Change Management - the strategy Implementation

 

Change management addresses the people side of change. Creating a new organization, designing new work processes, and implementing new technologies may never see their full potential if you don't bring your people along. That's because financial success depends on how thoroughly individuals in the organization embrace the change.

Change management is the application of a structured process and set of tools for leading the people side of change to achieve a desired outcome. Ultimately, change management focuses on how to help people engage, adopt and use a change in their day-to-day work.

When defining change management, we recognize it as both a process and a competency. 

Change Management as a Process

 

The change management process enables practitioners within organizations to leverage and scale the change management activities that help impacted individuals and groups move through their transitions.

There are numerous models for managing a change process. Two models that are particularly well-known and useful in understanding strategic change management are Kurt Lewin's Change Model and John Kotter's Change Model.

Kurt Lewin's Change Model (1947)

Kurt Lewin developed a change model involving three steps: unfreezing, changing and refreezing. The model represents a very simple and practical model for understanding the change process. For Lewin, the process of change entails creating the perception that a change is needed, then moving toward the new, desired level of behavior and finally, solidifying that new behavior as the norm. The model is still widely used and serves as the basis for many modern change models.

Unfreezing

Before you can cook a meal that has been frozen, you need to defrost or thaw it out. The same can be said of change. Before a change can be implemented, it must go through the initial step of unfreezing. Because many people will naturally resist change, the goal during the unfreezing stage is to create an awareness of how the status quo, or current level of acceptability, is hindering the organization in some way. Old behaviors, ways of thinking, processes, people and organizational structures must all be carefully examined to show employees how necessary a change is for the organization to create or maintain a competitive advantage in the marketplace. Communication is especially important during the unfreezing stage so that employees can become informed about the imminent change, the logic behind it and how it will benefit each employee. The idea is that the more we know about a change and the more we feel it is necessary and urgent, the more motivated we are to accept the change.

Changing

Now that the people are 'unfrozen' they can begin to move. Lewin recognized that change is a process where the organization must transition or move into this new state of being. This changing step, also referred to as 'transitioning' or 'moving,' is marked by the implementation of the change. This is when the change becomes real. It's also, consequently, the time that most people struggle with the new reality. It is a time marked with uncertainty and fear, making it the hardest step to overcome. During the changing step people begin to learn the new behaviors, processes and ways of thinking. The more prepared they are for this step, the easier it is to complete. For this reason, education, communication, support and time are critical for employees as they become familiar with the change. Again, change is a process that must be carefully planned and executed. Throughout this process, employees should be reminded of the reasons for the change and how it will benefit them once fully implemented.

Refreezing

Lewin called the final stage of his change model freezing, but many refer to it as refreezing to symbolize the act of reinforcing, stabilizing and solidifying the new state after the change. The changes made to organizational processes, goals, structure, offerings or people are accepted and refrozen as the new norm or status quo. Lewin found the refreezing step to be especially important to ensure that people do not revert back to their old ways of thinking or doing prior to the implementation of the change. Efforts must be made to guarantee the change is not lost; rather, it needs to be cemented into the organization's culture and maintained as the acceptable way of thinking or doing. Positive rewards and acknowledgment of individualized efforts are often used to reinforce the new state because it is believed that positively reinforced behavior will likely be repeated.

Some argue that the refreezing step is outdated in contemporary business due to the continuous need for change. They find it unnecessary to spend time freezing a new state when chances are it will need to be reevaluated and possibly changed again in the immediate future. However - as I previously mentioned - without the refreezing step, there is a high chance that people will revert back to the old way of doing things. Taking one step forward and two steps back can be a common theme when organizations overlook the refreezing step in anticipation of future change.

Kotter's Change Model (1995): This model advocates that companies lead employees through eight critical steps. The eight steps include:

1. Establishing a sense of urgency, or making sure that there is a need for the change and that people understand that need
2. Creating a guiding coalition of supporters that can help model the new change and work well together as a team
3. Developing both vision and strategy, a 'picture' of where the company is going and the steps for how to get there
4. Communicating that vision to employees in a way that is easy to understand
5. Empowering employees throughout the company to act on making the change possible
6. Generating short-term wins or small celebrations along the way to celebrate and encourage success
7. Consolidating what is learned from the current change to help the company improve the change process in the future
8. Anchoring the change in the corporate culture through strategies, such as making clear links to performance, profit, and customer satisfaction

The concept of change management dates back to the early to mid-1900s. Kurt Lewin’s 3-step model for change was developed in the 1940s; Everett Rogers’ book Diffusion of Innovations was published in 1962, and Bridges’ Transition Model was developed in 1979. However, it wasn’t until the 1990s that change management became well known in the business environment, and formal organizational processes became available in the 2000s.  

