1. The Change Equation© Imaginist 2009 9/7/2010 Introducing the INPACT Assessment Process The Change Equation How to manage complex change projects – and succeed! Peter Duschinsky Managing Director, The Imaginist Company

2. The Change Equation© Imaginist 2009 9/7/2010 Who are we?  The Imaginist Company is a change management consultancy  We specialise in helping private, public and non-profit sector clients identify and overcome barriers to change and performance improvement  Imaginist undertakes projects and programmes which require: ‘ Quantum’ thinking and the creation of new approaches Research, diagnostic assessment, analysis and evaluation Development of clearly written guidelines and policy documentation Dissemination, facilitation and mindset change  We have just published ‘The Change Equation’, a new capability / complexity assessment methodology, created to help clients improve the success of their change and transformation projects.

3. The Change Equation© Imaginist 2009 9/7/2010 Who are we? Our Associates and Partners

4. The Change Equation© Imaginist 2009 9/7/2010 4 ‘The Change Equation’ is based on some key contentions: 1.The success or failure of a change project is dependent on the complexity of the project being within the capability of the organisation 2.The management of change cannot be achieved within the lifecycle of the project – it has to start earlier and go on afterwards 3.A conventional approach to management of a complex project (i.e. control and intervention) will not achieve a successful outcome 4.Management typically: underestimates the complexity of the project, employs project teams with the wrong skillsets, and Is unwilling to invest in change management early enough The Change Equation

5. The Change Equation© Imaginist 2009 9/7/2010 5  So the objective of running an INPACT assessment is to change mindsets  In order to do this we need to provide clear and simple top- level indicators that managers can understand quickly  We use a dashboard approach, including route-maps and RED / AMBER / GREEN traffic light indicators The Change Equation

6. The Change Equation© Imaginist 2009 9/7/2010 6  Today we will look at how to take two models: 1.the Organisational Culture Evolution spiral 2.the Business Process Capability ladder  …and combine them to provide a baseline: the Organisational Capability Indicator  Then see how to assess the complexity and risks of a change project (3)  By analysing and quantifying the gap between Organisational Capability and Project Complexity, you can predict the likely success or failure of a change project  We can then add other tools to enrich the gap analysis The Change Equation £ 12 3

7. The Change Equation© Imaginist 2009 9/7/2010 Only 32% of change projects are successful  That’s not our opinion, it comes from accredited sources:  Standish Group annual survey 2009 confirms that: Only 32% of projects deliver the full benefits, on time and within budget 68% of projects are late, over budget and deliver less than the expected benefits 24% fail completely and are abandoned before they finish!

8. The Change Equation© Imaginist 2009 9/7/2010 Change projects often fail to deliver

9. The Change Equation© Imaginist 2009 9/7/2010 More evidence of the same trend  The Harvard Business School tracked the impact of change efforts among the Fortune 100 and they also found that only 30% produced a positive bottom-line improvement…  A recent 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

10. The Change Equation© Imaginist 2009 9/7/2010 More evidence of the same trend -2  Management consultant PricewaterhouseCoopers (March 2007) claim that: 25% of IT projects succeed 25% fail and 50% are late or over budget  A CIPD survey of 800 executives found that reorganisations failed to deliver real improvement in performance in 40% of cases Why do so many change projects fail to deliver? 25% FAIL25% SUCCEED50% PARTIALLY SUCCEED

11. The Change Equation© Imaginist 2009 9/7/2010 Why do so many change projects fail to deliver?  Here are some of the reasons we all know about: a focus on the technology instead of the business benefits poor specification of the system and lack of due diligence on supplier capability failure to gain senior management championship inadequate resources poor project management lack of user involvement  But if we all know about the reasons, why are change projects still going wrong so often?

