurately refuse to change to allow good practice to be introduced.

The challenge of getting senior management to actively support change that brings better systems into use to the benefit of the organisation they work for is not new. Henry Gantt had similar problems introducing his systems that demonstrably increased production by over 100% and massively increased profits. Here are a few of his comments:

  • The changing of a system of management is a very serious matter and cannot be done by a superintendent in his spare time (Work Wages & Profits, p168).
  • In every workroom there is a fashion, a habit of work, and every new worker follows that fashion, for it isn’t respectable not to (Work Wages & Profits, p186).
  • The most casual investigation into the reasons why so many of the munition manufacturers have not made good, reveals the fact that their failure is due to lack of managerial ability rather than to any other cause (Organizing for Work, p64).
  • Our most serious trouble is incompetency in high places. As long as that remains uncorrected, no amount of efficiency in the workmen will avail very much (Organizing for Work, p64).
  • Our industries are suffering from lack of competent managers,—which is another way of saying that many of those who control our industries hold their positions, not through their ability to accomplish results, but for some other reason (Organizing for Work, p64).

By the way, Henry was also less than impressed with the bankers of his time as well: “No …laws…. have so far been framed that restrain the ‘high financier’ who, without giving anything in return, taxes the community for his own benefit to an extent that makes all other forms of acquiring without giving an adequate return seem insignificant.”

The framework needed by senior executives is well established the APM has just published the 2nd edition of Directing Change – a guide to the governance of project management (60,000 copies of the 1st edition have been distributed since publication in 2004). This guide is written by senior managers for senior managers. It provides clear overall guidance to an organisation’s governing body (board or equivalent) and executives on their responsibilities and more specific guidance on choosing the right projects (portfolio direction), project sponsorship, project management capability and disclosure and reporting. Copies can be downloaded from the APM website or: www.mosaicprojects.com.au/Resources_Papers.html#Governance

Martin Samphire’s view is that applying good governance in their management is 80% of the answer to successful projects. I feel he is understating the importance of the role and responsibility of the senior executives, particularly when it comes to the process of changing an organisations culture to accept good governance and effective project management!

Culture eats strategy for breakfast 2!

In my first post on this topic I suggested that:

  • Even where a smart business has aligned the project with a sensible/necessary strategic intent, and then properly leads and resources the effort, failure is still likely if the power of culture is ignored.
     
  • And culture can be loosely defined as ‘the way we do business here’ and incorporates attitudes, expectations and the way both internal and external relationships work. The people in the organisation are there because they can operate in the culture as it currently is and embody the culture; they are predisposed to resist change.

This post looks at the entrenched nature of culture and its affect on change.

Surveys by the Australian Institute of Management and others consistently show that around 30% of people in an organisation are looking to leave; which means 70% are content. This majority are comfortable within the current status quo and know how to ‘work the system’ to their advantage. The 30% who aren’t happy may be open to change but are also already disaffected and therefore probably disinterested.

Introducing a new ‘best practice’ will inevitably change the status quo and change the relative power balances within the organisation. A couple of examples:

  • The organisation decides to introduce an effective scheduling system (possibly supported through a PMO). The people involved in doing the schedule gain ‘power’ they develop the schedule and report progress against the plan. The project teams lose power, they need to conform to the plan (losing the flexibility to do what they feel like on a day-to-day basis) and failures to achieve the schedule are highlighted to management much sooner than if the schedule was not being used. We can prove having an effective schedule improves the probability of project success (see: Proof of the blindingly obvious), but what’s good for the organisation as a whole is not necessarily going to be seen as good by the individuals affected by the ‘improvement’.
     
  • The organisation decides to introduce a Portfolio Management process to select the best projects to undertake to achieve its strategy, within its capacity to properly support the work. This is a great strategic initiative that maximises the value to the organisation but will mean rejecting more the 60% of the potential projects it could do if it had unlimited resources. This means 60% of the pet projects supported by various members of the executive will be canned! Which means these people will lose power and status firstly to the team making the portfolio decisions and secondly to the executives whose projects were selected. Another group disadvantaged by the selection process (or more accurately the rejections) are the teams who develop the idea and build the business case for the non-selected projects.