Operationalizing your strategy takes discipline and focus. Organizations undergoing restructuring, merger integrations, or transformation need to think through implementation implications and risks at three levels – organizational, team, and individual. Each level presents unique implementation challenges. Driving a new strategy without a thorough execution plan frequently leaves organizations falling short of their intended results.  Often, senior teams do not translate the broader strategic objectives into operational plans. Even more challenging is gaining broad organizational buy-in and alignment. Good strategies fail when organizational commitment is weak or non-existent.

Translating your strategy into reality by bridging the gap between the new strategy and the desired outcomes  starts by clarifying the operational impact of your strategy as it cascades down through your organization.

Significance of Change Management

Major organizational change can be challenging. It often requires many levels of cooperation and may involve different independent entities within an organization. Developing a structured approach to change is critical to help ensure a beneficial transition while mitigating disruption especially  when undergoing strategic change due to:

·         Organizational Restructuring

·         Merger integration

·         Scaling for Growth

·         Downsizing/Consolidation

·         New Group Design

·         Market Access Redesign

·         Field Force Expansions

·         Enterprise-wide Initiatives

Benefits for top management from change management:

·         Translate leadership strategy into clear execution plans

·         Develop implementation cascades with “turn key” roll-out materials, tools, and solutions

·         Determine business risks and impact; develop risk mitigation strategies

·   Link Human Capital processes and tools to drive specific behavior change and improve performance

·         Define and track progress against success metrics

·   Use effective change management strategies to gain commitment and alignment from all stakeholders

 

Change management is defined as the methods and manners in which a company describes and implements change within both its internal and external processes. This includes preparing and supporting employees, establishing the necessary steps for change, and monitoring pre- and post-change activities to ensure successful implementation.

The following are the three most important types of Organizational change that are a part of the organizational paradigm. They are:

·         Transitional Change: These are the changes performed by the project managers or the high-level officials to steer the company away from one direction into another to make sure that the problem that the company is facing, is solved. These included mergers, automation, and acquisitions.

·         Developmental Change: Any changes that are made in the company’s policies or in the project development processes to make sure that the already established processes be optimized and improved.

·         Transformational Change: These changes are the most impactful as they change the fundamental concepts on which the company is based, and also the operations and the core values that the company holds dear.

Changes usually fail for human reasons: the promoters of the change did not attend to the healthy, real and predictable reactions of normal people to disturbance of their routines. Effective communication is one of the most important success factors for effective change management. All involved individuals must understand the progress through the various stages and see results as the change cascades.

These 7 R’s of change management checklist consists of 7 simple questions. These questions are as follows.

1.      The REASON behind the change?

2.      RISKS involved in the requested change?

3.      RESOURCES required to deliver the change?

4.      Who RAISED the change request?

5.      RETURN required from the change?

6.      Who is RESPONSIBLE for creating, testing, and implementing the change?

7.      RELATIONSHIP between suggested change and other changes?

If you have reasonable answers , yo are ready to pursue the change execution.

The organization is constantly experiencing change, whether caused by new technology implementations, process updates, compliance initiatives, reorganization, or customer service improvements, change is constant and necessary for growth and profitability. A consistent change management process will aid in minimizing the impact it has on your organization and staff. 

Below given is 8 essential steps to ensure your change initiative is successful.

1. Identify What Will Be Improved
 
Since most change occurs to improve a process, a product, or an outcome, it is critical to identify the focus and to clarify goals. This also involves identifying the resources and individuals that will facilitate the process and lead the endeavor. Most change systems acknowledge that knowing what to improve creates a solid foundation for clarity, ease, and successful implementation.
 
 
2. Present a Solid Business Case to Stakeholders
 
There are several layers of stakeholders that include upper management who both direct and finance the endeavor, champions of the process, and those who are directly charged with instituting the new normal. All have different expectations and experiences and there must be a high level of "buy-in" from across the spectrum. The process of onboarding the different constituents varies with each change framework, but all provide plans that call for the time, patience, and communication.
 
