Leadership

9 Things You Need to Know about Organizational Change

By Nicole BeckermanDecember 27, 2016

While Benjamin Franklin may have said only death and taxes are certain in this life, the modern worker would likely cite another inevitability: change. With the pace of technology and globalization, change is happening faster than ever and has become a mainstay of corporate life. Leadership and development personnel have an essential role to play in making sure the people in their company are prepared for change and emerge from it successfully.

Here are 9 helpful statistics to unpack the realities of organizational change:

2015 was a record year for M&A action, and 9 of 10 of executives agree that deal activity will stay strong or even increase.

In other words: Companies are in for a lot of change. As deals are made, organizations will find themselves combining, restructuring, shifting vision, looking for a competitive edge, and other activities that result in times of transition. Managing the shifts ahead will be an ongoing challenge, especially as organizations are continuing to look at targets abroad for deals and are expanding their remote workforce. This means more complicated transitions which may have to encompass a workforce that is international, off-site, partially freelance, and so on.

The majority of change efforts fail.

This is a steady trend, as in 2008 a McKinsey survey of 3,199 executives globally concluded that only 1 in 3 transformation efforts succeeds. Why the dismal statistics? In essence, changing human behavior is difficult and requires calculated effort, particularly across a large organization. The costs can be daunting, and the return uncertain. It is easy to drop the ball on change management or only take it halfway, but it in fact can be an opportunity for reflection and significant improvement if approached correctly.

Companies that have good change management practices are 3.5 times more likely to outperform peer organizations.

Unfortunately, companies are leaving millions on the table by conducting change initiatives poorly. By worrying about the cost of taking action to get their workforce through change successfully, they end up costing themselves more. The organizations at the highest levels of effectiveness are 3 times more likely to spend time and effort considering behaviors which drive success rather than program cost.

For large projects, there is a 6.5x return on change management spending, and smaller projects can expect at least 2x.

As a subset of change initiative spending, investing in change management is particularly rewarding. The overall project spending may cover the logistics of a change initiative, but change management spending has to do more with shifting the behavior of the workforce. Examples can be training on communication for managers, interviews and analysis during the project to see if the change story is working, and so on . Not only is change management effective in causing workers to actually modify their behavior in times of transition, it dramatically increases customer satisfaction which has a long-term positive effect. High customer satisfaction has a wealth of positive externalities for the entire organization and leads to more sustained ROI.

In failing innovation/change initiatives, managers spend over 60% of their time in corporate survival mode.

Yet managers in times of change can fall into the trap of trying to please people and being afraid of making an incorrect decision. When they aren’t confident about their change management skills, managers can’t focus front line employees on specific actions and hold them accountable, nor can they communicate barriers to success upwards. Since managers are so key to change initiatives, if they are unprepared and begin to act defensive or fearful it can hamstring even a good transition plan. A lack of clear focus and direction moving from leadership to management to front line is “one of the fundamental reasons why change initiatives fail.”

77% of workers at “high effectiveness organizations” say managers explain the reasons for change well, versus only 7% at “low effectiveness organizations.”

Communicating is an essential skill for managers, and nowhere is it more vital than transitional times. Front line employees need to understand the reasons and vision behind change to successfully move forward with it. The next step beyond explanation is helping employees adapt to change, which can be more difficult it seems, with 69% of “high effectiveness organizations” and only 5% of “low effectiveness organizations” reporting manager efficacy.

When asked, employees cite 5 factors of motivation.

These are: Impact on society, impact on the customer, impact on the company/shareholders, impact on the working team, and impact on them personally. Yet leadership “does not tap into roughly 80% of the workforce’s primary motivators,” reports McKinsey, leaving managers in transition times to handle the nuances in between. Without managers working to construct a change story that engages employees along these lines, change management efforts are likely to fall flat. However, by understanding employees and managers a strong change story can emerge even if things get off to a rocky start: By shifting their change story, an initiative at a large US financial services company nearly doubled employee motivation metrics in the span of a month, for example.

Only 1 in 4 organizations say the training they give to managers is working.  

Companies are not unaware of the need to train managers, and the statistics certainly support it. In testing new methods for change management, test teams in a large organization were able to outperform control teams by more than 21%. “The best companies invest in effective training so that managers can support employees,” states a Willis Towers Watson study regarding change management. Yet current methods are not generally proving effective, judging by the percentage of failed change efforts. The majority of companies are not falling under the “high effectiveness” label when it comes to change. This is likely because the reality of organizational life has moved on from traditional training methods and employers need to re-evaluate how best to conduct change management training.

Over 70% of employees are turning to search engines for learning, and 50-60% use online courses, while 80% also say they learn on the job through interactions with peers, colleagues, and managers.

Most professionals are hardly complacent about developing themselves or seeking out useful knowledge, but organizations need to make an investment in strategic, guided training geared towards change management. Not only that, but training methods must meet employees where they are at rather than simply inserting classroom learning into their time. Managers preparing for change, or in the midst of a transitional period, need a combination of training methods that best helps them and integrates smoothly into their work life.

Nicole Beckerman

Nicole Beckerman

Writer

About the Author

Nicole Beckerman is a marketing consultant, writer, and clothing designer based in Los Angeles, CA. She holds an MBA from Mills College as a Goldman Sachs Scholar.

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