A leading consumer-packaged-goods (CPG) player was struggling to respond to challenging market dynamics, particularly in the value-based segments and at the price points where it was strongest. The near- and medium-term forecasts looked even worse, with likely contractions in sales volume and potentially even in revenues. A comprehensive transformation effort was needed.
To fund the journey, the company looked at several cost-reduction initiatives, including logistics. Previously, the company had worked with a large number of logistics providers, causing it to miss out on scale efficiencies.
To improve, it bundled all transportation spending, across the entire network (both inbound to production facilities and out-bound to its various distribution channels), and opened it to bidding through a request-for-proposal process. As a result, the company was able to save 10 percent on logistics in the first 12 months—a very fast gain for what is essentially a commodity service.
Similarly, the company addressed its marketing-agency spending. A benchmark analysis revealed that the company had been paying rates well above the market average and getting fewer hours per full-time equivalent each year than the market standard. By getting both rates and hours in line, the company managed to save more than 10 percent on its agency spending—and those savings were immediately reinvested to enable the launch of what became a highly successful brand.
Next, the company pivoted to growth mode in order to win in the medium term. The measure with the biggest impact was pricing. The company operates in a category that is highly segmented across product lines and highly localized. Products that sell well in one region often do poorly in a neighboring state. Accordingly, it sought to de-average its pricing approach across locations, brands, and pack sizes, driving a 2 percent increase in EBIT.
Similarly, it analyzed trade promotion effectiveness by gathering and compiling data on the roughly 150,000 promotions that the company had run across channels, locations, brands, and pack sizes. The result was a 2 terabyte database tracking the historical performance of all promotions.
Using that information, the company could make smarter decisions about which promotions should be scrapped, which should be tweaked, and which should merit a greater push. The result was another 2 percent increase in EBIT. Critically, this was a clear capability that the company built up internally, with the objective of continually strengthening its trade-promotion performance over time, and that has continued to pay annual dividends.
Finally, the company launched a significant initiative in targeted distribution. Before the transformation, the company’s distributors made decisions regarding product stocking in independent retail locations that were largely intuitive. To improve its distribution, the company leveraged big data to analyze historical sales performance for segments, brands, and individual SKUs within a roughly ten-mile radius of that retail location. On the basis of that analysis, the company was able to identify the five SKUs likely to sell best that were currently not in a particular store. The company put this tool on a mobile platform and is in the process of rolling it out to the distributor base. (Currently, approximately 60 percent of distributors, representing about 80 percent of sales volume, are rolling it out.) Without any changes to the product lineup, that measure has driven a 4 percent jump in gross sales.
Throughout the process, management had a strong change-management effort in place. For example, senior leaders communicated the goals of the transformation to employees through town hall meetings. Cognizant of how stressful transformations can be for employees—particularly during the early efforts to fund the journey, which often emphasize cost reductions—the company aggressively talked about how those savings were being reinvested into the business to drive growth (for example, investments into the most effective trade promotions and the brands that showed the greatest sales-growth potential).
In the aggregate, the transformation led to a much stronger EBIT performance, with increases of nearly $100 million in fiscal 2013 and far more anticipated in 2014 and 2015. The company’s premium products now make up a much bigger part of the portfolio. And the company is better positioned to compete in its market.
This knowledge is brought to you by organisational change management expert Viisti Dickens, just one of thousands of top management consultants on Expert360. Sign up free to hire freelancers here, or apply to become an Expert360 consultant here.
Table of Contents
- Scoping Change: Single Initiative To Complete Transformation
- Types Of Change
- Is Change Management An Oxymoron?
- Why is Managing Change Important?
- When To Engage A Change Manager?
- How To Set Up A Change Framework
- Changing Role Of Change Managers
- Summary And Essentials
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Change management is the approach used to optimise the people-based ‘return on investment’, upon which the execution of business strategy is dependent. Effective change management in an organisation enables people to be ready, willing and able to accept, drive and lead change.
