Making Business Change Successful

One of the things I have learnt through being involved in big projects in big companies is the value of "Change Management". When I worked as the Finance person involved with projects and programmes costing millions in a multi-billion pound group, I was initially surprised that we employed a Change Manager as well as a Project Manager.

So if Change Management is not the same as Project Management, then what is it and what are the distinguishing features? And more importantly why is it worth reading an article about? How will it help you in your small business?

The following are just my observations. I am not an expert, I haven't read any books on Change Management. I have simply seen great Change Managers at work (people like Chris Collison), and seen the value of what they do.

Project Management relates to the best practice procedures for running projects - what documentation you need to define the project's objectives, terms of reference, scope, etc; what phases it goes through and how you manage each phase; resource management; etc etc.

Change Management seems to me to involve softer skills. If Project Management is about how to implement change, Change Management is all about how you make the change successful, so that it achieves what you wanted it to. (Change Management is also broader than projects, looking at how organizations and people cope with inevitable change, turning it to their advantage.)

Three things that a Change Management focus brings to any project, from my experience:

Focus on benefits: Whereas Project Management will focus on what we are planning to change and how, Change Management will ask why. Why are we implementing this new computer system? Why are we introducing these new forms?

It doesn't even have to be a project. So you can have Change Management, even where you don't need a formal project.

If you always keep in mind why you are doing something, what it is designed to achieve, why it will be helpful or value-adding, then you will implement the change in such a way as to achieve those benefits.

Let's face it, you don't spend thousands of pounds putting a new system in just because you want a new system (well, you might, but you shouldn't if you are concerned about the value of your business!) - you implement a new system because you think it will be beneficial.

But you have to be explicit and intentional about those benefits if you really want to achieve them.

And the value of thinking in that way is that it reminds you of other things you need to do. For example, Project Management processes will (hopefully) ensure that you implement the system you intended to. But a Change Management mindset will help you understand the things you need to do (e.g. the training, communications, process change, etc) to get the benefits you want out of the new system.

Focus on the stakeholders: Who is going to be impacted by the change or the project you are proposing? If you don't think about them then you may end up adversely affecting their ability to do their jobs. Or you may not get buy-in to your change. You'll have a new system (say) that people don't want to use because it came in suddenly and they struggle to get used to it.

So you need to think about all the people and groups of people that will be affected in some way by what you are proposing. Do you need to consult with them and ask for their ideas? Do you need to inform them in advance, so they can get ready? Do you need to train them to use new procedures and systems? Do some people need to do things differently? Are you looking for cost savings in their departments, and you need them to reorganize to get the benefits you want?

Constantly communicate: Of course, this is really the other theme in the point above. All people who are affected by change need to be involved in some degree of communication. There will be some level of consultation, information, advising, training, directing with everyone who has a stake - and at all times, listening.

Listening, I have found, is an oft-neglected part of communication. But people impacted by change know their jobs better than you do, even if you are the manager of the team or the MD of the company. And they can tell you how the change will affect them, and whether you need to modify your project to cater for their concerns, so that they can continue to do their jobs properly.

In fact, change that arises from ideas generated by the people at the "sharp end" are often the ones that get the best buy-in and are the most successful in adding value.

Conclusion: When you are looking at a big change in your business, you need to take a hard look at who is going to be impacted by the change and what benefits you are trying to achieve. Then you can communicate effectively about the change and make sure that everyone who is affected contributes positively to achieving those benefits.

© Charis Business Consulting Limited 2009

This is the third in an 8-part series especially for new subscribers to the Creative Finance & Management email newsletter. Every week we are sending you an article aimed at helping you to think about a different aspect of the financial management of your business. This is in addition to the normal bi-weekly newsletter. We are doing it to give all new subscribers the same orientation to the way that Charis FD thinks about small business performance management. That way we can have confidence that all our subscribers have been given the benefit of foundational advice in all aspects of business performance management.

If you miss any of these articles, don't worry. They are on the Creative Finance & Management blog. Just look for the "New_Subscribers" tag.

These are the articles in the New Subscribers series:

1. The ingredients for success in Finance
2. Strategy and Planning
3. Business Change - implementing your strategic plans
4. Measurement and Management go together
5. Paralysis without analysis
6. Your Finance team - a valued asset
7. Stakeholder management - the importance of keeping people happy
8. Internal Control - 3 fallacies that add risk to your business

So, ...