In both cases what’s good for the organisation is potentially bad for a large group of individuals who are currently happy and effective working within the current culture and structures of the business – if they weren’t happy they would not be there!

In Culture eats strategy for breakfast! #1, I raised the concept of creating ‘space’ in the existing culture for the change initiative to move into and fill. This ‘space’ is created by crafting a general acceptance within the culture that the current status quo is not working well for the majority and some sacrifice of existing power and ‘comfort’ is generally warranted for the good of each individual as well as the organisation. This objective can be achieved in a number of ways:

  • by identifying a ‘clear and present danger’ that is threatening the group and the organisation as a whole – the need to change to survive;
  • alternatively a competitive challenge to beat an opposing organisation may work or;
  • best but most difficult to achieve a engendering general striving for excellence simply to be part of something great.

Engendering the move towards accepting or desiring the change requires powerful leadership embodying credibility and a clear message that identifies the reason for the change and generates buy-in to the concept of changing and improving before the specifics are even discussed. This leadership has to come from the top! (see more on leadership)

The more established the ‘culture’ is the harder creating the desire for change becomes. Small and medium sized businesses can link the well being of the business to the benefits of the individuals far easier than large businesses. Commercial organisations can link their success to the well being of individuals far easier than stable government organisations with permanent employment as part of the public servant’s culture. The more resistant the culture, the more important effective leadership linked to powerful communication becomes in creating the space for change.

Once the ‘space’ has been created and the desire to improve is generally present, a careful two-way dialogue is needed to define the best options for change and build engagement, to recognise those who will inevitably lose power or be inconvenienced by the change and to help these ‘losers’ re-gain their losses (or perceive a better future despite the losses). Altruism is wonderful but it is unwise to rely on it as the primary mechanism for change.

There will always be resisters to change, the challenge is to shift the majority to a point where they want the improvements (or at least recognise the changes are essential). In addition to leadership, this also requires effective stakeholder management (see more on stakeholder management ). Once this shift is achieved, traditional change management processes cut in to deal with the implementation of the change, supported by project management processes to create the necessary deliverables to implement the change.

However, if the organisation fails to create the ‘space’ in its existing culture for the new processes to work within, the existing culture will definitely eat the intended strategy for breakfast!

Culture eats strategy for breakfast!

Most business changes involve a strategic intent, implemented by a project or program that defines the new processes and procedures needed to achieve the change and then develops and implements the processes.

Smart organisations realise this is not enough and include training to make the organisations staff familiar with the new processes and the really smart organisations link achieving the intended benefits to a key executives KPIs. And the changes still fail!

Two areas of notable failure are IT projects where the focus is on the technology rather than the business and PMO start-ups where the focus in on processes and reporting rather than improved project outcomes.

However, even where a smart business has aligned the project with a sensible/necessary strategic intent, and then properly leads and resources the effort, failure is still likely if the power of culture is ignored. Culture can be loosely defined as ‘the way we do business here’ and incorporates attitudes, expectations and the way both internal and external relationships work. The people in the organisation are there because they can operate in the culture as it currently is and embody the culture; they are predisposed to resist change.

There is an old joke that asks ‘how many consultants do you need to change a light bulb?’ The answer is ‘one, provided the light bulb wants to change!’ This adage applies to changing culture in any organisation – it wont change unless the people in the organisation want it to change, and overall most people in the organisation are quite happy with the culture as it exists (if they were not, they would move on to another job).

The challenge with implementing changes falls into two areas:

  • The first is doing the ‘right project right’ by implementing effective Portfolio, Program and Project management. Whilst it is true that $billions of projects fail due to poor management practices, these failures are a deliberate choice of executive management. We know how to do projects, programs and portfolio management properly, not implementing effective systems is a cultural decision that prefers the status quo and failure over change.
     