This becomes even more important as the speed and complexity of change is increasing for many organisations. Many types of significant change impact all sectors and industries, and often simultaneously:
- the need to respond to rapid market disruption
- strategic decisions around new technologies
- mergers, acquisitions or divestments
- new leadership and restructures
- changes to regulatory environment
- new culture and different ways of working
- new processes and key performance indicators
- customer and consumer trends, behaviour and actions
- product development and innovation
- physical relocation or geographic dispersal of ‘value chain’.
Typically, well-executed change management programs enable the effective delivery of strategic programs in response to market dynamics, Board decisions and priorities as below:
Scoping Change: Single Initiative To Complete Transformation
Project and Program Change
Discrete change projects and programs are often contained to one site, business unit or specific type of change. Examples include system upgrades, specific process improvements, or the organisational redesign of a particular team.
For these types of change, change management often follows a more linear process across stages of stakeholder awareness to engagement and complete integration into a ‘new business as usual’. Expert change support is focused on ensuring this ‘business acceptance’ and user adoption using a change toolkit and strong focus on people engagement.
By comparison, transformation encompasses large-scale, multi-faceted and complex change comprising multiple programs, projects and tools. Often, such enterprise or portfolio change enables the execution of strategic business choices such as growth, turnaround/ restructuring, organisational structure, new business model, and innovation. A strong correlation binds digital disruption and transformation. In other words, transformation entails ‘step-change’ – not incremental change.
Transformational change is often also cross-functional in nature, simultaneously spanning multiple business units such as finance, sales, HR, technology, operations and supply chain. This can include multiple types of change per function or business unit – such as operating model, organisation design, technology/ system implementation, culture, values, leadership and location.
Managing a portfolio or enterprise view of transformational change is therefore complex. The holistic view of change ‘hitting’ the organisation must be considered. A tailored change strategy should be developed, based on an effective assessment of the scope, size and impact of change. This is best undertaken by change experts through early engagement at the business case stage of strategic planning.
Types Of Change
Three common types of change include:
- Process or system improvement or upgrades
- Change support is focused on human centred design, user experience and adoption
- Infrequent and short-term
- Often comprising strategic or scheduled programs or projects of change
- Examples include new enterprise systems or new organisational design
- Usually confined to one business unit/ department
- Change management business consultants typically work with program teams and enable business readiness
- Multiple types of change impacts occur at once: culture, leadership, operating model, technology, process, customer, location, business model
- Multiple parts of the organisation impacted such as finance, HR, operations, retail, supply chain, sales and marketing, customer support, technology
- Requires a holistic and strategic view of change managed carefully to avoid risk
- Change expertise is required at the coach and facilitator level, as well as delivery for each large program stream of work, as well as to support delivery teams
Is Change Management An Oxymoron?
Given change is ‘constant’ in the workplace, some might suggest that ‘managing’ change is impossible, or even that ‘change management’ is an oxymoron. How can you manage something that is not always tangible, but is rather constantly moving and evolving?
Accepting that change is inevitable and can be positive relates to organisational psychology, organisational development, culture, mindsets and leadership. Change experts can design and execute programs and interventions, to help build this ‘change readiness’ within organisations. Using online tools and a focus on shared purpose and values are examples.
When change is a point in time choice – based on a strategic decision – then the conscious management of specific programs requires concerted action. This includes the engagement of change experts – for discrete programs such as process improvement or new system implementation, or for multifaceted transformational change.
What is certain in an ambiguous operating environment is that the ‘how to’ manage change is changing. Change tools now include more online assessments, personalised and responsive feedback loops and platform-enabled people engagement.
So although the type of change intervention can vary from a linear process to a more flexible and agile activity, managing change still requires planning, analysis and good execution.
Why Is Managing Change Important?
For most organisations, although change is increasingly common – it is not always easy. Mckinsey research indicates a high failure rate of Change Programs as being around 70% (McKinsey, 2015). Contributing factors include:
- an unclear ‘future state vision’
- poor or absent executive sponsorship
- lack of leadership alignment
- a ‘frozen middle management layer’
- passive or active resistance
- poor culture or behavioural norms
- ineffective engagement and communication
- lack of user experience considered early enough
- underestimation of change impacts
- discordant parts of change programs
- lack of coordination across functions
- low levels of change resilience, and
- a lack of change capability and maturity within organisations.
