Reducing The Cost Of Change

Have you ever been in a situation where the promised benefits are exceeded by the cost of achieving those benefits? Or worse - when the promised benefits do not materialise at all?

Unfortunately, these situations occur more often than we would like to admit, but this does not mean that we should abandon change management. Nor does it mean that we should continue with the same practices in the hope that, one day, the hoped-for benefits will be delivered at a cost less than the benefits themselves.

Change is a constant - but that does not mean that all change is worthwhile. It is just as likely that an organisational change initiative will destroy value as create it ...

There are two forces at play here. Whether or not value is created or destroyed by the change. And then, if value is created, whether or not the cost of the change exceeds the value created.

A situational change management context

Suppose there is a change initiative to save 10% across-the-board in operating costs. The first question to ask is - Why 10%? The second is - How will you know that you've been successful? The third - How will this affect all stakeholders? Let's examine in more detail: 

• Question 1 - Why 10%?
  
  Unfortunately there is rarely a rational reason for such numbers. Sometimes they are simply plucked from the air, others find that they are a nice, round number that someone, somewhere thinks is achievable.
  
• Question 2 - How will you know that you've been successful?
  
  With a target such as a 10% saving in operating costs, you could be forgiven for thinking that measures of success would be easy to establish. But if those savings result in an exodus of staff with the costs of recruitment and settling in of new staff, how much have you really saved? And if those savings result in a drop in quality and revenues fall due to customers leaving, is that 10% meaningful?
  
• Question 3 - How will this affect all stakeholders?
  
  Needless to say, most targeted savings programmes do not take into account the whole-of-life costs of the change initiative. Nor do they accurately assess the effect on all stakeholders.

In short, we can conclude that many change initiatives rest on arbitrary targets, have questionable success factors and may finish by costing more than the value created!

How can we avoid this?

Five ways to reduce the cost of change

1. Understand where you are now
   
   Put in the effort up-front and understand where you are now. Usually effort is put into identifying the desired end state and planning how to get there. But if you don't know your starting point, you'll never know if you've actually departed.
   
2. Clearly identify your desired future state
   
   Once you have understood the current situation, the situation you wish to change, then determine where you want to end up.
   
3. Identify all domains that are subject to change
   
   This means considering structure, process, values, buildings and plant and machinery, including IT. The usual approach is to focus solely on the structure, then hope that once the people have been shifted around, they will find out how to make it work. But the organisational structure only tells you who can approve your leave, it does not say anything about how the work is done.
   
4. Set and agree measures
   
   You need to set measures for success in all domains, then agree to them across domains. Many change programmes fail to deliver the expected results because the measures in place, if they exist at all, are contradictory - a gain in one domain means a loss in another.
   
5. Take small steps
   
   Effective and value creating change does not need to be momentous. Taking small steps and monitoring the success or otherwise of each step will allow you to alter direction, back-track as necessary, or forge on, based on carefully considered and agreed criteria.

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