Change is hard on everyone involved, but to resist change in today's competitive environment is deadly. Here's how to build a successful change management plan that your employees will buy into.
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Dev Chopra, director of human resources and financial services at Toronto-based Ontario Hydro, North America's largest fully integrated electric utility, is in the middle of a major financial reengineering effort. In an attempt to lower the cost of financial services — and thus customer utility rates — the company is consolidating the financial functions of 12 autonomous business units. The effort includes major process redesign as well as the implementation of long-overdue new technology. The change, which would be difficult under the best of circumstances, is complicated by the fact that 40 percent of the company's financial staff has been downsized in the last three years.
Getting remaining employees to buy into the need for more drastic change hasn't been easy. In fact, it's taken Chopra more than two years of research, planning and communication to gain employee and management support for the $60 million effort. “Before we ever attempted to make a change, we had to build consensus for it,” Chopra says.
In an era where radical corporate change is a given, Ontario Hydro is an anomaly. Why? Because the company is planning for successful change by anticipating failure and resistance. According to Douglas Smith, author of Taking Charge of Change, four out of five change efforts — such as total quality management, reengineering or the implementation of new technology — ultimately fail, not because companies didn't know what they were doing or why, but because they didn't know how to lead employees through the change. “For change to be successful, people need to change behaviors and develop new skills and relationships,” he says. “As anyone on a diet can tell you, this takes a lot of energy and commitment.”
“Leaders fail because they don't understand how resistant people are to change,” agrees Alan J. Parisse, an organizational consultant based in Boulder, Colo. “Dealing with emotions is not the long suit of most financial professionals.”
This doesn't mean, however, that controllers who are leading change efforts have to become therapists and mothers to their employees. Rather, they must keep in mind the factors that contribute to successful change, including thorough planning, clear-cut goals, proper motivation and top management support.
Instead of starting his financial reengineering effort and then working to gain employee support, Chopra methodically built support ahead of time — and for good reason. At a time when the company's 12 business divisions were clamoring for more autonomy, Chopra was proposing that financial transactions such as payroll and benefits, taxes, and accounts payable be consolidated. Such a proposal was not politically correct, to say the least.
The only way Chopra could convince managers the change was necessary was through careful research and extensive employee involvement, both of which are necessary components of any change planning process.
He began by benchmarking — comparing the financial services costs of Ontario Hydro against other companies of similar size. After determining his company's costs were significantly higher than average, Chopra set out to learn the best practices of lower-cost companies. He didn't do this alone, however. He gathered a task force of financial managers from the various business units to help him. “Knowing some of these people were against the change, I wanted to bring them into the effort as quickly as possible,” he says.
Along the way, Chopra and other members of the task force shared what they were learning with employees, including why Ontario Hydro's financial costs were so high and what could be done to bring them down. Employees were also given extensive opportunity to challenge the proposed changes and present other alternatives.
Through research, workshops and one-on-one meetings with employees, Chopra and his team were able to develop a detailed vision of the reengineering effort. This vision included what the new transactional process would look like, what would happen if the company didn't make the changes and what the risks of the change would be. “I didn't want to fool people into thinking this would be an easy change to implement,” he says.
By making employees aware of the problem and involving them in the search for answers, Chopra was not only able to create a more thorough plan for change, he was able to gain the commitment necessary for the change to eventually become reality.
Gaining employee support and buy-in is a critical first step in managing change, but leaders can't stop there. Employees have to continually be motivated to change their behaviors throughout the change. To use the diet analogy once more, people may understand all the reasons why they have to lose weight, but without the proper support and motivation, they might never muster the energy required to do so.
So how do you incite behavioral change? The New York Times Company, which is consolidating the financial functions of 50 separate business units into a single shared services center that is accessed through local area networks (LANs), encouraged employee participation in several ways.
First, like Ontario Hydro, the company communicated endlessly about the reasons change was necessary. “No matter how much communicating you do,” explains Frank R. Gatti, vice president of financial management, “you can never do enough.”
Second, because the change will eventually cause half of the company's financial services staff to be downsized, the company offered new skills training to employees who were interested in seeking work elsewhere in the company. Training was also provided on the network technology that will be used by the shared services center. “You can't change people,” says Smith. “You have to create ways for adults to take responsibility for their own behavioral change.” By providing voluntary training, The New York Times Company put the responsibility for learning new skills in the hands of employees who would be affected by the change.
Third, a portion of each manager's bonus was set aside pending the accomplishment of certain strategic objectives. “We had to make it worthwhile for people to make the changes that were necessary,” Gatti explains.
Fourth, because so many positions will ultimately be eliminated by the shared services center, the company offered “stay-on bonuses” to employees who stay with the company until the transition is complete.
Finally, as important as money is, Gatti says the most effective motivation for change has been the ongoing recognition given to employees who are actively involved in the change effort. “Keeping people focused on change is tricky,” he says. “We give a lot of recognition to highly involved employees through visibility in the newsletter, special awards and bonuses.
“Change creates insecurity,” he adds. “By focusing the majority of our attention on employees, we stand a better chance of making a successful change. The implementation of new processes and technology are easy compared to the people issues involved.”
Neither The New York Times Company nor Ontario Hydro could have accomplished their change efforts without the support of top management. As Greg Hackett, president of The Hackett Group, a Hudson, Ohio-based management consulting firm, explains: “Executives have to be on board early in the process, not to lead the change effort, but to support it.”
More specifically, he says, top managers have three major roles in change management. They have to write the check for it, they have to give the change agents enough time to do it right and they have to use their clout to manage the organizational politics that surround any major change. “Even more importantly,” Hackett says, “they have to get out of the way and let change happen.” Because top management support is critical, controllers who are leading change efforts must keep senior managers informed about progress and focused on the goals of the effort.
In addition to top management support, behavioral incentives and adequate planning, Hackett, who assisted in the change efforts at both Ontario Hydro and The New York Times Company, offers these final words of advice to controllers involved in change management: “Create a thorough plan and stick to it,” he says, “... and don't let the naysayers get you down. Not everyone will agree with what you're doing, and you have to be able to ride the roller coaster of emotions.”
Yes, in the end, change is hard on everyone involved. But to not change in today's competitive environment is even more deadly. Managing change is dealing with life.