12. The Change Equation© Imaginist 2009 9/7/2010 “The Terminal 5 debacle is a national disgrace” Daily Mail, 14 April 2008 Some examples… Terminal 5

13. The Change Equation© Imaginist 2009 9/7/2010 So what went wrong? 1.Shortage of staff car parking spaces 2.Only one employee security checkpoint operating 3.Some staff unable to log on to the computer system 4.Hand-held communication software running slow 5.No managers on the ground to re-allocate work 6.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  The result: Over 28,000 lost bags, 700 cancelled planes and more than 150,000 disrupted passengers

14. The Change Equation© Imaginist 2009 9/7/2010 C-Nomis  2004: HM Prison Service commissions C-NOMIS to give prison and probation officers real-time access to offenders’ records  June 2005: the approved lifetime cost of the project is quoted as £234m  March 2007: Home Secretary John Reid: “the main C-NOMIS base release, encompassing full prison and probation functionality, will be available no later than July 2008"  July 2007: [just 4 months later!] £155m has been spent, C- NOMIS is two years behind schedule; estimated lifetime project costs are now £690m. The Ministry of Justice suspends the project  How can they have let a Minister do that? Surely someone knew…?

15. The Change Equation© Imaginist 2009 9/7/2010 What went wrong?  National Audit Office report: The project board accepted assurances that the project was “all going well” and nobody knew what was being delivered for the money being spent There were insufficient resources and structures in place to deliver such a complex project Over time policy developed and stakeholder requirements changed, but there was no cumulative view of the impact of change requests on costs and timescales No resources were allocated to simplifying and standardising business processes across the 139 prisons and 42 probation areas, each of which had their own ways of working The Commons Public Accounts Committee report verdict: “a spectacular failure – in a class of its own”

16. The Change Equation© Imaginist 2009 9/7/2010 More examples…  Passport Office: In 1999 delays in processing British passport applications, following the introduction of the Passport Agency’s new system, cost £12 million £16,000 was allegedly spent on umbrellas to shelter those queuing in the rain to collect their passports!  MOD: In 2002 a project to replace the British Army, Royal Navy and Royal Air Force inventory systems with a single system (the Defence Stores Management Solution) was brought to a halt after £130 million had been spent Hardware worth a little over £12 million was able to be used elsewhere but the remaining £118 million was written off as a loss.

17. The Change Equation© Imaginist 2009 9/7/2010 More examples…  The London Ambulance Service Computer-Aided Dispatch System  October 26, 1992: the London Ambulance Service CAD system goes live – and fails  A total of 46 people didn’t get an ambulance in time and DIED!

18. The Change Equation© Imaginist 2009 9/7/2010 What went wrong?  The sequence of the collapse was: 1.Poorly trained staff did not update system with location and status of units 2.The increasingly out-of-date database meant units were being despatched non-optimally and multiple units were being sent to the same calls 3.A software bug generated a large number of exception messages– and un-responded exception messages generated repeat messages… 4.Lists scrolled off the top of the screens and were lost 5.The public repeated un-responded calls, adding to the chaos

19. The Change Equation© Imaginist 2009 9/7/2010 What went wrong? cont… 6.The system grinds to a halt: One ambulance arrived to find the patient dead and taken away by undertakers Another ambulance answered a ’stroke’ call after 11 hours, and 5 hours after the patient had made their own way to hospital 7.CAD system partly disabled. Part-manual system seizes up completely 8.Operators now using tape recordings of calls, then reverting to a totally manual system 9.29 October 2002: (3 days after confidently launching the system) Chief Executive resigns  The original estimate for the work was £1.25million.  By the time the project was abandoned, £7.5million had been spent.  A total of 46 people didn’t get an ambulance in time and DIED!

20. The Change Equation© Imaginist 2009 9/7/2010 Some conclusions  “The the small software error was the straw that broke the camel's back, but the responsibility for the LAS's CAD system failure does not lie solely on the single developer who made the error or even the developing organization to which he belonged. Rather, the attitudes of key LAS members toward the project and the unreasonable restraints they placed on the project allowed the failure to occur.” National Audit Office report

21. The Change Equation© Imaginist 2009 9/7/2010 Projects don’t just fail in the public sector!  MFI 2004/05: MFI’s new ERP system brought in - and crashes Total loss of customer order data reported 2005/06: UK retail division reports a ‘substantial loss’ following the discovery of significant issues with the system which are affecting its ability to dispatch orders MFI said they needed to spend another £30 million on it 26 Nov 2008 - MFI goes into administration with the loss of 1,500 jobs Coincidence?