  • The second challenge is cultural; the need to move the organisations culture to allow the change to be implemented effectively. This is a much more difficult process that needs leadership and drive. You need to create the willingness to allow the change to happen, before the change can be implemented effectively, before the benefits of the change can be realised. This requires the people in the organisation to buy into the concept of the proposed change long before the benefits can be tangibly appreciated.

Meeting the challenge of ‘culture’ requires effective leadership; the people in the organisation need to be prepared to follow their leader into the new, unproven future. These traditional aspects of leadership are outlined in our White Paper: Leadership.

Another important facet of leadership is ‘Tribal Leadership’, everyone belongs to one or more tribes of associates (defined as people they know well enough to greet socially) and effective leadership at this social group level can also be a powerful influence for change, firstly to build engagement within the group (see diagram below), then to generate support to allow the change to happen.

Whilst project managers can only ever have a small role to pay in the overall leadership of the organisation (this is the province of CEOs and executive managers), they can be effective tribal leaders.

Most tribes are quite small, less then 120 people. In their book, Tribal Leadership, Logan, King and Fischer-Wright describe an organisation as a tribe of tribes and if the project manager’s tribe expands to include key members of the wider organisational community affected by the planned change, their influence can be significant.

Creating the ‘space’ within a culture to allow change, both from the executive leadership perspective and tribal leadership perspective are elements of effective stakeholder management. What most organisations forget is this part of the change effort has to precede the role out of the new processes and procedures.

Creating the space to allow for the possibility of success is not the end of the change effort. For the change to be fully successful you still need to role out strategically effective processes and procedures, provide effective training and transition support, and then maintain visible support for the change over an extended period until the ‘new’ processes and procedures are fully absorbed in to the culture of the organisation and simply become part of the way the organisation does business.

Unfortunately very few organisations start soon enough or continue long enough with the overall change effort to be successful. But without this sustained effort, culture eats strategy for breakfast.

See also Culture eats strategy for breakfast 2!

Stakeholders and Change Management

When considering stakeholders, there are very few one-to-one relationships. Most stakeholders are, and have been, influenced by a range of relationships in and around your project, program and your organisation.

Stakeholders and Change Management

Change Management and Stakeholder Management

Stakeholder management is a key facet of organisational management where stakeholder management is often aligned with marketing, branding and corporate social responsibility (CSR) initiatives.

Similarly, stakeholder management central to change management and the ability to realise the benefits the change was initiated to deliver. The benefits will not be realised unless the key stakeholder communities accept and embrace the changes.

Project and program management also has a focus on effective stakeholder management. In a change initiative, the project and/or program undertakes the work to deliver the elements needed to facilitate the change but are only ever part of the journey from concept to realised value.

A typical evolution of a change initiative would flow along these lines:

  • The organisation decides on a major organisational restructure and as a consequence initiates a change management process and appointed a change manager.
  • The change manager develops the business case for the program of work and the executives responsible for the organisations portfolio management approve the business case and agree to fund and resource the program.
  • The program manager sets up the program management team, established the program management office (PgMO) and charters a series of projects to develop the various deliverables needed to implement the change.
  • The projects deliver their outputs.
  • The program integrates the outputs with the operational aspects of the organisation.
  • The organisation’s management make effective use of the new systems and processes.
  • Value is created for the organisation and its owners.

The change manager is the sponsor and primary client for the program but the people who need to be convinced of the value of changing are the operational managers and their staff. If the organisation does not accept and use the new systems and processes very little value is generated.

Within this scenario, stakeholders in the operational part of the organisation, and particularly the managers will be key stakeholders for a range of different entities:

  • They are stakeholders in the organisation itself and part of the organisational hierarchy.
  • They are stakeholders in the change process being managed by the change manager.
  • As end users of the new systems and processes they are also stakeholders of the program.
  • As subject matter experts (SMEs) they are likely to be stakeholders in at least some of the projects.

