Companies undertaking a broad-based business performance management (BPM) improvement initiative -- whether or not it includes a technology upgrade -- are embarking on an expedition of enormous cultural change. They may be rethinking their processes for allocating resources; their processes for setting expectations for performance in terms of revenue, margin, customer service, and other areas; their processes for gauging actual results relative to those expectations; and their processes for rewarding (and punishing) managers for their performance.

Doing BPM right requires buy-in throughout the company, and gaining that buy-in can be a huge challenge when it threatens to change decision-makers' performance evaluations and, ultimately, compensation. But some core change management concepts can help companies manage the organizational stress that BPM improvement initiatives can trigger.

Core Components of Successful Change

How successful an organization is at surviving any change depends on how it prepares for the change. Success requires that the company optimally manage innumerable skills and talents throughout the initiative, but there are two components that are key in a project that involves major corporate change: having the right leadership team and honestly evaluating the organization's readiness to implement the impending transformation.

Sometimes change may seem inevitable, so the question of the organization's readiness may seem irrelevant. However, ignoring the level of readiness for an impending change is a surefire way to sabotage the effort before it even starts. Conducting an honest assessment of your organization's current culture -- and then determining whether that culture is capable of withstanding and supporting the change that may be the outcome of the initiative you're undertaking -- is a cornerstone of success. The project's leadership team should drive this culture assessment, so the formation of the leadership team must be the first task in launching a BPM improvement initiative. Choosing the right leaders for the change effort is the single most critical factor in a successful change initiative.

In small to midsize businesses, the CEO may want to lead the change project; in large organizations, a divisional vice president might take up the BPM banner. The support of C-suite executives can mean the difference between a project's success and failure, but these people are usually not the best choice for project leadership. They are limited in bandwidth, and they may be viewed as having personal agendas. Also, they should probably not be diverted from overall company management by the nuts and bolts of choosing and implementing a software product, or in many cases even by the details of the budgeting process or operations management reports or sales compensation. Though any major change project should involve members of C-level management, their already-demanding jobs require that they take a more distant, project-sponsor role. They should limit themselves to helping set vision, direction, and key performance indicators (KPIs), and to running interference when the inevitable roadblocks appear. Effecting the actual change should be assigned to a tactical change management team.

Choosing the Right Team

The tactical change management team should have three key players, each with clearly defined roles and responsibilities: an initiative leader, a process director, and a change coach. Together, these people will drive the action, maintain the course, assess progress, document and communicate about the change, mitigate resistance, and respond to surprises. The members of the tactical team should be chosen for their ability to problem solve, their ability to function as free thinkers, their ability and experience in system analysis, their ability to base decisions on the situation and conditions, and their ability to thrive in a chaotic setting.

To build the team, the project's C-level sponsor should ask himself or herself three critical questions: Can this initiative be successful if the company relies only on internal leadership and resources? Who has the skill and internal respect to effectively manage the initiative's many components, to minimize the sizeable opportunities for the project to crash and burn? And can internal leaders who have department or division loyalties look beyond the impact of the performance management changes on just their department?

Another potential problem is that internal leaders who come from different departments or divisions are likely to move through the change process at different speeds. This inconsistent timing can cause frustration, reduce efficiencies, and sabotage success, even if the team believes it is making good progress. Internal leaders also may possess strong skills at protecting their turf; obviously, those skills are detrimental to an interdepartmental initiative that involves rethinking major corporate processes, such as budgeting or performance reporting. An outside perspective can be the answer. Hiring external consultants ensures unbiased solutions and reduces the tendency toward "protectionism." In addition, because they have only one focus, external consultants can often drive results faster.

Each of the three roles on the tactical change management team comes with distinct responsibilities:

Initiative leader. The initiative leader is the project's "air traffic controller"; he or she guides the other members of the tactical change management team and ensures that progress doesn't waver and that everyone lands safely. The initiative leader is responsible for keeping the project true to its vision and for achieving the results as defined by the project's KPIs. He or she is responsible for making sure everyone progresses at the right speed, thus making sure the project achieves its goals.