22. The Change Equation© Imaginist 2009 9/7/2010  HP 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."  There’s a clue in there, somewhere… Projects don’t just fail in the public sector!

23. The Change Equation© Imaginist 2009 9/7/2010 Complexity is EXPONENTIAL! Conclusion?

24. The Change Equation© Imaginist 2009 9/7/2010  We’re surrounded by examples of exponential growth:  For example, compound interest: "Scientists have developed a powerful new weapon that destroys people but leaves buildings standing – it's called the 17% interest rate.” Johnny Carson, The Tonight Show, 1980 All that we had borrowed up to 1985 was around $5 billion, and we have paid about $16 billion; yet we are still being told that we owe about $28 billion. If you ask me what is the worst thing in the world, I will say it is compound interest. President Obasanjo of Nigeria, 2000 Complexity is Exponential

25. The Change Equation© Imaginist 2009 9/7/2010 Complexity is Exponential  The world population is growing at an exponential rate:  …and consumption of resources is following close behind - our energy usage is depleting the world’s natural resources exponentially You are here! (6,792,142,533)

26. The Change Equation© Imaginist 2009 9/7/2010 Complexity is Exponential  And climate change is also following an exponential runaway profile

27. The Change Equation© Imaginist 2009 9/7/2010 Complexity is Exponential  "The greatest shortcoming of the human race is our inability to understand the exponential function. 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, emeritus Professor of Physics, University of Colorado  As a consequence of this, the complexity of a project is usually UNDERESTIMATED

28. The Change Equation© Imaginist 2009 9/7/2010 Managing Exponential Complexity  Exponential complexity = exponential RISK  So we should be able to apply risk management techniques to address it  Everyone happy with that?  According to David Christiansen, most risk management approaches work something like this: Make a list of risks Estimate the likelihood the risk will occur (call it X) Estimate the cost the risk will create if it occurs (call it Y) Multiple X by Y ( David Christiansen, Information Technology Dark Side, a Corporate IT Survival Guide)  So let’s draw up a table with all the risk factors and score them…

29. The Change Equation© Imaginist 2009 9/7/2010 Managing Exponential Risk So let’s draw up a table with all the risk factors, score them and then add them all together:

30. The Change Equation© Imaginist 2009 9/7/2010 Managing Exponential Risk There’s more…

31. The Change Equation© Imaginist 2009 9/7/2010 Managing Exponential Risk And still more…  You think this is daunting? Have you looked at government’s Gateway Review?

32. The Change Equation© Imaginist 2009 9/7/2010 Managing Exponential Complexity So what’s wrong with that approach?

33. The Change Equation© Imaginist 2009 9/7/2010 Managing Exponential Complexity  Lets go back to that earlier slide – only this time, lets look at the whole quote from David Christiansen:  Most risk management approaches work something like this: Make a list of risks Estimate the likelihood the risk will occur (call it X) Estimate the cost the risk will create if it occurs (call it Y) Multiply X by Y - that is supposed to tell you something useful - it might be the amount of contingency you need for the risk, or something like that When the risks you anticipated happen, they become issues When the risks you didn’t anticipate happen, you become a former project manager…

34. The Change Equation© Imaginist 2009 9/7/2010 Managing Exponential Complexity  Wouldn’t it be great if we could find a simple, high-level indicator of project complexity?  It wouldn’t obviate the need for a detailed risk analysis  But it would give us a high-level indication of whether the complexity of the project had been judged correctly when allocating budgets, skilled resources and roll-out timescales  Well, we can…

35. The Change Equation© Imaginist 2009 9/7/2010 Managing Exponential Risk  If complexity is exponential, we actually only need 3 factors to build an exponential scale: X * Y * Z  That won’t represent all the risks, but if we select the right factors, it will give us a good indicator  So what are our 3 factors?

