1. Building your Capability for Change
THE CHANGE EQUATION
Building your Capability for Change
Peter Duschinsky
Managing Director, The Imaginist Company

2. The Purpose of this Presentation
To:
Examine what makes an organisation good at managing change
Introduce the key models and tools in the Change Equation methodology
Develop the concepts of: Change Readiness and Capability for Change
Show how the Change Equation can be incorporated into your standard practices:
at project level - to deliver consistently improved project outcomes
at programme level – to deliver Capability for Change into the organisation as a key outcome

3. 70% of projects fail to deliver the planned benefits

4. Internal Change Programmes fare no better
The Harvard Business School tracked the impact of change efforts among the Fortune 100 and found that only 30% produced a positive bottom-line improvement…
A survey of change programmes in 400 European organisations quoted by Prof. John Oakland, Emeritus Professor, Leeds University Business School found that:
90% of change programmes faced major implementation problems
Only 30% delivered measurable business improvements
A CIPD survey of 800 executives found that reorganisations failed to deliver real improvement in performance in 40% of cases

5. What makes an organisation good at managing change?
Are there characteristics we can look out for?
Strong, visible, empowering, leadership
Clearly articulated and shared vision
Attention paid to supporting core values
High level of trust between managers and staff – decision-making devolved wherever possible
People able to give priority to new initiatives – overload issue managed well
Innovation encouraged and well managed
Good communication between departments
Collaboration with customers and suppliers
Adherence to standard ways of doing things
HR benefits and rewards aligned to business objectives

6. What makes an organisation good at managing change?
Does your organisation have these characteristics?
Then you are likely to have:
High level of involvement and commitment
Low resistance to change
Resilience in the face of challenges
Able to bring in changes rapidly and effectively in response to need
Capability for Change

7. “Stock of capability” (Rebecca Henderson, Harvard Business School)
Capability for Change
“Stock of capability” (Rebecca Henderson, Harvard Business School)
“Attention and resources focused on people and processes, developing the organisation’s capability and resilience”
Crucial if you want to respond to the accelerating pace of change and rising levels of business complexity
But erodes through natural entropy and neglect, so requires continual investment and maintenance
Any Change / Transformation Programme needs this to be part of its core deliverables, but many don’t
The Change Equation provides the tools you need

8. The Principles behind the Change Equation
The Change Equation is based on 3 key contentions:
Projects fail when the complexity of the project exceeds the capability of the organisation to cope
The changes needed in a complex project cannot be achieved within its lifecycle
A conventional ’command & control’ approach to management of complex change projects will not achieve consistently successful outcomes
Let’s apply these…

9. Contention 1
“Projects fail when the complexity of the project exceeds the capability of the organisation to cope”
Management typically:
Underestimates the complexity of its projects
Overestimates the capability of their organisation
So if we want to be able to predict success or failure, we need to measure project complexity and organisational capability
We do this by undertaking a Change Readiness Assessment

10. Change Readiness Assessment
The Change Readiness Assessment (CRA) comprises:
Stakeholder interviews, review of project documentation, analysis, senior management team workshop, report & recommendations
It allows us to:
identify the underlying causes of low and negative ROI on projects
quantify the barriers to success
predict the success or failure of projects
deliver a Route Map and Action Plan to help clients gain ownership of the risks and improve performance
Undertaking a CRA at the planning stage will improve a project’s outcomes
Integrating CRA into your standard project planning process will deliver consistently improved project outcomes

11. Change Readiness Assessment
We use a number of key models and tools
We will come back to these…
Process Management Capability Maturity model
Capability/Complexity Indicator
Exponential Complexity tool
Organisational Culture Evolution model

12. Contention 2
“The changes needed in a complex project cannot be achieved within its lifecycle”
The actions needed to achieve and embed behaviour change usually have to be linked to a wider programme
Building these into a Change (or Transformation) Programme will enable the development of an organisation’s Capability for Change
The Change Equation principles provide the framework
The CRA Route Maps and Action Plans provide the content

13. Contention 3
“A conventional ’command & control’ approach to management of complex change projects will not achieve consistently successful outcomes”
Conventional change management interventions attempt to impose change…so people give up, fall back on ‘what’s in it for me’ and the change project fails  
In a complex project, newly emergent ways of working and new forms of organisation need to be recognised, nurtured and embedded
You need to employ project and programme managers with the right skill-sets to achieve this

14. Integrating the Change Equation into standard practice
Audit
Undertake CRAs on selected projects
Stakeholder face-to-face interviews
Analyse
Identify and quantify key common barriers
Adapt methodology, terminology
Integrate
CRA into standard project management practice
Change Equation principles into programme architecture
Implement
Employ project and programme managers with right skill-sets
Consistent improvement in project outcomes
Capability for Change