In other words, contributing factors are mostly people related. By focusing on the ‘people side’, change experts work with leaders and teams to avoid these ‘change risks’. Change experts instead focusing on engaging with stakeholders to accelerate adoption and ultimately, the intended business benefits.
When To Engage A Change Manager?
Organisations can identify, manage and hence minimise risks associated with a single project or complete transformation by engaging skilled, strategic change management consulting professionals early.
Ideally, change leads are brought in at the time of business case development, before programs have kicked off. At this point, the change expert helps the program, business and transformation leads understand and express the holistic change vision. The business case should also include some assessment of the type of change, impacts and risks, and resourcing requirements (to include in the budget). These will differ by change type: implementing new technology, a new operating model, system and process, or culture change.
Experienced change managers should then be retained to assess the change impacts in more detail for each major program or project, as well as cross-functionally. Those programs or projects that have the highest change impacts and risks will require more focused change support to execute and manage the change through implementation.
Prosci research and publications recommend that around 10% of program budget should be allocated to change support, for those programs with high people impacts. This correlates with the high dependency on people for program success. However, not all projects/programs are adequately resourced or funded to enable the change function to be effective and have the intended outcomes. Having the right change framework helps.
How To Set Up A Change Framework
Setting up a change framework must consider both the discrete project and program based change, as well as the continuous, fluctuating change that is synonymous with a ‘VUCA world’ (characterised by Volatility, Uncertainty, Complexity and Ambiguity). This requires a two-track approach to change – one that is both considered and pre-emptive for ‘known changes’, as well as being responsive and agile to ‘constant change’. Change experts work with executives and teams to guide organisations through different types of changes.
A structured change approach enables a range of situationally appropriate individual and organisational responses. This is essential to maximising results and minimising program delivery risk. The change framework should include key steps to execution and a flexible and responsive change toolkit.
An example change management approach used by CQ Connection is illustrated in the steps below. This approach can be modified to fit the type of organisation, specific requirements, and type of change to be implemented.
Step 1: Understand change early
Early understanding of the high-level change type, scope, the scale and impacts of change programs is essential. In addition, the intersections and dependencies on different parts of the organisation, including key stakeholders and timeframes must be considered early.
Expert Change professionals use this base level of understanding of the change to develop a right fit change strategy. CQ Connection has a bespoke assessment tool to undertake this important analysis.
Step 2: Set the change strategy
The change strategy must support the business strategy – articulating what, where and how the business is moving ‘from’ and ‘to’. Not all of the information is always known at the outset, and many organisations have a ‘fuzzy future’ state. This can cause anxiety or resistance in change planning and execution.
Working with leaders to ‘chunk down’ the change via a clear strategy can alleviate such ‘people risks’. This could include definition of the ‘future state’ vision, co-creation of high level change impacts from current state through transition to future state. Allocation of effort (through external support and internal resources) is also critical to success.
Step 3: Engagement approach and actions
To integrate change – and “make change stick” – people need to be fully engaged. Yet not everyone is ready, willing and able to define, lead, believe in and execute change effectively from the outset. The change expert acts as a facilitator and catalyst, identifying people risks, key influencers, and enabling stakeholders to drive, lead or deliver change effectively. The organisational values and culture as well as individual mindsets and behaviours are also integral to successful change programs.
Some examples of engagement activities undertaken by Change Managers include workshop design and facilitation on vision, risks or impacts, as well as change coaching, co-creation of ‘change messages’, and engaging sponsors, managers and teams to lead change and communicate consistently. Including diverse thinking and innovation can be another change for some organisations.
The simple diagram below of the ‘Innovation Adoption Curve’ illustrates how different cohorts of people react differently to change, particularly technology adoption.
To accelerate change adoption, change experts may use a number of levers based on stakeholder engagement, including:
- leadership alignment
- change influencer network
- roles and KPIs
- capability uplift and culture ‘re-set’.