36. The Change Equation© Imaginist 2009 9/7/2010 Assessing Complexity  Which 3 factors?  They must be: Common to all projects Quantifiable (at least to a good approximation) by stakeholders Sufficiently powerful in combination to lead to an accurate assessment of the complexity of a project

37. The Change Equation© Imaginist 2009 9/7/2010 Managing Exponential Risk  The INPACT Exponential Complexity Tool uses the following 3 factors: 1.Number of people or Stakeholders involved More people = more complex = higher risk 2.Number of business activities or Processes affected More ambitious = more complex = higher risk 3.Elapsed Time to implement (in months) Longer to implement = more complex = higher risk

38. The Change Equation© Imaginist 2009 9/7/2010 The INPACT Exponential Complexity Tool  Think about a project you are familiar with. Where do you think you are?  Now do the numbers: Stakeholders x Processes x Time (in months)  Where are you actually?

39. The Change Equation© Imaginist 2009 9/7/2010 The model can also be used to understand whether a project that is going wrong can be rescued - or needs to be stopped The INPACT Exponential Complexity Tool Premature Termination Possible Recovery Conventional Management

40. The Change Equation© Imaginist 2009 9/7/2010 Complexity and the Implications for Change Management  “Complexity arises through connectivity and processes of feedback and emergence” Eve Middleton-Kelly, Director, Complexity Research Programme, London School of Economics  This feedback loop is also a feature of Chaos Theory  But in Chaos Theory, new, coherent and stable patterns eventually arise through repeated cycles of iteration  In a change project, the participants are constantly evolving, so the rules of interaction are in flux, making the final outcome ultimately unknowable “Technically complex projects are complex because of the human aspects and not the technical intricacies, which are just complicated” Thomas Docker, citi, 2008 - Complicated = not simple, but ultimately knowable - Complex = not simple and never fully knowable

41. The Change Equation© Imaginist 2009 9/7/2010 Complexity and the Implications for Change Management  In a complex project, new ways of working are created and new forms of organisation will emerge which are attuned to the culture of the organisation – and will therefore work  These need to be recognised, supported and embedded, not managed and controlled  This has important implications for Change Management

42. The Change Equation© Imaginist 2009 9/7/2010 Complexity and the Implications for Change Management  Conventional change management interventions attempt to design and control the outcomes  This imposes changes in behaviour and over-rides the individual’s need to ‘invent their own route to the future’  That approach blocks and constrains the naturally emergent patterns of behaviour…so people give up, fall back on ‘what’s in it for me’ and the change project fails  However, if the right enabling infrastructure is put in place to facilitate, nurture and support the new relationships and behaviours, the change project will have a good chance of succeeding  Are “nurturing” and “enabling” descriptions you would use of most project managers you know?

43. The Change Equation© Imaginist 2009 9/7/2010 Why else do change projects fail?  So that’s complexity – we typically underestimate it, so we under-resource it and our expectations of outcomes are too optimistic  Why else do change projects fail?  Look at these quotes: “85% of project success is dependent on factors related to people” Ohio Center for Information Based Competition “Even amongst successful implementations, 47% of companies reported serious challenges with end-user adoption that often put projects in jeopardy” - AMR Research “Companies that spend less than 17% of ERP implementation budgets on training put their projects at increased risk of failure” Gartner

44. The Change Equation© Imaginist 2009 9/7/2010 Why else do change projects fail?  It turns out that success rests as much on the capability of the people in the organisation to cope with change and take advantage of new systems, as on how well the project was planned and implemented  The complexity of the project needs to be within the capability of the organisation  We’ve seen how to assess the complexity of a project  How do we assess the capability of the organisation?  By looking at its Culture and its Process Management Capability

45. The Change Equation© Imaginist 2009 9/7/2010 Assessing an Organisation’s Culture  There is an underlying tension between the individual and the organisation  Successful change needs an integrated approach encompassing people and process in a balanced approach Point of balance 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

46. The Change Equation© Imaginist 2009 9/7/2010  Imagine the pendulum swinging and rising at the same time… Assessing an Organisation’s Culture 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

47. The Change Equation© Imaginist 2009 9/7/2010 5 8 Systemis t Imaginist 7 6 Empiricist 3 Dialectic 1 Pragmatist/Anarchic 4 Aligned Structuralist 2 5 Pragmatist/ Aligned 9 Pragmatist/ Empowered Assessing an Organisation’s Culture  That gives us the basis for our Culture Evolution Model ORGANISATION ‘External’ Focus THE INDIVIDUAL ‘Internal’ Focus