Select this person for an ability to lead during a time of crisis, and for skill in motivating, energizing, and coaching people. This person cannot be burdened with personal or political agendas, and the initiative leader should never be someone who's seen as being groomed for bigger and better roles within the company. If the initiative leader is the protégé of the project sponsor, team-building will be more challenging, and the project will be tainted from the start by questions about its fairness and the sponsor's motivations. Often an outsider is the best choice for the role of initiative leader. Consultants experienced in cultural change and project management can be agnostic to internal politics, which is a significant advantage in avoiding the political minefields that often contribute to failure.

Process director. This role is dedicated to driving the details of the improvement process. The process director is responsible for implementing the process improvement methodology and working with departments, employees, customers, and vendors throughout the process flow. He or she is responsible for coordinating activities that define the changes to be made, then monitoring activities and progress, documenting change, and ensuring consistency of approach and results across the organization. An internal leader may be suited for this role, but this person should be selected carefully based on his or her ability to be flexible, to fit decisions to the situation, and to solve problems with minimal drama. Being organized and focused is a plus, but being compulsively detailed and myopic is not.

Change coach. This person prepares employees for the changes that the BPM initiative will entail, coaches them as the changes are being implemented, and ensures that everyone throughout the organization understands the goals of the improvement initiative. Successful change projects are the result of selling the initiative, not telling people what to do, so the change coach must be someone who has the respect of employees and who can sell the reasons behind, and the expected results of, the improvement initiative.

The change coach is responsible for taking the pulse of the organization regularly so that he or she can recognize and dissolve resistance. The change coach ensures that communication channels are defined and used; he or she acquires feedback on the project, responds to the feedback, and shares information across departments and divisions. The change coach monitors resistance to the project and answers objections, as well as monitoring the strain of change on the organization and staying on the lookout for opportunities to reward employees who adopt desirable new behaviors. Finally, the change coach is responsible for ensuring that the company's values and vision are sustained and aligned during the initiative and after the change is accomplished.

The change coach is also the project's trust officer. Trust must exist up and down the chain of authority in order for change to truly take hold. The higher the trust level in the organization going into the change process, the more likely the new BPM processes and systems will be successful. But trust is delicate, and it can be eroded quickly by missteps in the initiative that result from internal politics, miscommunication, resistance that is allowed to continue, excessive internal competition, or unsupported risk-taking.

Can one person play all three of these roles? The answer is an emphatic no! Can all three roles be assigned to external consultants? Again, no. The process director and change coach should come from internal resources. An in-depth understanding of the company's processes and process history is critical to success, and companies embarking on BPM can't afford to give up this knowledge by going outside to fill these roles. Hiring external process consultants to work under an internal process director does have advantages, such as accelerating results and bringing new perspectives and solutions. But the role of director requires an intimate knowledge of the company that is difficult, if not impossible, for a consultant to possess. Similarly, the change coach should come from within because this person must already have the respect and trust of others throughout the company.

Why can't the change coach also serve as the process director? The change coach's role is focused on the psychological aspects of change, so he or she must remain above the fray -- and stay out of the process decisions that may not always be viewed as beneficial to specific individuals or departments. Depending on the size and complexity of the change initiative, a project's initiative leader and process director could be combined into one role, but ideally these roles should also be separate.

Assessing Readiness for Change

Change initiatives are successful when trust is high throughout the organization. Employees must trust that as they let go of old behaviors and adopt new behaviors, the organization will be there to support them. They must trust that if they take risks to accomplish change, they will be supported and not chastised. This is true of every initiative that involves cultural change, but it is even more critical when the change being undertaken will affect performance management processes. Most companies' budgeting systems are already plagued by gaming activities, which inherently undermine the trust among managers in various divisions and levels of the organization. On top of that, BPM projects frequently affect paychecks -- at the very least, they affect the way senior management views different groups' performance -- so it is imperative for employees and managers to trust that the company will reward those who take on change honestly and without hidden agendas.