 
3 .Plan for the Change
 
This is the "roadmap" that identifies the beginning, the route to be taken, and the destination. You will also integrate resources to be leveraged, the scope or objective, and costs into the plan. A critical element of planning is providing a multi-step process rather than sudden, unplanned "sweeping" changes. This involves outlining the project with clear steps with measurable targets, incentives, measurements, and analysis. For example, a well-planed and controlled change management process for IT services will dramatically reduce the impact of IT infrastructure changes on the business. There is also a universal caution to practice patience throughout this process and avoid shortcuts.
 
4. Provide Resources and Use Data for Evaluation
 
As part of the planning process, resource identification and funding are crucial elements. These can include infrastructure, equipment, and software systems. Also consider the tools needed for re-education, retraining, and rethinking priorities and practices. Many models identify data gathering and analysis as an underutilized element. The clarity of clear reporting on progress allows for better communication, proper and timely distribution of incentives, and measuring successes and milestones.
 
5. Communication
 
This is the "golden thread" that runs through the entire practice of change management. Identifying, planning, onboarding, and executing a good change management plan is dependent on good communication. There are psychological and sociological realities inherent in group cultures. Those already involved have established skill sets, knowledge, and experiences. But they also have pecking orders, territory, and corporate customs that need to be addressed. Providing clear and open lines of communication throughout the process is a critical element in all change modalities. The methods advocate transparency and two-way communication structures that provide avenues to vent frustrations, applaud what is working, and seamlessly change what doesn't work.
 
6. Monitor and Manage Resistance, Dependencies, and Budgeting Risks
Resistance is a very normal part of change management, but it can threaten the success of a project. Most resistance occurs due to a fear of the unknown. It also occurs because there is a fair amount of risk associated with change – the risk of impacting dependencies, return on investment risks, and risks associated with allocating budget to something new. Anticipating and preparing for resistance by arming leadership with tools to manage it will aid in a smooth change lifecycle.
 
7. Celebrate Success
 
Recognizing milestone achievements is an essential part of any project. When managing a change through its lifecycle, it’s important to recognize the success of teams and individuals involved. This will help in the adoption of both your change management process as well as adoption of the change itself.
 
8. Review, Revise and Continuously Improve
 
As much as change is difficult and even painful, it is also an ongoing process. Even change management strategies are commonly adjusted throughout a project. Like communication, this should be woven through all steps to identify and remove roadblocks. And, like the need for resources and data, this process is only as good as the commitment to measurement and analysis.

 

Once the strategist is sure about  the awareness level as shown in above diagram, the journey is comfortable. And people skill is the top priority in this role.

Balanced Score Card : Strategy Implementation Tools -1

Origins of the balanced scorecard

At the beginning of the 20th century, French enterprises began using the “Tableau de Bord,” or “Dashboard” in English. The Tableau de Bord was created in recognition that financial measures alone do not provide enough information for executives to monitor enterprise health. In 1987, Art Schneiderman of Analog Devices, created the Analog Devices Balanced Scorecard. In 1989, Ray Stata, Analog Devices’ CEO, described the company’s five-year scorecard in the Sloan Management Review.

In 1990, Mr. Schneiderman was involved in an unrelated research study headed by Robert Kaplan who worked with Nolan, Norton, & Co., a management consulting firm. During the effort, Mr. Schneiderman described Analog Devices’ work on performance measurement to other participants. In the early 1990s, several papers were published on the design of a balanced scorecard with the Kaplan and Norton paper garnering the most success.

The business performance management framework was laid out in a 1992 paper published in the Harvard Business Review by Robert S. Kaplan and David P. Norton, who are widely credited with having developed the balanced scorecard system. A key premise of the balanced scorecard approach is that the financial accounting metrics like return on investment and earnings per share, can give misleading signals for continuous improvement and innovation -- activities today's competitive environment demands.  Companies traditionally follow such measures to monitor their strategic goals are insufficient to keep companies on track. Financial results shed light on what has happened in the past, not on where the businessis or should be headed. The balanced scorecard system aims to provide a more comprehensive view to stakeholders by complementing financial measures with additional metrics that gauge performance in areas such as customer satisfaction and product innovation.

As a result of additional articles and their 1996 book, The Balanced Scorecard: Translating Strategy Into Action, Kaplan and Norton are widely seen as the concept’s creators.

