The business case for change management when driving organization transformation

Early-2020 ushered in a period of global change, which continues to impact everything from how we work to the economy at large. Most organizations have accepted, at least in theory, they must adapt or be left behind. Organizations are implementing bigger changes than ever and doing it as fast as possible.

Why focus on change management now?

2023 will be a year marked by transformation. Employees will be asked to think in new ways, embrace new technologies and behaviors, and operate in new environments. These changes cause disruption and introduce risks that impact both the employee experience and the organization. Effective change management delivers ROI by reducing risk, enhancing employee engagement and enabling success.

Consequences of ineffective change management

For decades, we’ve heard 70% of change initiatives fail. Companies that struggle to lead through organizational change see the negative impacts in their overall business performance. They also see dips in employee engagement, wellbeing and productivity. A recent WTW study describes current employee perceptions of change effectiveness within their organizations:

• Only 43% of employees say their organization is good at managing change (down from nearly 60% in 2019)
• Only 25% of organizations have employees say managing change is a major strength of senior leaders
• Only 37% of companies are getting the full value of the employee experience

This research highlights that change is happening all around us, yet most organizations aren’t getting it right. In fact, most are failing to do the most basic element of effective change management: Equipping leaders with the skills and information they need to lead change.

Introducing change accelerators

WTW research has identified a subset of organizations extremely successful at managing large-scale organizational change during times of business transformation. We call these organizations change accelerators.

Change accelerators are companies in WTW’s global employee opinion database whose employees have rated their organization’s "change effectiveness" favorably and have proven financial performance year-over-year. In fact, change accelerators see 264% more revenue growth compared to companies with below-average change effectiveness.

The financial performance of companies rated excellent managing change by their employees versus companies rated poor at managing change is far superior. Return on assets of 4.3 vs. -0.6, return on equity of 15.9 vs. -1.6, three-year revenue growth of 3.5 vs.-3.7 and three-year profitability growth of 4.9 vs. -3.8.

Financial performance of companies rated poor at managing change by their employees versus “change accelerators”

What sets change accelerators apart?

Change accelerators share common characteristics in their approach to managing change. They:

• Get the basics right by defining appropriate governance and sponsorship as well as ensuring clear roles and responsibilities
• Equip leaders and create trust through authenticity and respect
• Create a culture of innovation that promotes a growth mindset, continuous improvement and experimentation
• Deliver a consistent vision with a clear sense of direction
• Take a systematic and people-centered approach informed by data and insights
• Consider the impacts on their people and anticipate the challenges and support needed
• Empower employees to contribute and challenge and give them the skills and mindset to succeed in the new environment
• Keep employee wellbeing front and center of their thinking
• Move at pace and pivot when required
• Define the level of change readiness within the organization and are realistic about what can be achieved within the timeframe
• Implement agile and adaptive organizational structures responsive to the needs of the market

In addition to these characteristics, WTW analysis shows these organizations employ five highly effective change levers which sets them apart as accelerators of change:

1. Enable

Show what good looks like and teach people how to do it

• Equip leaders with the skills and resources to lead the change effectively
• Educate change agents and line managers to communicate future vision and support employees
• Actively support leaders and managers – they are often impacted employees, too
• Focus on behaviors and reward employees for changing
2. Listen

Solicit feedback on what is working and what people need, then adapt accordingly

• Involve employees: Let them have a voice and an impact on the outcome
• Measure the effectiveness of change interventions in alignment with the business objectives and key results of the change program
3. Promote

Make it important and do it with employees, not to them

• Concentrate on employees and what the new direction means for them, not the company
• Prove to employees the changes are working
4. Embed

Create an environment that supports the necessary business objectives for change

• Empower impacted employees with the necessary support (not just information and communication)
• Be organized and diligent to ensure leadership alignment and synchronization – not just once or twice, but throughout the change program
• Identify stakeholder segments and change impacts thoroughly – avoid the generic, be specific and relevant
5. Inform

Deliver engaging, personalized and timely communications

• Communicate with simplicity and precision – do not overcommunicate or overcomplicate
• Deliver messages at the right time to the right people using the most effective channel(s)
• Ensure the purpose of the information is clear – Why is the information being shared? For awareness? Action? Alignment?

Lessons learned: Getting started with organizational change

So, what does an organization need to effectively manage change?

• An enterprise-wide strategy and approach underpinned with a methodology that focuses on risk mitigation and employee experience
• A change management capability (e.g., change management office, external consulting support, center of excellence, etc.) within the organization that is involved from the onset of a change initiative
• A business case (e.g., objectives and key results) and executive leadership support of the premise that change management is not an HR initiative – it is a company-wide strategic effort

“

With our aligned focus on employees and their experience during times of change, WTW pushed us to deepen our thinking on how we deliver transformation projects of all types and sizes within Microsoft.”

Taeler Wilson | Change Management Lead, HR Digital Transformation & Employee Experiences, Microsoft

The momentum for change is ongoing. Organizations need to honestly assess their current approach to change management and consider whether it is resilient enough to manage future impacts. Once the approach is defined and endorsed by executive leadership, organizations should adopt the characteristics of change accelerators and employ the levers to achieve successful organizational transformation.

Authors

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Craig Keller

Global Leader of Change Management and Organizational Transformation, WTW

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Dr. Malika Viltz-Emerson

Global HR Leader, Digital Transformation, Employee Experience, Change Management and Learning & Development, Microsoft

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