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What makes an organisation good at managing change?

In a recent McKinsey’s article, management consultants Scott Keller and Colin Price summarise their forthcoming book: ‘Beyond Performance: How Great Organizations Build Ultimate Competitive Advantage’. The message is clear: organisational health is the “ultimate competitive advantage” and organisations need to build the capacity to learn and keep changing over time, if they want to achieve and sustain high levels of performance.

This confirms what we’ve been telling anyone who will listen for the past year: it’s what we call the organisation’s Capability for Change and it’s a crucial core value, if you want to survive in the face of the accelerating pace of change and rising levels of business complexity.

I took my definition of Capability for Change from Rebecca Henderson (Harvard Business School): “Attention and resources focused on people and processes, developing the organisation’s stock of capability and resilience”.

I also like this one:

Resilience: “The attitudes, skills and strengths, that enable individuals, and teams to thrive within organisational change” (The Taylor Clarke Partnership)

But like all aspects of an organisation’s culture and values, its resilience and capability for change requires continual investment and maintenance, or it will erode through natural entropy. In our opinion, any transformation programme needs these core values at the heart of its core deliverables, but in our experience, most don’t go there.

So, how do you know if your organisation has resilience and capability for change? How do you know whether it is good at managing change as a normal part of ‘how we do things around here’?

Try our ‘starter for ten’ list. Does your organisation have these characteristics?
  1. Strong, visible, empowering, leadership
  2. Clearly articulated and shared vision
  3. Attention paid to supporting core values
  4. High level of trust between managers and staff – decision-making devolved wherever possible
  5. People allowed to stop doing stuff when taking on new initiatives – overload issue managed well
  6. Innovation encouraged and well managed
  7. Good communication between departments
  8. Good communication/collaboration with customers and suppliers
  9. Adherence to standard ways of doing things
  10. HR benefits and rewards aligned to business objectives.

Yes? Then you are likely to have a good capability for managing change, i.e:

  • High level of involvement and commitment
  • Low resistance to change
  • Resilience in the face of challenges
  • Able to bring in changes rapidly and effectively in response to need.

No? Then you, like most organisations are probably on a ‘downward spiral to disaster’:

  • Senior management is taking a short-term view and focusing on cutting costs and hitting revenue or output targets
  • This may be succeeding in the short run, but it has diverted resources away from supporting your people and processes – your capability to manage change
  • As a result, it is actually becoming more difficult for the organisation to sustain its revenue performance – everyone is under so much pressure that even normal routine stuff doesn’t get done any more

Only reinvesting in your core capability will correct this downward trend and give the organisation a fighting chance to successfully manage the accelerating pace of change and rising levels of business complexity.

July 27, 2011 Posted by | analysis, business change management, change capability | , , , , | Leave a comment

How to Improve your Organisation’s Resilience and Capability for Change

I recently asked a senior director in a large multi-national corporation whether he was satisfied that they were building the resilience and the capability to handle the increasing pace of change and rising complexity of the challenges that his organisation faces today and in the future?

And he had to admit that they weren’t.

This is a question that all executives face, but most will (privately) agree that the answer is a resounding NO.

But those that fail to do so will not survive.

A recent IBM survey of 1,500 CEOs across the world confirmed that complexity is the single biggest issue for businesses and more than half doubted their ability to manage it.

In this blog, I want to explore how you can benchmark and improve your organisation’s capability to respond quickly, effectively and sustainably to these challenges – your Capability for Change.

In the past, this meant understanding your customers, knowing what your competitors were up to and putting in place the appropriate strategies to meet the challenges as they arose. You relied on your managers to run the operation, keep costs under control and implement the strategies (often in addition to their day jobs).

In fact, most organisations performed poorly in responding to the challenges that they faced. The need for change was often recognised too late and managers found themselves unable to galvanise their lumbering, bureaucratic organisation to respond quickly or effectively. However, the relatively slower pace of change allowed some degree of catch-up and the huge financial investment and sometimes sheer waste of skilled resources that were sacrificed because of the ‘too little too late’ response were rarely chronicled.