Balanced Scorecard

A balanced scorecard (BSC) is a performance metric companies used to identify and improve various internal functions and their resulting external outcomes. A balanced scorecard is a strategy performance management tool – a well structured report, that can be used by managers to keep track of the execution of activities by the staff within their control and to monitor the consequences arising from these actions. The balanced scorecard is a management system aimed at translating an organization's strategic goals into a set of organizational performance objectives that, in turn, are measured, monitored and changed if necessary to ensure that an organization's strategic goals are met

A balanced scoreboard is an analysis technique that translates an organization’s mission statement and business strategy into specific, measurable goals, and monitors the organization’s performance in regards to achieving these goals.

The balanced scorecard approach examines performance from four perspectives.

·         Financial analysis, which includes measures such as operating income, profitability and return on investment.

·         Customer analysis, which looks at investment in customer service and retention.

·         Internal analysis, which looks at how internal business processes are linked to strategic goals.

·         The learning and growth perspective assesses employee satisfaction and retention, as well as information system.

Kaplan and Norton cited two mainadvantages to the four-pronged balanced scorecard approach.

1.      First, the scorecard brings together disparate elements of a company's competitive agenda in a single report.

2.      Second, by having all important operational metrics together, managers are forced to consider whether one improvement has been achieved at the expense of another.

The BSC framework is based on the balance between leading and lagging indicators, which can respectively be thought of as the drivers and outcomes of your company goals. When used in the Balanced Scorecard framework, these key performance indicators (KPI) tell you whether or not you’re accomplishing your goals and whether you’re on the right track to accomplish future goals.

Kaplan and Norton stressed that the balanced scorecard is not a template to be applied to businesses in general or even industrywide. Businesses must devise customized scorecards to fit their different market situations, product strategies and competitive pressures.

Neither should the balanced scorecard approach be viewed strictly as a performance measurement system. Rather, it is a strategic management system that will "clarify, simplify and then operationalize the vision at the top of the organization," Kaplan and Norton wrote. How a company's mission statement and vision are operationalized to create value is up to the employees.

"The measures are designed to pull people toward the overall vision," Kaplan and Nolan wrote. "Senior managers may know what the end result should be, but they cannot tell employees exactly how to achieve that result, if only because the conditions in which employees operate are constantly changing."

Criticisms

In the mid-1990s, the scorecard was modified to strengthen the link between performance measures and strategic objectives using a "strategy map."

In the late 1990s, the design approach was again tweaked to include the vision or destination statement -- a statement of what "strategic success" or the "strategic end state" would look like.

Criticism of the balanced scorecard method includes charges that Kaplan and Norton failed to cite earlier research on this method and complaints about technical flaws in its methods and designs.

Others have noted that the four perspectives do not reflect important aspects of nonprofit organizations and government agencies -- for example, social dimensions, human resource elements and political issues.

The balance scorecard is used as a strategic planning and a management technique. This is widely used in many organizations, regardless of their scale, to align the organization's performance to its vision and objectives.

The scorecard is also used as a tool, which improves the communication and feedback process between the employees and management and to monitor performance of the organizational objectives.

As the name depicts, the balanced scorecard concept was developed not only to evaluate the financial performance of a business organization, but also to address customer concerns, business process optimization, and enhancement of learning tools and mechanisms.

Each area (perspective) represents a different aspect of the business organization in order to operate at optimal capacity.

·        Financial Perspective - This consists of costs or measurement involved, in terms of rate of return on capital (ROI) employed and operating income of the organization.

·        Customer Perspective - Measures the level of customer satisfaction, customer retention and market share held by the organization.

·        Business Process Perspective - This consists of measures such as cost and quality related to the business processes.

·        Learning and Growth Perspective - Consists of measures such as employee satisfaction, employee retention and knowledge management.

The four perspectives are interrelated. Therefore, they do not function independently. In real-world situations, organizations need one or more perspectives combined together to achieve its business objective

A traditional balanced scorecard examines the initiatives of a company from four different perspectives: Financial, Learning & Growth, Business Processes, and Customer. These activities are noted in the appropriate buckets with stated measures, targets, and objectives for data collection and analyzing. The activities then can be evaluated and assessed properly.

For example, Customer Perspective isneeded to determine the Financial Perspective, which in turn can be used to improve the Learning and Growth Perspective.