48. The Change Equation© Imaginist 2009 9/7/2010 It indicates how well the organisation will cope with change EXTERNAL FOCUS (Organisation) 5 INTERNAL FOCUS (Individual) 8 Systemist Imaginist 7 6 Empiricist 3 Dialectic 1 Pragmatist/Anarchic 4 Aligned Structuralist 2 5 Pragmatist/ Aligned 9 Pragmatist/ Empowered  This model allows us to identify the predominant organisational culture  Each point on the spiral represents a separate, definable culture  Each culture builds upon the earlier ones, progressing up the spiral Assessing an Organisation’s Culture

49. The Change Equation© Imaginist 2009 9/7/2010 Mapping your Management Culture  Which of the following descriptions most accurately describes your organisation (or your part of it)? You might be able to identify more than one - that’s because they are not discrete styles Each is only achievable when those below it on the spiral are in place The chances are you will focus mainly on the negative aspects of your management culture But each style has positive and negative elements - if not nurtured, they degrade over time

50. The Change Equation© Imaginist 2009 9/7/2010 This is where we all start In this entrepreneurial organisation, it’s results that count The boss may be micro- managing everything or leaving members of the team to do more or less what they like, as long as they achieve results Either way, success is what counts, not how you get there – ‘just do it’ There are some laid-down procedures, but people only follow them or take up a new initiative if they see benefits for themselves in doing so The Management Culture model: Level 1 8 Systemist Imaginist 7 6 Empiricist 5 Pragmatist/Aligned 9 Pragmatist/Empowered 5 1 Pragmatist/Anarchic Structuralist 2 3 Dialectic Aligned 4

51. The Change Equation© Imaginist 2009 9/7/2010 Rules, devolved authorities and formal procedures govern how this organisation works That has allowed the organisation’s operations to be scaled up, but it will also have allowed ‘silo working’ to emerge, hindering the sharing of ideas and knowledge across the organisation Change is slow and painful; decisions are often passed down, with formal but inadequate consultation; initiatives are not encouraged 8 Systemist Imaginist 7 6 Empiricist 5 Pragmatist/Aligned 9 Pragmatist/Empowered 3 Dialectic Aligned 4 1 Pragmatist/Anarchic Structuralist 2 The Management Culture model: Level 2

52. The Change Equation© Imaginist 2009 9/7/2010 The organisation wasn’t efficient, so management brought in the Business Process Redesign consultants, the LEAN specialists and an ERP system Your organisation is now streamlined, focusing on cost cutting and efficiency, with modern, rationalised and automated processes But it still doesn’t seem to be working very well, does it? Why not? 8 Systemist Imaginist 7 6 Empiricist 5 Pragmatist/Aligned 9 Pragmatist/Empowered Structuralist 2 Aligned 4 1 Pragmatist/Anarchic 3 Dialectic The Management Culture model: Level 3 4 Rationalist

53. The Change Equation© Imaginist 2009 9/7/2010 Well perhaps we didn’t spend enough time gaining the ownership for the changes… It might be better if: Then silo working might stop being such a significant barrier to change 8 Systemist Imaginist 7 6 Empiricist 5 Pragmatist/Aligned 9 Pragmatist/Empowered Structuralist 2 Aligned 4 1 Pragmatist/Anarchic 3 Dialectic The Management Culture model: Level 3  People were valued more than processes  Sharing knowledge was valued, as opposed to having (and protecting) knowledge  Managers and staff were encouraged to network and exchange ideas and information across the organisation

54. The Change Equation© Imaginist 2009 9/7/2010 Now, as a result of strong leadership and a good level of dialogue between people, the values and aspirations of the staff in your organisation are in line with its policies and strategic direction People feel valued and understand how they fit into the scheme of things, so are more motivated to accept change that will benefit the organisation, even if it doesn’t reduce their workload. Because people and processes are aligned, things work well Sounds like a good place to work, doesn’t it? 8 Systemist Imaginist 7 6 Empiricist 5 Pragmatist/Aligned 9 Pragmatist/Empowered Structuralist 2 1 Pragmatist/Anarchic 3 Dialectic 4 Aligned The Management Culture model: Level 4