It is clear that the margin for catch-up and profligate spending and waste is far narrower in today’s more demanding competitive and economic climate. The organisation needs to build resilience into its core values and its infrastructure.

But how?

First you need to benchmark your organisation’s Capability for Change.

I am not talking about the capability of your programme and project management teams. It almost doesn’t matter how well-managed they manage the projects and programmes, if the people affected by the project do not have the capability to learn and embed the new ways of working. I am talking about the capability of the organisation as a whole to cope with the huge task of making change happen. And then do it again, and again.

Typically, CEOs underestimate the complexity of change and overestimate the capabiity of the organisation to cope with change. It’s the gap between these two variables that you need to understand.

How can you tell how wide a gap there is in your organisation?

A quick way is to look at how the organisation deals with overload. Are your managers working effectively? That means they are probably loaded beyond their ability to do everything in the day, but not so overloaded that nothing gets done properly or well. Or are they struggling to cope?

That probably means that change initiatives have been passed down for them to cope with on top of their day job. Sometimes this is disguised by redefining the day job to include the initiative, but the key question is: did you allow them to stop doing other stuff to make the time for the extra work? If not, the initiative won’t succeed.

Research over the past few months suggests that there is a tipping point, beyond which initiatives, however good they may be, cannot ‘stick’.

Conclusion: Unless one of the first things you do in planning a change project is working out how to allow key people to stop doing other stuff (‘the day job’), they won’t be able to give the initiative the time and attention it needs, so it will fail. That usually comes down to budgets and resourcing decisions, which are under serious pressure in today’s competitive and economic climate. So the only way an organisation is going to be motivated to build sufficient resource into supporting their projects so that people can pass routine work across in order to concentrate on a change initiative, is by making this a core value for the organisation. And the only argument for making it a core value is if you can clearly quantify the financial benefits of doing it this way – and the financial consequences of not doing so.

So when we talk about the gap between the level of complexity of the project and the capability of the organisation, that gap has to be quantifiable and its impact on the bottom line profits of the organisation has to be demonstrable.

That’s where the Change Equation tools can help.

By applying the Change Equation models and tools in a Change Readiness Assessment (CRA) process, we can:

  • Calculate the complexity of the project and understand the level of organisational capability needed for the project to succeed
  • Assess the actual cultural and process management capability in the part of the organisation affected by the project
  • Measure the gap and quantify its impact on the project’s ROI

The CRA takes very little time, but delivers significant benefits. If you undertook a CRA as part of the initial planning for all your projects, you would achieve a consistent improvement in project outcomes, raise your return on time and resources invested and see the financial benefits on the bottom line.

 But that’s just the beginning… Now improve your organisational resilience!

You can do something even more important with these tools. By carrying out an audit of a selection of past projects across the organisation, you can begin to define the common barriers to change inherent in the your culture, systems and processes.

Analysis of these barriers allows you to develop an enterprise-wide transformation programme that focuses on bridging the gaps, building capability into how you undertake projects, building resilience into the core values and infrastructure of your organisation.

So a large corporation – or public sector organisation – could integrate the Change Equation methodology into its standard practices at two levels:
  1. At Project level – build the CRA into your project planning processes to ensure Change Readiness and deliver consistent improvement in change project outcomes
  2. At Programme level – use the Change Equation principles, Route Maps and Action Plans to provide the framework and content to deliver organisational Capability for Change as a core value.

Now that you have a clear change strategy, you need skilled people to help you work through the change process. I have just read Marcella Bremer’s new book: Organizational Culture Change: Unleashing your organization’s potential in circles of 10 and can recommend the OCAI Online team.

 

July 5, 2011 Posted by | analysis, business, business change management, change capability, project and programme management | Leave a comment