Balanced Scorecard in the 21^st century:

What you measure is what you get. Senior executives understand that their organization’s measurement system strongly affects the behavior of managers and employees. Executives also understand that traditional financial accounting measures like return-on-investment and earnings-per-share can give misleading signals for continuous improvement and innovation—activities today’s competitive environment demands. The traditional financial performance measures worked well for the industrial era, but they are out of step with the skills and competencies companies are trying to master today. The balanced scorecard is a strategic planning and performance management framework used by business, government, and non-profits to align day-to-day activities with enterprise vision, mission, and values. The balanced scorecard tracks financial and non-financial measures to determine the degree to which the enterprise is performing as desired and when corrective action is necessary.

The balanced scorecard is a widely used management tool, particularly in the U.S., the UK, Northern Europe, and Japan. Enterprises that are comfortable with the rigor required derive significant benefits from it. However, the balanced scorecard requires a great deal of effort to implement and use effectively. Enterprises must have the necessary resources and discipline to make the balanced scorecard successful.

The original balanced scorecard was designed to help for-profit companies. As the balanced scorecard became more widely accepted, it was adapted for government and non-profits. Since neither have profit, the financial perspective is usually retitled “Stewardship” to reflect the need to manage funding and staff judiciously. The customer perspective is frequently renamed “Beneficiaries” or “Recipients” by non-profits that provide their services for no or very low cost. “Stakeholder” is viewed as more descriptive than customer by some government agencies.

The initial balanced scorecard described the four perspectives but gave little guidance regarding how to identify meaningful measures or how to link measures to strategy. Kaplan and Norton’s The Strategy-Focused Organization: How Balanced Scorecard Companies Thrive in the New Business Environment, published in 2001, introduced the strategy map to show the specific activities required to achieve enterprise goals. The strategy map is a visual, one-page representation of the interrelationships among the activities across the four balanced scorecard perspectives. Associated with each activity in the strategy map are supporting metrics.

Balanced Scorecard: An Experience of ICICI Bank (source: their website)

Key challenges

Rapid growth in employee base – fresh and lateral recruits – Building knowledge and skill base – Ensuring adequate focus on multiple perspectives

Growth, profitability, service levels, building talent

Ensuring consistent implementation of strategy across the organisation – Aligning organisational, business-level and individual goals – Incentivising achievement of the goals set

We were seeking a strategic framework that would enable this…

Earlier performance management framework was primarily focused on financial aspect – Other perspectives covered qualitatively – “Input” rather than “output” based: focus on “work done” rather than “goals achieved”.  I did not meet the need for additional perspectives – Retail strategy required service focus – Wholesale banking required focus on transaction capabilities and quality of credit origination

Balanced scorecard at ICICI Bank – Stage I

Re-defined and expanded financial perspective – Growth, market share, profitability and credit costs

Introduced customer perspective: concept of service levels as an area of performance evaluation – Customer satisfaction scores

Introduced process perspective: focus on building a process orientation in the organisation

Learning perspective: focus on re-skilling for existing employees and speed-to-job for new recruits

Balanced scorecard at ICICI Bank - Stage II

Further development and detailing of customer service and process perspectives

Specific measures of performance introduced

– Branch service quality scores

– Turnaround time (TAT) benchmarks

– Good order index for client bankers

 – 5S achievement

 Focused measures served as enablers for meeting financial goals

Balanced scorecard at ICICI Bank - Stage III

Learning and development perspective – So far focused primarily on business skills – Commenced activity on building leadership pool

Reducing the number of scorecard templates – Already reduced from 750 to 230 in two years – Planned reduction to about 150

New challenges – Scorecards for operations in new geographies outside India

Lessons from ICICI Bank experience

Performance measures should be output rather than input based – People should be assessed on goals not on transactions – Removes ambiguity from performance management

• Scorecard need not be balanced for individuals but for business unit as a whole – All perspectives may not apply to all people

• Need for scorecard templates – Ensures consistency – Number of templates should be rationalised based on number of different job descriptions

 

Banks, like other business organisations, are operating in an increasingly complex environment • In this competitive paradigm, optimally directing all resources towards organisational goals in a focused manner is the key to access

 – Having a strategy is not good enough

 – The strategy must be

• Articulated

• Understood

• Executed

• The balanced scorecard is a tool that helps communicate strategy and goals across the organization

•          The balanced scorecard at ICICI Bank has helped achieve:

– Rapid business growth

– Strategic consistency despite growing scale and diversity

– Systematic and objective performance evaluation

 • The balanced scorecard can help to build a platform for sustained future growth and value creation