In one respect change management is stakeholder management. Therefore, in a change management initiative, stakeholder management should be an integrated process coordinated at the change manager’s level. All of the organisational elements working on the change need to coordinate their stakeholder management efforts to support the overall outcome. Confusing and mixed messages don’t help anyone.

But this is just one typical business scenario. When considering stakeholders, there are very few one-to-one relationships. Most stakeholders are, and have been, influenced by a range of relationships in and around your organisation. Consequently, focusing on a simple one-to-one view is unlikely to provide the best outcome for anyone.

Effective stakeholder management requires a mature organisational approach. One approach to developing this capability is the SRMM (Stakeholder Relationship Management Maturity) model described in my book. Stakeholder Relationship Management: A Maturity Model for Organisational Implementation. I will outline the SRMM model in a later post.

The Scope of Change

This blog is going to try and link project and program management with change management and benefits realization.

As a start, the only point of undertaking a project or program is to realize some form of value. Benefit realization! To realize value, three elements need to be brought together:

  1. There needs to be a new product or process created (an artifact);
  2. People within the organization need to make effective use of the artifact to deliver a service;
  3. The service as delivered needs to be accepted and used in the ‘market’.

The role of Strategic management and Portfolio management is to determine what services are likely to be accepted or needed by the market; a new shopping centre, an improved insurance package or simply a more efficient process to deliver information. These decisions will depend on the objectives of the organization, and is not the province of this blog.

The generally accepted role of project management is to create a unique product, service or result (an output) and the role of program management is to manage a group of related projects to achieve an outcome more efficiently than if the projects had been managed in isolation. Neither of these processes achieves real value in themselves. The realization of sustained value is achieved by the organization using the program’s outcome effectively over many months or years.

The Scope of Change Management

The Scope of Change Management

Projects and, to a greater extent, programs can realize some benefits, partially in the design and delivery of their respective outputs. Early benefits realization is frequently linked to ‘soft’ elements in the range of deliverables such as developing effective training, managing the transition to operations and ensuring a proper support framework is developed. Achieving these elements require the project/program team to really understand the requirements of their stakeholders. However, as demonstrated by the cost/benefit graph, benefits realization should continue for years after the program is finished and closed.

The extended timeline for value realization has important ramifications for organizational change management. Each project is an intense burst of change and the program absorbs these changes and has additional change effects of its own. These ‘activity related changes’ will include beneficial and negative impacts on a range of associated stakeholders. Some changes are disruptive caused by the execution of the work, learning curves, etc. Some changes positive caused by the improvements the projects and programs were initiated to deliver. Achieving a successful project/program outcome requires the effective management of these stakeholder communities, but the stakeolder management activity is essentially tactical.

The critical requirement to deliver sustained value is the organizational culture change needed to actively embrace the program’s outcomes and make valuable use of them. Embedding a culture change into an organization is a 2 to 3 year process as the change migrates from ‘new and threatening’, to ‘accepted (but the old way are still fondly remembered)’ to the ‘established old way’ things are done around here. This type of long term organizational change can only be accomplished by the organization’s line management supported by senior management. This is the realm of the program sponsor and executive management!

These ideas also have important ramifications for effective stakeholder management:

  • Project level stakeholder management is relatively short term and focused on minimizing opposition to the work whilst ensuring necessary organizational support is in place to deliver the project’s outputs effectively. This is essentially tactical in nature.
  • Program level stakeholder management has a wider view that needs to engage with the organizations strategic vision to ensure the program’s outcome is optimized to the changing circumstances within and around the organization. The key issue here is identifying and responding to changing stakeholder requirements, needs and expectations/perceptions over time; so as to optimize the value of the ‘outcome’ the project was established to deliver.
  • Organizational level stakeholder management needs an even broader and longer term view focused on the strategic needs of the organization and its long term relationship with both internal and external stakeholders. Sustained value creation requires both the organizations internal staff and its external customers to jointly perceive the programs ‘output’ as valuable to them and also to perceive the organization favorably so they together maximize its use:
    • For a new shopping center with a 20 year lifespan this translates to retail tenants being willing to rent space and the ‘public’ seeing the shopping center as a ‘good place to shop’.
    • For a new call centre management system this translates into the call centre staff seeing the system as efficient and easy to use and clients of the business perceiving the system and staff as friendly, efficient and effective so they are happy to make repeated use of the system.

