A while back I had the pleasure of collaborating with industry heavyweight Gail Severini on a series of posts addressing the costs of change management and what it will take to reduce them. It came up in conversation with a senior leader who used a very familiar phrase in the article! Here’s the first post by Gail- reposted with permission from The Change Whisperer.
“If you do not change direction, you may end up where you are heading.”—Lao Tzu
There is a back-room mindset in times of change: “Change the people or change the people.” It means either convince (or coerce) the existing staff to adapt to the new way of working or fire them and hire someone else. This phrase has always irked me.
Looking for some objectivity and additional insight for this series, I partnered up with senior change practitioner, Jennifer Frahm. You may know Jennifer from her terrific blog “Conversations of Change.”
We applied ourselves to articulating why this mindset is a fallacy, to considering what leaders are doing instead, and then finally to whether advancements will actually make Change Management, as we know it, extinct.
“Change the people”
In this mode, organizations force change mechanically, like a bulldozer or a crow bar. The Program team designs/builds the new thing, implements, and then de-commissions old. The work is focused on driving implementation as quickly as possible.
The Program Team:
- Works alone on solutioning and design, assuming they know better than others how to build a better mouse trap (i.e., “we’ll change what you do”)
- Pays lip service to communication with broadcast, compliance-driven announcements and progress updates (talking heads announce what, why, how, and when) (i.e., “we’ll change what you know”)
- Installs new capability with technical training to people who are largely unaware of, and ambivalent about, the reasons for the change (i.e., “we’ll change how you do it”)
- Implements a re-organization justified by the increased efficiency of the systems or processes; people are assigned different roles and some number of people are “downsized,” “packaged out,” or offered “early retirement” (i.e., “we’ll change who does it”)
- Repeats, program after program, as if one size change fits all
Sure, we are exaggerating some for effect, but not much.
This process basically assumes that people are homogenous, interchangeable and dispensable “resources.” Success assumes that when one changes out parts, that the machine will automatically function better. It is a hang-over from an industrial era when people were most often cogs in an assembly line.
There is a critical element that the “change the people” mode overlooks—people have discretion over their performance. We can ramp up to passionate commitment or ramp down to bare minimum compliance. This affects the speed of implementation and also quality of outputs. If for no other reason than this, Program Teams are waking up to deploying more effective change management.
Many of us have been on both sides of that industrial mindset, have felt that pain, and even exerted that pain. Further, we all know that this mode imposes irresponsible hard and soft costs on the organization, particularly in context of continuous change.
Without doubt, organizations do need to change constantly. We must be vigilant in the pursuit of relevance in a world dominated by rapid technological and social shifts. But is the answer really to “change the people” constantly?
Costs of “change the people”
Organizations seem numb (or oblivious?) to the reality that there are real costs to “muscling through” change and the more change the organization is experiencing, and the more transformational the change, the greater the costs.
So what costs are over and above the usual when organizations muscle through? Here are a few examples that come to mind for us:
- Lost productivity
- Resource churn
- Downgraded conditioning of the organization
1. Lost productivity:
Let’s take it down to a personal level then back to organizational. We have all experienced it—the agitation of uncertainty and or ambiguity. When we don’t have a confidence or clarity in our future we:
- Seek answers by talking the situation over with anyone who might have more information than we do, which has the unfortunate effect of fueling gossip channels
- Attempt to connect the dots, the pieces of information that we have, and often do so erroneously and head off in the wrong direction
- Hold on to what we know and hold back from moving into the future
- Create options, often including a personal job hunt
From a neurological perspective, our amygdala (the part of the brain where emotions are housed) goes in to hyperdrive and this prevents the front brain (where our clear, logical thinking is housed) from operating well. We can’t possibly be productive when faced with the threat of uncertainty: We’re thinking fight, flight, or freeze. For a great reference on this see David Rock’s “SCARF: a brain-based model for collaborating with and influencing others”).
All of these distractions suck valuable mindshare, actual time, and momentum away from the transformation. Imagine:
- If this represents even 2% of employees’ time then it is 9.5 minutes a day
- Assuming a 40-hour work week, that quickly adds up to 9.5 hours/Qtr or about a week/year per employee!