15. Change Readiness Assessment: Models and tools
Process Management Capability Maturity model
Capability/Complexity Indicator
Exponential Complexity tool
Organisational Culture Evolution model

16. Change Readiness Assessment: Models and tools
Organisational Culture Evolution model
Process Management Capability Maturity model
Capability/Complexity Indicator
Exponential Complexity tool

17. Assessing an Organisation’s Culture Using the Organisational Culture Evolution model
There’s an inherent tension between the individual and the organisation…
Between the aspirations and motivations of people and the external systems and controls that they work with…
Think of this as a pendulum

18. Assessing an Organisation’s Culture
There’s an inherent tension between the individual and the organisation…
Between the aspirations and motivations of people and the external systems and controls that they work with…
Think of this as a pendulum
When it swings to the left, people are ignored in favour of rules and processes…

19. Assessing an Organisation’s Culture
There’s an inherent tension between the individual and the organisation…
Between the aspirations and motivations of people and the external systems and controls that they work with…
Think of this as a pendulum
When it swings to the right, systems are ignored in favour of people’ doing their own thing’

20. Assessing an Organisation’s Culture
When the pendulum is at the point of balance, the organisation is working well…
But any disruption sets the pendulum swinging…
Point of balance
THE ORGANISATION
‘External’ Focus:
The organisation’s needs and direction
Systems and processes
Efficiency
THE INDIVIDUAL
‘Internal’ Focus:
Culture
People’s perceptions, attitudes, motivations, aspirations
Effectiveness

21. Assessing an Organisation’s Culture1 2 3 4 5 6 7 8 9
Point of balance
THE ORGANISATION
‘External’ Focus:
The organisation’s needs and direction
Systems and processes
Efficiency
THE INDIVIDUAL
‘Internal’ Focus:
Culture
People’s perceptions, attitudes, motivations, aspirations
Effectiveness
The evolution of an organisation’s culture can be described as a set of 9 points on a spiral
Each culture builds upon the earlier ones, progressing up the spiral
To progress up the culture spiral we have to deal with the underlying tension between:
Each point or ‘level’ represents a separate, definable culture
The ‘External’ Focus:
The organisation’s needs and direction
Systems and processes
Efficiency
The ‘Internal’ Focus:
Culture
People’s perceptions, attitudes, motivations, aspirations
Effectiveness

22. THE ORGANISATION - ‘External’ Focus THE INDIVIDUAL - ‘Internal’ Focus
The 9 Culture Levels
Organisation 2.
Efficient 4.
Informed 6.
Holistic 8.
1. Me
3. Engaged
5. Devolved
7. Creative
9. Empowered
THE ORGANISATION - ‘External’ Focus
THE INDIVIDUAL - ‘Internal’ Focus

23. THE ORGANISATION - ‘External’ Focus THE INDIVIDUAL - ‘Internal’ Focus
Assessing an Organisation’s Culture
Organisation 2.
Efficient 4.
Informed 6.
Holistic 8.
1. Me
3. Engaged
5. Devolved
7. Creative
9. Empowered
THE ORGANISATION - ‘External’ Focus
THE INDIVIDUAL - ‘Internal’ Focus
We all start by doing everything ourselves.
This works for a while, but…

24. THE ORGANISATION - ‘External’ Focus THE INDIVIDUAL - ‘Internal’ Focus
Assessing an Organisation’s Culture
Organisation 2.
Efficient 4.
Informed 6.
Holistic 8.
1. Me
3. Engaged
5. Devolved
7. Creative
9. Empowered
THE ORGANISATION - ‘External’ Focus
THE INDIVIDUAL - ‘Internal’ Focus
As we grow, we need to delegate. This needs rules and processes…

25. Assessing your Organisation’s Culture
Efficient 4.
Informed 6.
Holistic 8.
1. Me
3. Engaged
5. Devolved
7. Creative
9. Empowered
THE ORGANISATION - ‘External’ Focus
THE INDIVIDUAL - ‘Internal’ Focus
This needs rules and processes…
The problem with this is that it becomes bureaucratic and ‘tribal’.
Organisation 2.

26. Assessing your Organisation’s Culture
Efficient 4.
Informed 6.
Holistic 8.
1. Me
3. Engaged
5. Devolved
7. Creative
9. Empowered
THE ORGANISATION - ‘External’ Focus
THE INDIVIDUAL - ‘Internal’ Focus
So we streamline our processes…

27. Assessing your Organisation’s Culture
Informed 6.
Holistic 8.
1. Me
3. Engaged
5. Devolved
7. Creative
9. Empowered
THE ORGANISATION - ‘External’ Focus
THE INDIVIDUAL - ‘Internal’ Focus
But that didn’t seem to work very well.
Why?
Efficient 4.

