October 26, 2016Tools
Thoughts on investing in the people side of change
People are wonderful problem solvers, in fact many of us actually enjoy the challenge of solving the problems we come across in life. So, it is probably no surprise that when faced with issues in business, organisations immediately look to finding a ‘solution’ to the problem they are facing and recognise that financial investment will be needed to identify the cause and to build and implement a technical solution. What is often neglected is a focus on budgeting for the people side of the equation. If your people are not fully ready, willing, and able to embrace your solution will your project succeed and will you see the expected return on your investment?
There are typically several aspects to business solutions such as:
- new or changed systems
- implementing different business tools
- better equipment and infrastructure
- and reengineering of processes.
Business cases are developed articulating how the change to a new solution will deliver improved performance, efficiencies and profits. Budgets are allocated, the project is carefully planned and executed, everything goes well and it’s all systems go. The money is spent, the new solution is built and delivered, the business sits back to reap the benefits in anticipation that the problem has been solved yet so often the solution fails to deliver.
So, what went wrong, what did we miss?
Almost always your people will be affected by the implementation of a new business solution and so it follows that the success of your solution will heavily depend on your people having the necessary skills, knowledge and behaviours to work with the new solution. So, while not as tangible as other purchases, investment in managing these aspects of your change is essential.
Given that you generally already invest in your employees through the payment of their remuneration you may be wondering specifically what investment in people I am referring to? Simply put it is the Organisational Change Management expense of integrating the solution into the way your people do business.
Change budgeting tools
Whilst attending the inaugural Prosci Advanced Practitioner Workshop in San Francisco, it was clear that one question change management professionals around the world need to answer is, ‘How much should be budgeted for Change Management and why?’
A key aspect of the workshop was Tim Creasey, Chief Innovation Officer at Prosci, sharing the features of Prosci’s new online CMROI calculator. This tool lets you review the anticipated benefits of your project and understand just how much of your benefits case relies on people acting or doing thing differently. It allows you to weigh up and prioritise the numerous anticipated benefits of your solution, to arrive at an indication of how many of these outcomes rely on a change in the skills, knowledge and behaviour of your people.
Prosci has undoubtedly created a great tool for framing a discussion on the value and the ‘at risk’ benefits that an investment in change management might address and their research shows there is a direct correlation between greater change investment and the likelihood of project success but don’t actually recommend investment amounts or ratios. So how do we decide what we should be spending?
Advocating for a change budget
As a rule of thumb successful projects usually have a change budget of about 10-15% of the value of the project. This can be hard to secure if the funding stakeholder does not understand the purpose and value of change management and if, as often is the case, the funds are pooled with the other project funding. Due to overruns or unanticipated costs in other areas, the funds available for change can be eroded, at times resulting in severely reduced amounts available when it is most needed.
Luckily awareness of the value of investing in change management has increased significantly over the past few decades but seldom is it easy to secure a solid commitment upfront. This ‘wait and see’ approach usually results in slow benefits realisation and delays in reaching full productivity, with flow on higher net expenses because of the protracted time taken and the remediation activities required. Often the delay in getting positive results can mean that the organisation loses commitment to, or confidence in, the solution altogether preferring to reinvest more money in a completely new solution/approach.
A 2008 IBM study found that organizations that invested more than 11 percent in change had a 23% higher success rate than those that didn’t.
How much should we be spending?
Below is quick method to evaluate and estimate your change spend:
Take your project investment estimate (end-to-end but excluding change) and multiply it by the percentage of benefits dependent on people doing or acting differently, then multiply this figure by 20% to arrive at the right change budget.
Project budget * CMROI score *20% = Change Budget
e.g. If your project budget is 100K and 76% of the stated project benefits rely on people acting or doing things differently than just over 15K is a sound budget allocation for the project estimate.
100K * 0.76 * 0.20 = 15.2K
Do you think this adequately considers the nature of the change whilst providing a pragmatic budget to focus on preparing your people for the change?
While this is a great starting point for change budgeting we find that there can be real value in injecting some expert advice early on to ensure detailed change impacts are accounted for and that your change strategy is appropriate. You can find out more by trying our free online change gauge.
Whatever you do, it’s worth remembering that it is highly likely that your business case has assumed that 100% of your people are ready, willing and able to use the solution to its maximum potential, in exactly the way it was designed to be used, from day one and every day thereafter.
Systems, processes and people all need dedicated focus and an appropriate investment so that no one gets left behind when we make the change. We so often find that while the people side is not always apparent, organisations who invest early and adequately up front also maximise the benefit on the bottom line.
What’s your view on allocating resources to the people side of projects?