So you’re about to kick off a new procurement exercise.
What are you trying to achieve?
The answers that I tend to get after asking this question are varied but can be summarised in 3 words “To Improve Performance”.
This may be achieved through reduction of unit costs by x%, negotiation of additional discounts based on achieving volume of £y, or more often through improved specification of requirements.
So what would you say if I told you that you are more than 75% likely to fail to deliver on this objective?
Would you still go ahead?
At this stage, many respond “no, obviously not!”
However, today, there will be a significant number of projects kicked off where the project leaders will be blissfully unaware of this scary statistic.
So, what can you do to ensure that you don’t become just another statistic?
What do you think is the main cause, that results in such a high percentage of project failure?
After studying this very issue across hundreds of companies, the #1 reason identified is a failure to effectively manage the necessary change to behaviours, processes and skills required to ensure that the benefits can be realised.The #1 reason behind project failure is a lack of effective change management Click To Tweet
Why do you think that Change Management is so important?
I believe that it’s because without really understanding how you are going to manage the change across the business, you are heading downhill rapidly and any benefits that you think you can deliver will be significantly diluted if you don’t effectively manage the change across the business.
Within Procurement, you’ll hear the term “maverick spend”.
What do you think is the main cause of ‘maverick spend’?
Put simply, ‘maverick spend’ is the result of an individual or groups of people not following due process and utilising alternative sources. Typically, this is a result of those individuals not ‘buying in’ to the change in suppliers/ process/ products etc.
Their lack of compliance reduces the potential benefits achieved.
An example of this was seen recently within a client organisation that I’ve been working with that had changed suppliers after negotiating better rates. The catalogue of products provided both ‘branded’ and own brand products and the focus of the savings was to drive the uptake of the own brand lower cost options.
However, a significant number of their people simply carried on buying the ‘branded’ option and the potential cost savings were significantly diluted.
Why did this happen?
As always, there are a number of factors but one of the main issues was that the rationale for the move to ‘own’ brand products hadn’t been ‘sold’ into the business. Furthermore, budgets hadn’t been changed to reflect the potential savings and local management were more focused on budget compliance rather than anything else.
As such, as long as the business areas managed their costs within their budgets, no pressure was applied. As a result, there was no local pressure to migrate to ‘own brand’ products!
There’s an old management theory that I passionately believe still holds true – “People do what gets measured”People do what gets measured! Click To Tweet
As such, you need to ensure that any change that you are looking to make within your company is properly reflected within your core performance management structures.
This is a relatively simple example and in most cases, the change requirements are more complex. Rarely does a solution only involve one area of an organisation. To deliver the benefits, many associated changes may need to be defined and implemented to solve a specific business problem or deliver specific benefits.
Figure 1 – Potential Catalysts for Change
Even the introduction of a new supplier may involve the definition of new processes, changes in skills and changes in behaviours to deliver the benefits that the business needs.
As I mentioned earlier, 75% of all projects fail to deliver their stated benefits!
There are many reasons for this shameful statistic but common ones include;
Lack of Business fit
- No-one wanted to use it
- It didn’t work the way we needed it too
- No one could make their mind up what they wanted.
- What we got was not what we asked for.
- It cost much more than planned and was very late.
- It got out of control and we stopped it.
- The scope implemented was much less than the scope we set out with
So how do you get control around change management?
How do you minimise the risks associated with this critical area?
My 6 stage C.H.A.N.G.E. Accelerator TM provides you with a proven framework;
Let’s take a look at each of these areas and highlight some ways that you can minimize the impact of change across your Organization.
1. Control & Governance
One of the more common reasons for organisations failing to deliver change is a lack of governance across the change process. I’m sure that you’ve come across the old saying “a failure to plan is a plan of failure”A failure to plan is a Plan of Failure! Click To Tweet
So why is it so unusual for a change process to be effectively planned?
There are two essential elements to ensuring control and governance around your change initiatives. Firstly, you must ensure that you have clear leadership – strong and visible sponsorship from one of the top executive team, creating a compelling vision for the future.
This will establish the purpose and direction whilst the second essential – programme management – will ensure its delivery.
You need to create a focused strategy for change, prioritised on economic benefits for the business.Create a focused strategy for change, prioritised on economic benefits for the business Click To Tweet
Base the strategy on objective analysis rather than on the sum of current management opinion.
Employ strong project management and work to a recognised project lifecycle, installing project teams with the right balance of change experience and business knowledge.
Create a structured approach to change programmes and insist the structure is followed. I’d encourage you to consider incentives for key personnel based upon completion to time, within cost, and to agreed (benefit-based) deliverables.
Finally, proactively manage interfaces within your company and work across functional boundaries to ensure that risks are fully understood and actively managed.