55. The Change Equation© Imaginist 2009 9/7/2010 Once people feel valued and share information the organisation starts to function differently Managers trust their staff to act in the best interests of the organisation Decisions can be made closer to the customer, quickly and effectively Staff are actively encouraged to get involved in innovation and performance improvement initiatives Things get done, change becomes easier The Management Culture model: Level 5 8 Systemist Imaginist 7 6 Empiricist 9 Pragmatist/Empowered Structuralist 2 1 Pragmatist/Anarchic 3 Dialectic Aligned 4 5 Pragmatist/Aligned

56. The Change Equation© Imaginist 2009 9/7/2010 Now the organisation is not so inward-facing and obsessed with internal power-plays, it can function better in the ‘real world’ Key information about your customers, suppliers, competition etc. flows across departments, as well as up and down the management hierarchy Because it does not suffer delays or distortion from passing through departmental silos, the information is timely and accurate, which means that management decisions are well-informed and effective The Management Culture model: Level 6 8 Systemist Imaginist 7 9 Pragmatist/Empowered Structuralist 2 1 Pragmatist/Anarchic 3 Dialectic Aligned 4 6 Empiricist 5 Pragmatist/Aligned

57. The Change Equation© Imaginist 2009 9/7/2010 Because your organisation is working well, senior managers are not focused on short- term fire-fighting and intervention, allowing them the time to concentrate on longer-term planning and more important issues They are operating with timely and accurate information, which means they can make intuitive, high quality and far-reaching decisions - and that means the organisation is able to cope well with change This requires a different calibre of manager, the Imaginist The Management Culture model: Level 7 8 Systemist 9 Pragmatist/Empowered Structuralist 2 1 Pragmatist/Anarchic 3 Dialectic Aligned 4 5 Pragmatist/Aligned 7 Imaginist 6 Empiricist

58. The Change Equation© Imaginist 2009 9/7/2010 The organisation now recognises its place in its business, economic, social and community contexts – and plans and manages accordingly Your CEO makes him/herself visible and available, and is vocal in championing changes and issues that are critical to the organisation’s success, but his/her leadership style is to steer from behind and focus on building longer-term capability, rather than intervening in operational issues This works because the organisation has a strong and effective Board and an aligned workforce The Management Culture model: Level 8 9 Pragmatist/Empowered Structuralist 2 1 Pragmatist/Anarchic 3 Dialectic Aligned 4 5 Pragmatist/Aligned 6 Empiricist Imaginist 7 8 Systemist

59. The Change Equation© Imaginist 2009 9/7/2010 Finally, if you are lucky enough to be working in an organisation that has set itself the challenge of being the best in class: You are fully empowered to plan and manage your own workload, within a supportive management culture This includes working collaboratively in teams and leading and participating in change projects, to continually improve the effectiveness of the organisation to meet its customers’ needs This is a learning organisation We’re a long way from the culture of blame and focus on short-term gain, where we started The Management Culture model: Level 9 Structuralist 2 1 Pragmatist/Anarchic 3 Dialectic Aligned 4 5 Pragmatist/Aligned 6 Empiricist Imaginist 7 9 Pragmatist/ Empowered 8 Systemist

60. The Change Equation© Imaginist 2009 9/7/2010 Structuralist 2 1 Pragmatist/Anarchic 3 Dialectic Aligned 4 5 Pragmatist/Aligned 6 Empiricist Imaginist 7 9 Pragmatist/Empowered 8 Systemist EXTERNAL AXIS (Organisation) INTERNAL AXIS (Individual) Where are you?

