Change Management Needs to Change

By Peter Harlamon, Daniel Penn Associates

Global corporate expenditures on change management programs in 2016 were $10 billion a year. At a 5% per year increase, annual change management expenditures exceed $14 billion dollars today. Despite this significant expenditure, 70 percent of these projects fall short of their objectives as they fail to demonstrate any sustainable improvement in performance.

Sometimes, you need to go slow in order to go fast

The speed at which change programs are implemented often jeopardizes the project’s outcome. Many result in a greater chasm between the workforce and management than before the change program was initiated. As workers, suspicious of management’s intentions, resist adopting work changes, morale, customer service, and productivity often decline – sometimes irreversibly.

Employee resistance to change reveals an underlying trust problem between management and employees. It’s exacerbated by a constant flow of change initiatives that create fatigue. If there’s no analysis or learning from the last failed attempt, companies risk launching an endless wave of change initiatives that never deliver on their promise.

Place employees at the center of your change strategy

Management is responsible for applying best work practices, utilizing current technology, and implementing efficient workflows. Given the disappointing results of their change efforts to date, it is time to reconsider the change strategy and adopt new methods that are inclusive and transparent. This management re-think is critical for companies if they are going to succeed in our hypercompetitive global economy. As a management consultant, I have participated in change projects with public corporations on four continents and 10 countries. What I’ve learned about organizational change is simple but essential: Management must approach change holistically. Successful change programs incorporate both the human and the process sides of change. They elevate the human contribution to workplace improvement.

This approach does not impose change on employees who are not given a voice. Rather, it empowers them as agents of change. It aligns workforce goals with management objectives. Placing employees at the center of the change strategy can alleviate apprehension, fear of job loss, and lack of trust.

 A platform for sustainable change 

Think of change as smartsizing your organization, not downsizing it. It’s all about upskilling your workforce within an environment that encourages employees to excel. This mindset can overcome employee resistance that contributes to change management’s dismal track record. While organizational change is never easy, removing employee concerns greatly improves the chances for success and can transform organizations. Addressing employee concerns also encourages them to actively engage in a continuous process of renewal and innovation.

The two-step smartsize method supports both business objectives while improving the operating environment that influences corporate culture and employee behavior. It creates a value-led, inclusive, and transparent working state. It seeks to understand and work within the cultural nuances that support or block change. The second step embraces rapid improvement events, a participative method where employees implement process change. This two-step method provides a disciplined pathway any organization can adopt and scale, at a speed that allows each organization to assimilate change successfully.

How change happened at a deeply divided operation

The most challenging labor relations engagement of my career occurred at a remote production facility in Australia. At this plant, I encountered significant worker resistance to change from a union with a history of strikes, sabotage, and intimidation. The management team was battle-hardened from years of conflict with the union. Although geographically isolated, this plant was not insulated from the global changes, causing significant disruptions in its industry.

Provide a compelling reason for the change

The union resisted all management attempts to allow us to engage with their membership during work. As I did not want to exacerbate the situation, we agreed with the union that we would not engage with their members until we had a working agreement. The union told its members that it would not stand down until union leadership was satisfied with an agreement detailing how we would interact with their members.

I learned from our meetings that the fear of job loss and the union’s lack of trust in management based on past experiences had created a divisive and almost intolerable working environment.

The union’s number one demand was job security, but management was not in a position to guarantee jobs. I was finally able to convince the union leadership that changes in business practices were necessary to keep the operation profitable. Without this, the plant’s cost structure would soon become uncompetitive, threatening jobs and the operation’s viability. This became the compelling reason for the change.

To overcome the union’s objections, we offered to add two members from the union to our project team. After much deliberation, this concession, among others, was accepted by the union leadership.  It marked a turning point in our relationship.

The next challenge was to convince plant management to accept the union agreement, which was more difficult than I had anticipated. The management team believed I was giving too much to the union. I appealed to the chief executive to agree to the union proposal. The plant’s leaders begrudgingly accepted it, and a minority of the managers welcomed it as a chance to rebuild a broken relationship.

Transparency and inclusion build trust

As our transformation journey progressed, we invited union members to engage with us in an analysis of the current state of production capabilities. This was not an easy task, as many union members were reluctant to participate, fearing their insights into production problems would lead to job losses. We invested considerable time listening to understand employees’ concerns about work and management oversight. Most concerns were legitimate, especially on workflow, transparency, trust, and prior lack of communication.

To alleviate employee concerns, we held short weekly updates where we would share information with each shift on our progress. The exchange of information began to have an impression on the employees as the conversation changed from suspicion and mistrust to experimenting with new work procedures and implementing improvements in the production process. These activities helped us earn the trust of employees.

Create a working environment where change can thrive

Working with management, we recommended changes to make the work environment more open, transparent, inclusive, and value-guided. Communication updates and feedback sessions improved the dialogue between management and the workforce. Process changes were implemented in addition to improvements in procurement practices, customer service, inventory management, and safety.

Transformation takes time. It’s worth it.

The most important changes we observed were in the attitudes and behavior among management and the workforce. As a result of our efforts to create a collaborative environment, cooperation increased between management and employees, which in turn improved morale. The transformation journey at this plant took 18 months to complete and resulted in significant annual savings without any job losses.

Key takeaways for management consideration

Organizations can consider the following before embarking on their next change initiative:

• Think about your senior team’s management style. Is it authoritarian? Participative? A hybrid of the two? What type of organizational structure supports your management of the business? Are you organized around revenue streams or silos?
• What would your employees say about your working environment? Do they see it as benevolent, benign, or toxic?
• How would your employees define the organization’s culture? We are not referring to whether your culture is viewed as customer-centric or a clan culture. These are manifestations of what you do as an organization. We are interested in the inputs that determine your culture. For example, which values guide the organization? Unfortunately, most corporate cultures are, by default not design. Instead, culture should be shaped and cultivated by leadership.

These human behavioral issues can no longer be ignored by management. They must be addressed as part of the change process. Work has evolved from labor-intensive to knowledge-intensive and now creative-intensive effort. The management of organizational structures that support work must change significantly to complement its evolution.

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Peter Harlamon is a senior consultant and associate at Daniel Penn Associates.

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