The company's top leaders set the trust level; they are the example. Senior management must accept change themselves. If this level of personal commitment is absent, the BPM initiative is destined to fail. The company's current leadership built (or at least perpetuated) the current culture, and it must build a new culture after a change as major as a revamp of the company's performance management processes. Therefore, any assessment of readiness for change must begin with a sincere self-examination by senior executives.

Once members of the C suite have evaluated their own willingness to change, the next step in assessing a company's change readiness is to decide who should conduct the assessment of the overall organization. Direction, or at least support, from outside consultants should be given serious consideration because honesty on the part of managers and employees throughout the company is absolutely critical. Internal players may not be seen as trusted or independent, which can skew response to the assessment. Organizational development consultants are experienced and adept at root-cause analysis and will deliver honest results from which executives and project leaders can determine what actions they need to take before the initiative in order to improve their chances of success.

Overall, the readiness assessment is looking for four things: gaps between management's perceptions about the culture and employees' perception of the culture; gaps between the stated vision and values of the organization and how business is actually executed; gaps between the current culture and the desired elements of the new culture; and the degree of flexibility, adaptability, and innovation in the organization. A change-readiness assessment should examine 10 individual cultural elements:

Project KPIs. The road to successful change must begin with a clear understanding of where you're going and how you'll know when you've gotten there. The tactical change management team, in collaboration with and under the direction of the project sponsor, must establish key performance indicators in three areas before the project begins: performance, which is to say productivity, efficiency, and internal and external customer satisfaction; culture, encompassing behavior, values, and decisions; and the financial, which includes profitability, cost reduction, and market position. The organization's goals for the BPM initiative will determine the KPIs it sets for the project, but without a clear picture of the desired end result, project leaders will be unable to provide the tactical road map the organization requires in order to take action and evaluate interim progress.

Risk tolerance. Change involves risk; therefore, an organization's willingness to allow risk-taking, and at times even failure, is one of the most important indicators of the organization's readiness to change. How does the organization view risk? How do employees manage risk? What levels of risk are acceptable? Is entrepreneurial spirit rewarded? Trust must be present up and down the organization if employees are going to take the kind of calculated risks necessary to implement major changes in the company's performance management processes.

Decision-making. Employees make decisions every day, regardless of their position or level of authority. These big and small decisions become the drivers of change, so how decisions are made is vitally important. Are decisions made quickly after fact-finding and evaluation, or does it take "forever" for someone to make a decision and take action? Do management teams at all levels listen to a variety of opinions, or do they go only to the anointed few for input? Is there much conflict during and after the decision-making process? And is there a clear process in the first place? When change initiatives bog down, it is often due to a fear of making a mistake, which leads to poor and slow decision-making.

Organizational structure or hierarchy. Companies with strong and clearly delineated hierarchies are often built on the belief that people need close supervision in order to produce. Micromanagement is the norm. But effective change initiatives, especially in areas that affect as many people as budgeting or performance reporting, require independent thinking and decision-making. Change that is forced on people is never fully adopted, and resistance becomes a huge challenge. If employees feel that they can't make a move without approval, the organization will find change extremely difficult, if not impossible, to achieve.

Flexibility and innovation. Flexibility and innovation naturally correlate closely with the willingness to take risks. But in addition to considering their risk tolerance, organizations should assess how often they actually attempt new things. Are new products introduced regularly? Are policies and procedures evaluated regularly to ensure customer satisfaction? Is customer input solicited, and is action taken based on the results? Do employees implement new ideas on a consistent basis? Are they allowed, or encouraged, to make decisions and solve problems within their own departments?