Conclusions

Change management and stakeholder management are closely aligned. Effective stakeholder management is essential for successful change management.

Change management and stakeholder management must start as soon as the project or program are initiated but should continue well after the project/program are completed.

The on-going organizational component of change management supported by strategic stakeholder management is critical if the real value of the outputs/outcomes created by the projects and program are to be realized.

Benefits realization is a line management responsibility starting with the project sponsor. All project and program managers can do is ensure their deliverables are crafted to facilitate and encourage benefits realization.

Value is in the eye of the stakeholder

The only purpose of undertaking any business activity is to create value! If undertaking the work destroys value the activity should not be started.

The Value Chain

The Value Chain

Any value proposition though is ‘in the eye of the stakeholder’ – this is rarely solely constrained by either time or cost. Effective value management requires an understanding of what is valuable to the organisation and the activity to create value should be focused on successfully delivering the anticipated value.

The chain of work starts with a project or similar activity initiated to create a new product, service or result. However, the new output by itself cannot deliver a benefit to the organisation and the project manager cannot be held responsible for the creation of value. The organisation’s management has to make effective use of the output to realise a benefit. It is the organisations management that manages the organisation and these people need to change the way the organisation works to realize the intended benefit. The role of the project team in value creation is to ensure their output has all of the necessary characteristics and components to allow the organisation to easily adopt the ‘new output’ into it’s overall way of working (eg, effective training materials).

The outcome from making effective use of the output is expected to create a benefit – however to realise a benefit, the outcome needs to support a strategic objective of the organisation. If the outcome is in conflict with the organisations strategy, value can still be destroyed. Strategic alignment is not an afterthought! The processes to initiate the project should have as a basic consideration its alignment with the organisations strategic objectives.

Assuming strategic alignment is achieved, the realised benefits should translate into real value. The challenge is often quantifying value – the concept of ‘value drivers’ helps. Value drivers allow the benefit to be quantified either financially or by other less tangible means.

In the current economic climate, organisations are finding operating capital in short supply. Therefore a new process to accelerate the billing cycle can be measured at several levels:

  • The output from the activity to develop the new billing process is simply the new process – this has no value.
  • Once the organisations management starts using the new process the measurable outcome is a reduction in the billing cycle from (say) 45 days to 32 days.
  • The benefit of this reduction in the billing cycle could be a reduction in operating capital needs of $500,000.
  • The value of this reduction is $500,000 at 12% interest = $60,000 per annum.
    The above example may also trigger additional value by allowing the capital to be redeployed into another profit generating activity, improving customer relationships, etc.

Once the whole organisation is aware of the value proposition, decisions to de-scope the initial work to meet time constraints and/or cost constraints can be made sensibly.

  • A decision to de-scope the project to achieve a 2 week saving in time that results in a 6 week longer implementation period (eg, by reducing training development) is clearly counterproductive.
  • Similarly a decision to de-scope the project to avoid a $5,000 cost overrun that changes the reduction in the billing cycle time from 13 days to 6 days will result in a halving of the capital saving and a cost increase to the organisation of $30,000.

The challenge is identifying and communicating the value drivers to all levels of management involved in the activity so that valuable decisions are made in preference to knee jerk gut reactions focused on short term, easy to measure metrics. Value is created by meeting the strategic needs of the organisation’s stakeholders – this requires careful analysis and understanding of who they are and what are their real requirements; ie, effective stakeholder management.

For more ideas on the realisation of value, see the work by Jed Simms at: http://www.valuedeliverymanagement.com/

For more on effective stakeholder management see: http://www.stakeholder-management.com