28. Assessing your Organisation’s Culture
Efficient 4.
Informed 6.
Holistic 8.
1. Me
3. Engaged
5. Devolved
7. Creative
9. Empowered
THE ORGANISATION - ‘External’ Focus
THE INDIVIDUAL - ‘Internal’ Focus
Perhaps we didn’t spend enough time gaining ownership for the changes…

29. Assessing your Organisation’s Culture
When we involve people in creating their future, they pull the changes through, instead of resisting them! ‘Efficiency’ + people = ‘Effectiveness’
Organisation 2.
Informed 6.
Holistic 8.
1. Me
3. Engaged
5. Devolved
7. Creative
9. Empowered
THE ORGANISATION - ‘External’ Focus
THE INDIVIDUAL - ‘Internal’ Focus
Efficient 4.

30. Assessing your Organisation’s Culture
Efficient 4.
Informed 6.
Holistic 8.
1. Me
3. Engaged
5. Devolved
7. Creative
9. Empowered
THE ORGANISATION - ‘External’ Focus
THE INDIVIDUAL - ‘Internal’ Focus
And when everyone is pulling in the same direction, we can give people more control over how they achieve results

31. Assessing your Organisation’s Culture
Efficient 4.
Informed 6.
Holistic 8.
1. Me
3. Engaged
5. Devolved
7. Creative
9. Empowered
THE ORGANISATION - ‘External’ Focus
THE INDIVIDUAL - ‘Internal’ Focus
Now that we are working as a team, communication flows undistorted - across as well as up and down – so we can focus outwards and use real-time information to make better decisions

32. Assessing your Organisation’s Culture
Efficient 4.
Informed 6.
Holistic 8.
1. Me
3. Engaged
5. Devolved
7. Creative
9. Empowered
THE ORGANISATION - ‘External’ Focus
THE INDIVIDUAL - ‘Internal’ Focus
Now managers have the information to enable them to make radical and innovative decisions

33. Assessing your Organisation’s Culture
Efficient 4.
Informed 6.
Holistic 8.
1. Me
3. Engaged
5. Devolved
7. Creative
9. Empowered
THE ORGANISATION - ‘External’ Focus
THE INDIVIDUAL - ‘Internal’ Focus
Now the captain at the helm can stop fire-fighting and intervening - and start thinking strategically

34. Assessing your Organisation’s Culture
Efficient 4.
Informed 6.
Holistic 8.
1. Me
3. Engaged
5. Devolved
7. Creative
9. Empowered
THE ORGANISATION - ‘External’ Focus
THE INDIVIDUAL - ‘Internal’ Focus
Now people can be empowered to manage their own work - the most effective organisational culture

35. Assessing your Organisation’s Culture
Efficient 4.
Informed 6.
Holistic 8.
1. Me
3. Engaged
5. Devolved
7. Creative
9. Empowered
THE ORGANISATION - ‘External’ Focus
THE INDIVIDUAL - ‘Internal’ Focus
Where are you now?
Where do you need to be?

36. Assessing an Organisation’s Process Management Capability
Where are you?
1. Initial
Ad hoc process
Chaotic
2. Managed
Repeatable process
Controlled environment
3. Defined
Standard process
Consistent Execution
4. Quantitatively Managed
Measured process
Quality and Productive Improvement
5. Optimising
Effective process
Continuing Improvement
Software Engineering Institute
Where do you need to be?
What’s stopping you?

37. The Organisational Capability Indicator

38. How should we measure complexity?
LOW Complexity HIGH
‘Developmental’
Apply management improvement techniques to “make it work better”
‘Transitional’
Replace one system or process with another
‘Transformational ’
Scrap whole operation/business and start again
e.g.
‘Transformational’
Scrap whole operation/business and start again
Major impact on people
‘Transitional’
Replace one system or process with another
Some impact on people
‘Developmental’
Apply management improvement techniques to “make it work better”
Little impact on people
Complicated = not simple, but outcomes are ultimately knowable
Complex = not simple and outcomes are never fully knowable

39. Terminal 5
Over 28,000 lost bags, 700 cancelled planes and more than 150,000 disrupted passengers
“The Terminal 5 debacle is a national disgrace” Daily Mail, 14 April 2008

40. So what went wrong? Shortage of staff car parking spaces
Only one employee security checkpoint operating
Some staff unable to log on to the computer system
Hand-held communication software running slow
No managers on the ground to re-allocate work
Shortage of bar-reading storage bins
Baggage handling staff late in arriving
60 staff queue to get into terminal
6am: 3 planes leave without bags
Bags pile up, unattended
By midday 20 flights cancelled
4pm: baggage conveyor belt grinds to a halt, BA suspends all baggage check-in

41. “The Perfect Storm”
In 2004, HP's project managers knew all of the things that could go wrong with their ERP centralisation programme. But they just didn't plan for so many of them to happen at once.
The project eventually cost HP $160 million in order backlogs and lost revenue—more than five times the project's estimated cost.
Gilles Bouchard, then-CIO of HP's global operations, says: "We had a series of small problems, none of which individually would have been too much to handle. But together they created the perfect storm.”
Complexity is exponential!