- Multiplied by the number of agitated employees and their hourly rate this can add up to a pretty significant cost. For 100 employees impacted by a strategy that takes a year to implement and at an average hourly rate of $40 ($80K annual), that comes out to $166K.
Of course, this is an unscientific calculation with no justification. However, for argument’s sake, go with it for a minute. If we multiply by 50,000 employees, which many of our large global corporates have, we are talking about $83M. Of course, the counter-argument is that many of the business benefits of these large-scale transformations are predicated on a billion-dollar return being realized. $83M is chump change…but it’s not just about the short term.
The legacies of these kinds of forced transformations tarnish the future transformations. So the 2% of employees’ time becomes 4%. It’s a spiral of ever-decreasing benefits realization over the long term.
2. Resourcing churn:
This kind of cost takes many forms, including:
- Flight risk: Valued resources get nervous, fearful that their jobs will change and fearful as to whether they will have jobs in the new environment. They begin looking around and some will leave. This requires the organization to incur the additional costs of recruiting for their replacements, lost productivity while that position is open and while new recruits come on board, and lost institutional memory and the corresponding decrement in productivity. In cases where these are client-facing resources, there is the additional risk that they could go to a competitor and take some clients (or the volume of their transactions) with them. One could put rough numbers to this fairly easily: What if two of those 100 employees left? What is the cost of acquiring a new resource? Consider the time to post the position and then to screen, interview, select, negotiate, and onboard. Hours of time goes into this and sometimes direct costs to professional recruiters. What if one of those fleeing employees took 2% departmental revenue?
- Re-org gap: Re-organizations are still practically a default tactic and we have done our share. To the extent that this is an entirely legitimate requirement of the transformation, what are the aspects unique to “muscling through”? When organizations bulldoze change they announce a re-org and check off all the required processes. They follow legal process for letting people go and often offer Employee Assistance and/or career counseling. For those staying in new roles or even in the same roles surrounded by change, they run various Town Halls and Team meetings. If lucky, within a week or two it is considered “done.” But we have worked in organizations where this can take months. Regardless of the time taken to implement the procedural side of a re-org, the inconvenient fact is they have barely scratched the surface. There is a timeline for developing commitment to change that is not “done” with “understanding.” Positive Perception, Experimentation, Adoption, Institutionalization, and Internationalization all must follow to drive business results. What are the costs of stopping short on implementing a re-org? Most leaders probably assume that this will get worked out through business-as-usual coaching and through the performance appraisal cycles. The problem today, with the rate of change that we must accommodate, is that these operational processes are usually too little, too late. There is often a gap between installed and realized. We don’t measure benefits on adoption and institutionalization, only implementation.
3. Downgraded conditioning of the organization.
Every time an organization muscles through change, it is painful and costly. Somehow, the organization carries on. It becomes normal. However, this suboptimal performance becomes part of the way we do things around here. This may be the most insidious of costs.
It reduces employee engagement and morale. It robs the organization of the discretionary effort that employees want to bring to a job that fulfills them. What if that represented a gap of 2% across the whole payroll? (If your resources truly earn their pay every day then this is not even a true reflection of the “cost” to the organization because the lost benefit is closer to 2% of gross profit.)
Sure, this is not a scientific approach; we don’t think we need one. Anyone can cast an eye over these examples and come up with more or better. Do your own cost analysis on specific cases if it lights up your brain.
“Free” is not free
The point here is that “changing the people” is not free to the organization. There are indirect costs that are substantial and long term.
Furthermore, there is a case to be made that one can only “muscle through” a certain degree of change. Incremental change (single silo, stepped change) can be forced through, in reasonable quantity. However, transformational change (requires Enterprise adaptation, incurs political and system adjustment, is long term and emergent) is more akin to wrestling a herd of greased pigs than it is to shearing sheep.
The larger questions that intrigue us, are: Are there better ways? Is it justified to “change the organization”?
More on this in the next post.
Thoughts? Reactions? We invite you to comment.