Step 4: Execution
Effective change practitioners enable a bridge to be built between program teams planning and delivering the change and the organisation receiving the change. This needs to be considered at an individual, team and organisational level.
During the execution and delivery of change programs, Change Managers operate as part of a ‘change enabling system’ that can include various subject matter expertise contributing to the change or transformation program execution (example below adapted from Prosci):
In other words, as more change occurs across more parts of organisations simultaneously, and more quickly, the social dynamics of organisations also change as part of ‘change system’. This requires a different approach to managing change, in addition to deep functional expertise. Managing change is increasingly collaborative and trust-based. Change experts are increasingly required to be coaches, advisors and strategic partners, as execution is dispersed and dependent on multiple stakeholders across various functions.
Changing Role Of Change Managers
The Change Management Institute Whitepaper ‘Change in the Age of Disruption’ (published in 2016) lists the core competencies of ‘Change Management 1.0’, namely:
- change maturity and capability
- leadership and sponsorship,
These remain important today. However, in an increasingly ‘VUCA world’ (see above for definition) an additional set of competencies and themes have evolved for organisational change management experts. These are illustrated in the table below:
Evolution of organisational change management (Change Management Institute White paper, 2016)
Many organisations are responding the ‘VUCA world’ by moving to non-linear, agile change delivery. For example, many small and large change programs are using daily stand-ups, visual scoreboards and design thinking in program design and delivery.
There is also an increasing focus on early consideration of user experience, employee and customer engagement to ensure the process, product or service is fit for purpose and works well. As more organisations use ‘human centred design’ to achieve this, there is more acknowledgement of the importance of engaging people throughout the change process – from ideation to co-creation and ultimately, adoption.
As a result, the role of the Change Manager has also evolved to be a guide, a coach and a facilitator – enabling others in the organisations become change agents and to lead change.
To do so requires Change experts having both a seat at the table with Transformation and senior leadership teams, as well as the ability to influence program and project delivery.
Upskilling peers and leveraging change networks – both formal and informal – is increasingly necessary, particularly in cost-conscious and dynamic environments. This is made more complex with matrix, virtual and cross-functional onshore/offshore teams.
Working between the change program and the business, change experts ensure the organisation and the individuals are ready, willing and able to accept and deliver change.
Summary And Essentials
Organisational change management enables the return on investment of discrete projects or large transformations by focusing on those elements that are dependent on people for their success. Change expertise supports business and operating model change, mergers and acquisitions, technology implementation, process improvement, culture change and capability uplift.
Some questions to determine when to engage a Change experts include:
- How much of your transformation program depends on people doing something different, or thinking or behaving differently (eg risk culture)?
- How ready, willing and able are leaders and teams to deliver the strategy?
- What assumptions have been made about executing change and transformation?
- Have you assessed all the risks and impacts associated with delivering the change?
- Is there a clear vision or a ‘fuzzy future’? How passionate are people about it?
- How change ready and resilient is the organisation – teams and key people?
- How ready or mature is the in-house change management capability?
- How aware, engaged and invested is the business in making change a success?
- Have organisational resources been allocated in accordance with size/ impact?
Key to the success of change and transformation programs from strategy to execution is the collective vision, maturity, and capability of in-house teams – from sponsors and senior executives, to middle managers and operational/ delivery teams executing the changes. Change experts can coach and build this change capability.
Understanding the role of people in strategy execution cannot be underestimated. Engaging change experts drives business benefits whilst minimising risk, through people.
Make sure you share your thoughts on this piece in the comments below. Be part of the discussion!
Director at CQ Connection
Viisti Dickens is a Director at CQ Connection (www.cqconnection.com), a boutique advisory business with a primary focus on helping organisations with change, transformation, culture, strategy development and implementation. She has more than 15 years’ experience in Australia and overseas. She is a former Global Board member of the Change Management Institute, a Member of the Australian Institute of Company Directors and a graduate of the Asialink Leaders Program. She has a Masters of Law, Masters of International Relations and a Business degree. Organisations she has worked with include financial services, professional services, telecommunications, media, technology, government and education.