Posts Tagged “Human Resources”

Transformational change results in lower productivity. People are worrying about jobs, who is getting which job, how they will work in the new job, and a gazillion other things. Every level in the organization is wondering, “What’s in it for me?”  The wondering and worrying translates into lost productivity – and large opportunity costs. What value would employees create if they weren’t worrying about the big change?

It would probably take a doctoral study to analyze the numbers comprehensively, but some directional assumptions point toward a scary story. The spreadsheet below takes some average numbers for revenue and costs per employee, and estimates the value created by each employee.

The logic continues that if the average employee’s productivity falls 10% during the change, the company has foregone $2,070 in value. Because the employee contributed 10% less, less value was created. People aren’t creating new products, selling to new customers, analyzing trends for opportunities, negotiating better prices, etc… They are too busy wondering and worrying.

Carrying the logic all the way out, if the change program lasts 12 months and the company has 1,000 employees, the company has an opportunity cost of nearly $25M. 

$25M is a big number, and one would naturally ask, what can be done to reduce it?

The two options are “faster” and “better.” Faster says: get the 12 month project done in 11 months. Better says: get the project done in a manner whereby productivity is preserved. (This productivity preservation requires change management approaches.) Based on the assumptions I used, “better” is clearly – well… better.

A couple comments in closing:

• To repeat – these numbers aren’t an analysis. These numbers are directional estimate based on some reasonable assumptions. Using the mildest of assumptions, however, shows that productivity losses extrapolate into some large foregone value.
• If you would like to try your own numbers, you may download an Excel version of the Change Initiative Cost Estimation Worksheet.
• The figures regarding revenue and costs per employee in the spreadsheet come from PriceWaterhouseCoopers – Saratoga’s 2007 / 2008 US Human Capital Effectiveness Report.

I was recently asked by a Human Resources professional how he could help their company become better at managing change.

I felt a little bit like the doctor answering the question, “I have a bad headache, what’s wrong with me?”

Without a lot more information, the answer will be simple, “Take two aspirin, and call me in the morning.”

Resisting the urge to encourage him to call my office, I gave my diagnosis-free prescription: “Improve senior management leadership capabilities.”

Without a doubt, the approach will help. As detailed in a prior post, CEOs believe senior manager skills and experience stand in the way of implementing change. Not only are senior manager skills an opportunity, but improving their capabilities will give you leverage in future initiatives.

The better diagnosis would come after some frank conversations in the C-Suite. Six topics should be covered:

1. Please tell me about the largest change initiatives you have gone through in the last five to seven years.

2. What went well with those initiatives, and what did not go as well?

3. How likely are we to go through large-scale change in the next three years?

4. How likely are we to repeat the positives and negatives of your previous experiences?

5. How well prepared are our senior and middle managers to lead future changes?

6. What should we do now to best prepare for the future?

After having this conversation with each member of the C-Suite, I would identify the common themes and report back to them as a group. The report would have three elements:

• What did they say?
• How does their collective view compare to best practices and experiences in other organizations?
• My recommendations to address the opportunities.

Those recommendations could cover a wide range of options, but people-related opportunities are likely to dominate. The best part of approach is that the go-forward plan will be largely of their creation. They will give you a charter to prepare for change and become your guiding coalition in that journey.

Perhaps I should give my acquaintance a call and give him some new advice. He needs to go have a frank conversation with the C-Suite.

Monday’s post was about the types of change occurring in large companies. Today’s is about what stands in the way of organizations implementing large-scale change.

PriceWaterhouseCoopers’ 11^th Annual CEO Survey asked: “Which of the following people challenges were critical barriers for your organization in terms of achieving the desired benefits?” Frankly, the answers are fairly depressing.

The depressing part is that all five of these barriers are within the CEO’s control. The CEOs are talking about their own people.

Some observations:

• As Bill Gates said, “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten.” He was likely not referring to the pace of change within a company, but the quote is still appropriate. The C-Suite is typically looking for transformational change to occur much more quickly than it actually takes. What might be seen as a two-year project is usually a three-year project. Sometimes the factors above play a role, but sometimes it is just plain old, overly optimistic, bad estimating.
• The Human Resources function has a responsibility to address. If speed, flexibility and agility equal competitive advantage, and senior management skill sets are a significant barrier, HR should be forcing change management skill development.
• The CEOs never mention that they themselves may be part of the issue. They aren’t saying, “Failure to hire appropriately skilled senior managers,” or, “Inadequate time spent on leading change initiative.” The cure for some of these issues could very well be the personal demonstration of change management skills.

Today has been a rather exciting day for orgreadiness.com. We have been added to alltop.com’s HR section as a “top site.”

Alltop.com is a website aggregator that acts a “digital magazine rack” of the internet. They strive to provide “aggregation without aggravation.” Even without their inclusion of orgreadiness, I’ve got to say, I like their site. It is definitely worth a look.

Based on casual conversations with just about anybody in the business world today, large-scale change is commonplace. The Society for Human Resources (SHRM) published the Change Management Survey in 2007 and quantified those types of change. Over the two years leading up to the survey, companies with more than 500 employees had the following types of change: 

The key takeaway: change is occurring for any and all reasons. In the words of Benjamin Disraeli, “Change is inevitable. Change is constant.”