One of the most successful change programmes that I have been involved in resulted in the complete transformation of a high street Bank, moving it from laggard to industry leader in the space of 5 years.
How was this achieved?
The Chief Executive at the time lay down an absolutely clear vision and mandate to the business and his senior leadership team – “to deliver a billion by the millennium”.
Everybody in the Bank was clear of what we were trying to do and how we would all benefit from the transformation.
Moreover, every Thursday morning at 10am, we all knew where the Senior Management Team were because part of the Governance Structure was a formal Change Management Group (CMG) and each week, the CMG sat and reviewed progress, took decisions on key components of the change and communicated to the rest of the business.
Having presented to the CMG on numerous projects, I knew that I’d get one of three decisions;
Approved – now go and deliver it.
Rejected – move onto the next project
Deferred – you need to provide specific extra information for us to make a decision
This approach was so empowering and ultimately over delivered on the benefit case, delivered the change quicker than expected and mobilised a highly productive team that had absolute clarity in what they were doing.
2. Honesty in Communications
Let’s make one thing clear – nobody likes change!
The initial reaction is to feel threatened by change – what will the impact be on me? How will I be affected? Will I lose my job?
The impact of this is that most people initially shy away from accepting change.
So how do you mitigate against this. Well before I answer that, let me ask you a question;
Why do you think that people react in this way?
Why do they feel threatened?
In most cases, it’s because they don’t know what the impact of change will be. How are they going to get to know? Well, that’s easy to answer isn’t it – from you.
Be open and honest and communicate frequently with your full team – let them know what’s happening, let them know the reasons for the change and where possible provide early reassurance for them.
When this isn’t possible, be open and honest and explain what the potential impact of the change will be and how they will be affected. More importantly, how you intend to manage the change and keep them updated on progress.
Often leaders refuse to do this, thinking that the team will become demotivated.
Yes, there may well be an impact but it is one that you can actively manage, which is not something that you can do when the demotivation occurs as a result of a lack of communication and scare mongering that will inevitably go on.
So, be honest in your communication, be open and be proactive.A Lesson in Change - be honest in your communication, be open and be proactive Click To Tweet
Success is based largely on trust – do your team trust in what you are saying – by being open with them, and communicating with them frequently, you will maintain and indeed build this trust.
When you don’t communicate, people tend to feel that you are holding something back and trust is broken. Once broken, it is extremely difficult to get back.
3. Alignment to Business Needs
When change is aligned to a clear business need, the change is much easier to embed. Alternatively, when the perception is that this is not the case, then reaction and disruption will more than likely occur.
When developing the initial specification, be clear to actively engage with the ultimate users across the business. Let them feel an integral part in the design and final selection – they will have much more ownership of the change that you are looking to deliver and be much more supportive if they have been actively involved from an early stage.
This is equally as relevant to the wider Supply Chain partner team. A support services client worked extensively with a wide variety of independent service providers, as well as a direct labour force.
Much of their work was conducted on behalf of public sector organisations and over the last few years, the pressure to deliver more for less has been intense. After reviewing performance metrics across both the direct labour force and the external delivery partners, we identified significant variances across productivity and realised that by moving everyone to the ‘average’ would deliver a significant financial benefit.
At this point, we could have simply looked at the best performing teams, found out what they were doing and then ‘told’ the rest to copy. However, I always found that ‘tell’ mode doesn’t work.
Instead, we pulled together a small working group made up of both direct and indirect team members and set them a task to assess the differences between good, average and poor performers. We positioned this with the external parties as a way to help them to become more efficient and thus more profitable – again creating a Win Win scenario.
Over a period of 6 weeks, the working group not only reviewed performance, but pulled together a best practice guide and developed a training and communication plan.Over a period of 6 weeks, the working group not only reviewed performance, but pulled together a best practice… Click To Tweet
They ‘owned’ the delivery, they felt that they had designed the output and over the next 6 months, performance across all aspects of client delivery improved at a faster rate than ever before.
4. Nurture & Engage
All too often, change is ‘communicated’ and then a tick is placed in the ‘delivered’ box. Have you seen this within your company?
I certainly have – there have been so many instances where a new supplier arrangement has been negotiated and implemented. This process may have taken a significant amount of time to complete, yet the launch and ongoing engagement across the business is often neglected, resulting in an inconsistent level of adoption across the business.
One such example occurred recently in a client – a significant amount of effort had been expended to review and ultimately select a new provider of basic products – you know the type – high volume, low price items.
The cost to change, in terms of business interruption and risk associated with the change wasn’t insignificant and the company laboured to make the final decision to change. But ultimately, they agreed to change vendor.
A significant amount of planning had been undertaken within the head office environment and a reasonable amount of communication issued to update the business of the change of vendor.
