When organisations become aware of the need to transform, strategic planning hones its edges on conversations about cost and benefits. The focus on transformation and adaptation moves from potential option to critical success factor. Once the hard decision has been made, it becomes almost too tempting to run at the changes and get business concluded as quickly as possible. But like anything that prompts in us a sense of urgency, if we fail to plan an approach, we risk sending out ripples and shock waves that impede our ability to contain the message, control the risk and focus the energy on the highest priorities.
As leaders, understanding the true value of change management becomes a pivotal element in driving success and ensuring sustainable growth. Return on Investment (ROI) is a familiar metric that not only quantifies financial benefits but also serves as a compass for strategic decision-making.
The Transformational Power of Change Management
Change management, often perceived as a soft skill, holds the key to unlocking the tangible outcomes that will deliver the organisation's transformation. When understood and applied as a business-as-usual function in organisations, change management can revolutionise an organisation's growth and change trajectory. When orchestrated effectively, change management becomes the catalyst for innovation, efficiency, and ultimately, profitability. More than just a process, it is a strategic imperative that propels businesses towards their goals.
The ROI Equation: Calculating Benefits that go Beyond Numbers
ROI in the realm of change management hinges on the opportunity cost of not managing change well.
The problem with humans is that we possess an innate genius. If we encounter a problem, an emergency or urgent situation, our brain is already equipped to assess the situation, find resources close to hand, adapt to unique conditions and respond with energy fuelled by adrenaline until the emergency has passed. Many of us naturally associate change with a problem, an emergency or urgent situation because it's unfamiliar and can generate similar responses to what we might feel under pressure.
Because we're all natural geniuses, it can be tempting to think that human-centric processes like change management can be 'picked up' and added to the existing workload of a talented leader. Many change management processes are intuitive, but they are based on planning, knowledge of the people involved and deep understanding of the impacts on the people and business of the changes proposed. This takes time, it involves method, enquiry and it requires specialised effort to get it right.
So, what is ROI?
ROI is a financial metric that evaluates the profitability of an investment by comparing the gain or loss generated relative to its cost. By calculating ROI, organisations can compare different types of investments and determine what investment types are most efficient for them.
The formula for calculating ROI is to establish the net gain or profit from the investment, and divide that by the cost of the investment. The cost of hiring a specialised resource or team to manage change will be evident: this is the bottom line of the formula. The challenge may be in calculating the top line: attributing the proportion of benefits realised by the program specifically to the change management effort.
But the challenge goes deeper still. Imagine the crucial change for the organisation is to reorganise the entire structure and operating model to capitalise on the unexpected hyper-performance of a product line. The market can't get enough of this product, and the organisation is not geared up to produce the volume being suddenly demanded, and it must reorganise to do so.
In terms of the top line of a standard ROI calculation, the profitability of the organisation may not have changed. But it may have reduced without the capability provided by the reorganisation. In addition, the reorganisation could likely proceed without a single change manager on the premises, but it will assuredly not have gone as smoothly.
While monetary gains are undoubtedly crucial, the true ROI lies in the holistic impact on the organisation. It encompasses factors such as employee engagement, organisational culture, planning for and overcoming resistance and adaptability – all of which contribute significantly to overall performance and success.
ROI of Change Management
The ROI of Change Management lies in comparing benefits achieved with change management in place, as compared to those achieved (or achievable) without change management in place.
If an organisation can not communicate changes effectively to its workforce, then it will achieve zero project benefits without change management.
An organisation's future state performance is significantly assisted through a change management process that coordinates communication, engagement, training, leadership, resistance management - and more - to establish and embed effective future-working pathways.
Mitigating the risk of non-achievement
Embracing change is not without its challenges. Resistance, uncertainty, and fear of the unknown often cast shadows on the journey towards transformation. This is where change management shines brightest – by creating a structured framework that mitigates risks, enhances communication, anticipates questions, and ensures a seamless transition for all stakeholders involved.
The Ripple Effect of Effective Change Management
The benefits of robust change management reverberate across every facet of the organisation. From streamlined processes to enhanced employee morale, the ripple effect is undeniable. Leaders who prioritise change management witness a more harmonious convergence of strategy and execution, resulting in a series of deliveries that have true capability to push the competitive edge.
Embracing a Culture of Continual Improvement
Change management is not a one-time endeavour but a continual pursuit of excellence. Leaders who champion a culture of adaptation and improvement pave the way for sustained success. By recalculating ROI to encompass not just financial gains but also transformative impact, organisations set themselves on a trajectory towards long-term viability and prosperity.
Assessing the Financials and the True ROI of Change Management
As leaders, the challenge lies in embracing change not as a disruption but as an opportunity for delivering the transformative growth needed to remain competitive and viable long term. By assessing the financial benefits of change management through the lens of ROI, organisations can account for innovation and resilience as factors of prosperity. For leaders, adaptability skills are becoming a necessity and the returns of investing in change management are those that will guide organisations smoothly to achieve the benefits of transformation. In addition to which, each successful change breeds confidence and skills that lead to further success and more sophisticated change skills.
Agencia Change can work with you to highlight the strategic significance of change management in driving innovation and efficiency. For more on how we can help address challenges and solutions in implementing effective change management, book a free consultation.
Comments