42. Complexity is Exponential
”We live in a world that can change exponentially – but we have brains that are hardwired to plot things out linearly - the software in our brains compels us to think about progressions as being simple arithmetic ones
So as a species, and a society, we deal poorly with uncertainty in non-linear domains.” Prof Albert Bartlett, University of Colorado
That’s one good reason why management typically under- estimates the complexity of projects!

43. How should we measure complexity?
If complexity is exponential, we can build it with just 3 factors: X * Y * Z
‘Transformational’
Scrap whole operation/business and start again
Major impact on people
‘Transitional’
Replace one system or process with another
Some impact on people
‘Developmental’
Apply management improvement techniques to “make it work better”
Little impact on people
LOW Complexity HIGH
Apply management improvement techniques to “make it work better”
‘Transformational ’
e.g.
Complexity Factor
Exponential Complexity Model
Complexity Factor
Not simple - needs some project management
A complicated project – needs an experienced project manager
Your project is too complex – break it down into separate projects and employ a programme manager
Simple project
A complex project – needs a dedicated project team
Exponential Complexity Model

44. The Exponential Complexity Tool
Which 3 factors? They must be:
Common to all projects
Quantifiable by stakeholders
Good predictors of the complexity of a project
The Exponential Complexity Tool uses the following 3 factors:
Number of people or Stakeholders involved
(More people = more complex = higher risk)
Number of business activities or Processes affected
(More ambitious = more complex = higher risk)
Elapsed Time to implement (in months)
(Longer to implement = more complex = higher risk)

45. The Exponential Complexity Tool
Think about a project you are familiar with
Where on the scale do you think you are?
Now do the numbers: Stakeholders x Processes x Time
Think about a project you are familiar with
Where on the scale do you think you are? 20
200
18 mths
Complexity Factor
Not simple - needs some project management
A complicated project – needs an experienced project manager
Your project is too complex – break it down into separate projects and employ a programme manager
Simple project
A complex project – needs a dedicated project team
Exponential Complexity Model
72,000

46. Combining Capability and Complexity

47. Deliverables: Action Plan
Organisation
Component
Implication
Action required
Management
Culture
The lack of information-sharing, alignment and empowerment will jeopardise the success of the project. At the very least it will mean poor take-up and a lower than planned level of benefits.
A programme of interaction and dialogue across the organisation is urgently needed to improve the management culture. This needs to include increasing trust, see below.
Process
Capability
The organisation’s process capability is poor. This means that any projects which seek to standardise and improve processes to achieve greater efficiency will be very difficult to achieve.
Consider carrying out a programme to raise the levels of process capability ahead of implementing the project or using the project itself to inject the necessary disciplines. In this case it is crucial for the Board to make compliance to the new processes mandatory.

48. Deliverables: Route Map
THE ORGANISATION - ‘External’ Focus
Organisation 2.
Efficient 4.
Informed 6.
Holistic 8.
1. Me
3. Engaged
5. Devolved
7. Creative
9. Empowered
THE INDIVIDUAL - ‘Internal’ Focus
You need to be here
You are here

49. Deliverables: Calculation of the Impact
- %
Total potential impact on benefits
+ %
Total potential impact on project timescales/costs
Other factors impact estimated at:
IT Solution 9
Relationship with suppliers 8
OTHER FACTORS
Delivery of Project Impact estimated at:
Benefits Realisation 7
Distrust factor 6
Visibility of process 5
DELIVERY OF PROJECT
Project Impact estimated at:
Complexity of project 4
Clarity of objectives 3
PROJECT
Capability Impact estimated at:
Capability Maturity 2
Management Culture 1
ORGANISATION
Benefits -%
Time/Cost +%
Potential Impact
Status
Component

50. Summary
The Change Equation methodology is designed to be integrated into standard practice:
at Project level – CRA ensures Change Readiness and deliver consistent improvement in change project outcomes
at Programme level – Change Equation principles, Route Maps and Action Plans provides framework and content to deliver organisational Capability for Change as a key outcome
If you think this approach might be of value to your organisation, please contact us

51. Can you afford not to find out more?
Peter Duschinsky
Managing Director
The Imaginist Company
Tel:
Mob:
Web:
‘The Change Equation’ is available from Amazon.co.uk