However, all of this was one-way communication – tell mode and not surprisingly, many people simply didn’t listen and take notice.
Upon the date of change, all hell broke loose across the business and ‘suddenly’ as far as the operational team was concerned, their existing supplier(s) had been ‘switched off’ and they had no confidence in the vendor selected.
What they were really saying was that they didn’t want to change, but what came out was their frustration!
Establish a well structured, focused communication strategy with appropriate interventions at all stages of the project lifecycle and constantly review communications for effectiveness.Change Lesson - Establish a well structured, focused communication strategy with appropriate interventions at… Click To Tweet
Create ownership within the business for the change and ensure that there is sufficient business input at all stages, enabling the business to participate actively in the design of the change.
Don’t forget to proactively manage your key Stakeholders by knowing who’s affected and how it will affect them. Involve every layer – create a network of committed champions, as well as local transition teams, to extend the change team’s work and set expectations appropriately.
5. Goals & Objective
At all times, you need to be outcome focused – you need to know what is required – by whom/ by when etc. and you need to focus on demonstrating benefits.
Do you know what success for the change would look like?
Is this vision shared?
Do the whole team understand this clear definition of success?
You will find that those individuals that are not supportive of the change will try to find evidence to suggest that you are failing to deliver the agreed benefits. As such, it is essential that you develop a clear benefits realization plan, one that can track those benefits right back to the bottom line.
The banking example that I mentioned earlier – that had a clear goal didn’t it – to generate a billion by the millennium!
How easy is it to evaluate progress and ultimately success of this goal?
Yes, I agree that it isn’t always that easy, but don’t ignore this step. Always crystalize in your mind exactly how you will demonstrate success and put in place clear milestones to monitor progress.
6. Embed the Change
You may have done all of the above, but until you can honestly say that any change is fully embedded within the company, it is highly unlikely that you will be able to demonstrate delivery of full value.
The degree to which you embed the change will determine the ultimate value that you deliver to the business, so how do you go about it?
First and foremost, lets define what we mean by embedding change.
Embedding change requires people to consistently and permanently adopt new practices, behaviours, skills or capability. Remember embedding takes time and you must be prepared for an on-going cycle of development.Change Lesson - Embedding change requires people to consistently and permanently adopt new practices,… Click To Tweet
Prepare people for the change and support them through the change by making training appropriate and timely.
One essential, often forgotten is to realign employees’ KRAs and KPIs measures to desired new performance standards.
Change management isn’t easy and is often overlooked. However, get it wrong and your savings or amount of value created will be significantly reduced.
Let me illustrate this still further with a real life example. A few years ago, I was working with a client that managed one of the major utilities in the UK. Whilst completing a different programme, I got to know the Major Contracts Director really well. He ran a team that managed around £300m of annual contracts – these contracts were awarded to just 6/7 large-scale sub contractors.
Over the previous 12 months, the Contracts Director, let’s call him Andy had brought in one of the Big 4 consultancies to help him to redesign the Engineering Period Contracts (EPC) – this resulted in the framework being changed to a ‘Gain share’ arrangement, whereby individual jobs were given a specific price and if the contractor was able to deliver the jobs at a cheaper rate, they would retain 50% of the savings.
At the other end of the spectrum, should the contractor costs be greater than 102% of the agreed price, they would have to shoulder the extra cost themselves.
The expectation was that, given the upside, the contractors would be ‘incentivized’ to deliver the work in the most cost effective way and overall costs would decline.
Makes sense doesn’t it.
The company is protected by the maximum exposure whilst the contractor is able to maximize their profits by delivering individual jobs at a cheaper rate that the ‘agreed price’.
So why do you think I got the call from Andy asking me to go and help him to understand why his costs had risen?
Well, when I concluded my review of what was happening on the ground, it became clear that the necessary change management hadn’t been completed.
The Contract Managers were ‘operational’ in mindset rather than commercial and the Contractors had quickly realized that as long as they delivered to around 98/102% of the agreed cost, everything would get signed off and the occasional job over budget would be discussed at length and in the majority of cases, an agreed overspend would also be signed off.
Within 2 months and after a lot of sweat and focused effort, I, along with a small number of colleagues coached and mentored the Contract Management team and over the next twelve months delivered over £30m of savings.
Within the C.O.S.T. Optimizer Programme TM, we dig much deeper into the C.H.A.N.G.E. AcceleratorTM and provide you with proven models, tools and techniques to enable you to make sense of and deliver organizational change.
For those organizations that require more detailed support, we offer an Academy where for 6 months we work closely with internal teams to help them understand, apply and benefit from the C.O.S.T. Optimization Formula. The Academy includes a really valuable Mastermind Group where non completing organizations work together to learn and develop the processes together. Find out more here