61. The Change Equation© Imaginist 2009 9/7/2010 Organisational Capability - the next step  We have looked at management culture  Now let’s focus on the organisation’s capability to manage its business processes

62. The Change Equation© Imaginist 2009 9/7/2010 Organisations with aspects of their operation at levels 1 and 2 will find it difficult to introduce standard systems and processes Assessing an Organisation’s Process Management Capability 1. Initial Ad hoc process Chaotic 2. Repeatable Stable process Controlled environment 3. Defined Standard process Consistent Execution 4. Managed Measured process Quality and Productive Improvement 5. Optimised Effective process Continuing Improvement Software Engineering Institute  We use the Process Capability Maturity Model (CMM) to assess the organisation’s process capability – the discipline and consistency with which processes are managed

63. The Change Equation© Imaginist 2009 9/7/2010 The Organisational Capability Indicator V.High High V.HighHigh Med Low MedLow 5432Level 1 9. Pragmatic/Empowered 8. Systemist 7. Imaginist 6. Empiricist 5. Pragmatic/ Aligned 4. Aligned 3. Dialectic 2. Structuralist 1. Pragmatic/ Anarchic Management Culture Business Process Capability  Combining these two assessments gives us a high level indication of the Organisational Capability

64. The Change Equation© Imaginist 2009 9/7/2010 The Organisational Capability Indicator V.High High V.HighHigh Med Low MedLow 5432Level 1 9. Pragmatic/Empowered 8. Systemist 7. Imaginist 6. Empiricist 5. Pragmatic/ Aligned 4. Aligned 3. Dialectic 2. Structuralist 1. Pragmatic/ Anarchic Management Culture Business Process Capability  Combining these two assessments gives us a high level indication of the Organisational Capability  So, for example, a level 2 culture and level 3 process capability suggests a Medium overall capability to cope with change

65. The Change Equation© Imaginist 2009 9/7/2010 Where on the exponential complexity scale was your project? ? Was it significantly further up the scale than you had thought?

66. The Change Equation© Imaginist 2009 9/7/2010 Combining Capability and Complexity Capability High Med Low Simple Not SimpleComplex Too Complex Complexity = The project looks as if it’s within your capability = This project is at risk of not realising expected benefits = This project is not within your organisation’s capability  Put the project’s complexity status into the context of your organisation’s capability, to show the relative complexity of the project - the gap between the organisation’s capability and that required to manage the project and cope with the changes it requires people to make

67. The Change Equation© Imaginist 2009 9/7/2010 Combining Capability and Complexity Capability High Med Low Simple Not SimpleComplex Too Complex Complexity = The project looks as if it’s within your capability = This project is at risk of not realising expected benefits = This project is not within your organisation’s capability  In this example, the project is at risk of not realising expected benefits and, as planned, may actually be beyond your organisation’s capability to cope with the changes it would bring

68. The Change Equation© Imaginist 2009 9/7/2010 Other models and tools  We now have a reasonably good assessment of the likely success or failure of the project  A typical assessment process involves face-to-face interviews with stakeholders which would also provide the stories and rich detail that is needed to make sense of these top-line results  There are other models we use to add further to our understanding: The Trust/cost model The Dynamic Benefits Realisation model etc

69. The Change Equation© Imaginist 2009 9/7/2010 Measuring Trust  We measure the 3 dimensions of relationships to give a Cost/trust Indicator: 1.How far do you trust your boss to represent your interests, consult you when necessary and keep you fully informed? 2.How far do you trust your staff to work without your keeping an eye on them? 3.How far do you trust your colleagues to share accurate information and keep you informed about changes that might affect you? Dimension 1: Relationship with my manager Dimension 2: Relationship with my staff Dimension 3: Relationship with my colleagues

70. The Change Equation© Imaginist 2009 9/7/2010 Measuring Trust  Score each of these on a scale where: 0 = not at all 1 = not sure 2 = mostly 3 = totally  Add these up (max 9)  Convert into %... eg 4/9 = 45%  Invert that to find your Distrust Factor  so 45% –100 = 55% distrust Dimension 1: Relationship with my manager Dimension 2: Relationship with my staff Dimension 3: Relationship with my colleagues

71. The Change Equation© Imaginist 2009 9/7/2010 Measuring Trust The higher the levels of distrust, the more time and effort the project will require and the higher the cost, so add at least 55% to planned time and cost 55% HighLow

72. The Change Equation© Imaginist 2009 9/7/2010 With only two questions we can assess how well the project will realise ‘indirect’ benefits such as efficiency savings: a)Does the project have a published benefits realisation plan? b)Are Dept/Division heads formally accountable for achieving the performance improvements enabled by the project? Why? Benefits Realisation