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Business Change

One of the areas where Finance professionals can probably add the most value is around business change. They bring control and ensure that you go into the change with your eyes open, and hopefully if you listen to their advice they can help to ensure you only implement changes that will benefit the business.

First let's start by defining "business change". Thinking back to the last new subscriber newsletter, business change is just a type of strategy for the business. Business change is simply changing the business in a big way. Strictly, I suppose, you could apply everything we are going to say to small changes (recruiting an extra person or buying a new PC) as well as big changes. But normally when we talk about business change we are talking about something that has a big impact. So it could be the acquisition of a new business, the introduction of some automation into the manufacturing process, the implementation of IVR on the phone system, buying a building, implementing a new accounting system, selling part of the business, restructuring programmes, closing a factory, opening a new shop, and the list could go on.

My point about business change is somewhat similar to my point about strategy last time - I can't stress enough the importance of being intentional and analytical. You may laugh at me at this point and say, "how can I buy a business or implement a new system without being intentional? I can't imagine ever saying, 'Oops! I accidentally just bought a business!'" Well, that's not exactly the point I'm trying to make.

The point about being intentional is because sometimes people suggest changes because they just feel like a change. It happens in both big and small companies. In big companies, the CEO might say, "I think we need an SAP ERP system, or a Siebel CRM system." In small companies, the owner may say, "I just feel that we need some really nice offices." Now in both cases there could be good reasons for wanting those things, but I've shown them bluntly to illustrate that it is perfectly possible that it's all down to vanity! The big company CEO may want to get those words on his CV, the small company owner may just want to feel more successful.

In one business I worked with I once heard an acquisition referred to as, "a triumph of vanity over sanity!" That was because the company paid too much to buy the business, so that it would take years to make a positive return on investment, but everyone had to admit that it looked good for the chairman/CEO, who was also the majority shareholder. If your business vision is to build your ego, rather than your business value and bottom line, then that type of acquisition is fine! That might sound sarcastic, but I'm actually being semi-serious. If you realise that a change project is not going to deliver any benefit to the business, but you want to do it anyway because you want the Kudos, then at least you are going into it with your eyes open. The people I have a problem with are those who try to fool themselves and everyone else that their project is really beneficial.

Ok, so what is the right approach?

Being intentional is about making strong links between what you are trying to achieve in your strategy and vision and the change you are proposing to make. The best way to do this is to write down benefits statements briefly in bullet points in the format, "one of our strategic issues is "; This project "; The benefit is ". If the benefit does not address a strategic issue, then why are you doing it? If your project is really addressing strategic issues in your business, then you will have no trouble writing down these benefits statements. If you do struggle then that should ring alarm bells.

Being analytical is objectively assessing whether the benefits will outweigh the costs. Sometimes this is where the frustration comes, when you discover that something you want to do is actually going to financial damage the business. The project may have so many benefits, but not enough to justify the cost and the impact on the bottom line. I admit it is frustrating. But it's better to identify this before you start, then you won't waste your time as well as your money!

As an example, I once worked with a very large company with nearly 40,000 employees. For two years the HR Services team had been managing annual bonus and pay review calculations through a suite of spreadsheets, while at the same time the business had been recruiting more and more people onto new contracts with bonuses. So their problem was only going to get worse. What the team proposed was an expensive off-the-shelf system. It would definitely save time and therefore money (not having to employ temps to do the spreadsheets), and reduce the risk of error, but when we analysed it the savings did not outweigh the costs, even over a 5-year period.

In that case I had to say no to them, but I also suggested that they talk to the IT team to see if they could write some visual basic to automate their spreadsheets. It wasn't the nice shiny built-for-purpose system they wanted, but since it was a fifth of the cost of the initial proposal it clearly then gave the benefits we needed at a cost we could afford.

Lots more could be said, but let's leave those things for future CF&M articles! In conclusion, be intentional - be really clear that the change you are proposing is addressing the biggest strategic issues you have identified. Also, be analytical and objective or realistic - set figures on the benefits and the costs and see if one outweighs the other over a period of time (say, five years).

Final word, just in case you haven't come across the term before - the benefits statements, and the analysis, are the main parts of what is normally referred to as a "business case".

All the best!

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Until next time...

If at any stage you want to talk to us, we're quite happy to give you a call to talk more about your business and the challenges you face. And you may be eligible for a free Finance Strategy Review session. To set that up either email us at enquiries@charisfd.com, remembering to leave your phone number and email address; or go to our website and complete the contact form.

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© Charis Business Consulting Limited 2009