Change history. Past successes can be indicators of future success. Has the organization implemented some form of change within the last five years? (Remember that organizational memory can be short.) Was the change initiative successful? What did the company learn from that experience? Was a change-readiness assessment completed before the change initiative? What failures has the organization experienced in the last five years? What can the tactical change management team do to overcome a failure mentality?

Processes and function. Major performance management initiatives require redesigning processes, and sometimes also functions and roles. Are your managers in the affected areas open to change? Are they supportive of the change? Has turf building and turf protection ever been an issue in the organization? Do departments willingly collaborate and see themselves as interdependent? Are departments mired in paperwork that will work against change?

Communication. Before, during, and after change, communication is a critical factor in the success of the initiative. You must honestly assess the communication structure within the organization -- in terms of both formal and informal communication. Is communication a two-way street, with honest dialog up and down the line? Is gossip rampant and destructive? Are there trusted communicators in the organization whom the tactical change management team could use in the dissemination of information? Is communication with employees direct, or only through the hierarchy of managers? How frequently does senior management communicate with, and listen to, the rank and file?

Competitive awareness. The more aware the organization is of its industry and competitors, the better its chance for success. Change in a vacuum is difficult. Do the key people in your organization stay informed on your industry? Are they aware of market changes? Do they track trends and see the impact on your business? Are they knowledgeable about the competition and their position in the market? The more employees know about the industry, the more they will understand the need for change and the benefits change will deliver. In addition, the more aware they are of looming competitive threats, the more they will see the prospective benefits of gaining faster access to more accurate information about how the company is performing relative to competitors.

Rewards. An organization's reward structure drives employee and manager behavior. Are employees rewarded for new ideas, for risk-taking, for independent decision-making? Or are they slapped, metaphorically, for taking action without multiple approvals? Change initiatives must reward employees and managers for the right reasons, and frequently, in order to drive new behaviors. This is particularly crucial in projects that substantially change the budgeting process, or those that affect the way a particular department's or division's performance appears. The behavior you reward is the behavior you will see; make sure you reward the underlying actions that will support your change initiative.

When the readiness assessment is complete, the organization must decide what to do about its findings. The company's culture and the management style of its executives will define which interventions, if any, to take in advance of the BPM project; thus, it's impossible to recommend a standard solution to problems that a readiness assessment may discover.

There's a chance the assessment will result in a decision not to pursue the BPM initiative after all. Alternatively, cultural challenges that the assessment raises -- such as low risk tolerance, an unwillingness to allow broader decision-making, or low levels of trust in management -- may require dramatic change efforts themselves, so the BPM initiative may be postponed while executives decide whether and how to change fundamentals of their corporate culture. However, when an organization has completed a readiness assessment and is ready to proceed with the BPM project, the change coach, working in conjunction with HR, must develop strategies to mitigate the remaining foreseeable cultural roadblocks.

Honest, independent, and thoughtful responses in the readiness assessment process are necessary to prepare a change management team for obstacles they will face in improving performance management processes. For those in the early stages of planning for BPM upgrades, a quick look at several characteristics can determine whether their organization is open to change, and thus how likely it is to succeed with its BPM project. Companies that are most likely to succeed share these traits: Their leadership team is committed and is open to change. Their culture rewards experimentation, flexibility, and innovation. They promote independent decision-making and have strong, well-defined communication channels. They routinely accept shared accountability and collaboration. And managers and employees are consistent in their interpretation of the organization's vision and values.

Sometimes companies looking to revamp their BPM systems may see the effort exclusively as a technology project. But as soon as the initiative delves into process changes -- which is almost inevitable, and which BPM experts agree is critical to improving performance management -- it is as much about people as about software. For that reason, thoughtful and careful selection of a tactical change management team, and then preparation for cultural obstacles the project may face, are sure to improve the likelihood of success, even for the most technology-focused performance management improvement project.

Shelley F. Hall is principal of Catalytic Management Consulting in Stow, Mass., which specializes in business performance and growth consulting (www.catalyticmanagement.com).