73. The Change Equation© Imaginist 2009 9/7/2010  A common barrier to change is the perception that: “change is something that is done to you”  This is the ‘push’ dynamic found in most change programmes  Wouldn’t it be better if the changes were being PULLED by the operational managers and staff?  That’s what the Dynamic Benefits Realisation model helps us to do The Dynamic Benefits Realisation model

74. The Change Equation© Imaginist 2009 9/7/2010  It is often hard to demonstrate the efficiency benefits from a change programme  Business cases can claim these as cashable benefits, but most organisations do not check whether the benefits have been realised - they simply cut budgets to reflect the theoretical improvement and leave it to the local staff and managers to cope  This puts managers under pressure to cut corners, so the quality of performance goes down  So what’s the alternative? Hold local managers accountable for the changes in their part of the organisation Don’t try to measure indirect ‘savings’, focus on improvements to core performance targets, enabled by the new system and processes The Dynamic Benefits Realisation model

75. The Change Equation© Imaginist 2009 9/7/2010 The Dynamic Benefits Realisation model 1. Identify potential impact on core processes eg Speeds up or eliminates process (typically up to 50% average time savings achievable) 2. Calculate resources potentially available for redeployment Who (how many affected in group)? How much time saved? 5. Prioritise roll-out Based on the relative value of the benefits identified in [4] 4. Agree who is accountable for its realisation Identify key System/ Process users and ensure representatives are on Project Management Board 3. Agree measurable improvement and by when Quantify value; use existing service level improvement KPI wherever possible 6. Manage project with System/ Process user representatives driving it, not the Project Manager Hold local managers accountable at Board level for core KPI improvements

76. The Change Equation© Imaginist 2009 9/7/2010 Benefits Realisation Indicator Plan in place? Account ability? Possible Outcomes Yes This project has a good chance of achieving the planned benefits YesNo Make local managers accountable for adopting the new processes and redeploying released resources to drive improved performance, or the benefits will not be realised NoYes Without formal framework, local managers will not be held accountable in practice – put one in place No This project will not achieve its savings objectives

77. The Change Equation© Imaginist 2009 9/7/2010 Calculating the Impact  This is where we calculate the potential impact of these indicators on the business case  We consider the status of each of the elements identified in the assessment and calculate the impact on costs or benefits, or both  This gives us an overall impact on the project’s bottom line  That’s the language senior managers understand!

78. The Change Equation© Imaginist 2009 9/7/2010 Deliverables: Action Plan & Route Map Organisation ComponentImplicationAction 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. We develop an Action Plan to overcome the barriers, mitigate the risks and help clients plan for success

79. The Change Equation© Imaginist 2009 9/7/2010 Using the Culture Evolution model, we develop a Route-Map to improve the organisation’s capability for change We ask two questions: If you are here now, where do you need to be? What will happen if you don’t change? The first question identifies what needs to change The second gives you the ammunition you might need to defend the change – it describes the future if you stay where you are Structuralist 2 3 Dialectic Structuralist 2 3 Dialectic The more mature the management culture, the better the organisation will adapt and respond to change Deliverables: Action Plan & Route Map

80. The Change Equation© Imaginist 2009 9/7/2010 To summarise:  Projects fail when the complexity of the project exceeds the capability of the organisation to cope  Complexity is exponential and is typically underestimated  Conventional change management interventions which attempt to design and control the outcomes can cause a change project to fail  Capability barriers (comprising both organisational culture and process management weaknesses) - the focus of ‘change management’ - can be assessed  A ‘gap analysis’ will predict whether a project is likely to fail and what to do about it  But the barriers and risks cannot normally be overcome within the implementation lifecycle of a project – you have to start earlier and continue after the completion of the project

81. The Change Equation© Imaginist 2009 9/7/2010 The Change Equation is about changing mindsets  Is your organisation underestimating the complexity of its change project/s?  Does it have the capability to cope with the changes?  Are you investing in change management early enough?  What more do you need to do to ensure that your change project/s will succeed?

82. The Change Equation© Imaginist 2009 9/7/2010 Any questions? Peter Duschinsky peter@imaginist.co.uk ‘The Change Equation’ is available from Amazon.co.uk