Pwc Internal Change Capability

7/27/2019 Pwc Internal Change Capability

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Addressing the change constantSuccessful change from the inside

PwC Advisory Services

At a glance

Portfolios of changeare the new norm.

How do you effectively

address change from

the inside?

Building internal

change management

competence results in

organizational agility.


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2 Addre ssing the c hange con stant

Successful changefrom the inside

Introduction

Portfolios of change are the new norm and their presence demandsthat businesses have some form of resident organizational changemanagement capability. In order to ensure that change will be acceptedand embraced, leaders must address two tough questions: Does myorganization have what it takes to effectively execute change on a

continual basis? and What are our change capabilities and howcan we leverage them for competitive market advantage?

Given the economys continued

volatility and uncertainty, the pace,

scale, and complexity of organizational

change initiatives continue to escalate

in organizations around the globe.

In PwCs 15th Annual CEO Survey,

70% of CEOs told us their

organizations anticipate a change

in their companys strategy over the

next 12 months. Yet, in the midst

of this sea of unrelenting change,

business leaders have a woefully

low level of satisfaction with the

outcomes of their change initiatives.

75% of change initiatives fail to

fulll their stated goals and objectives.1

This rate of failure amounts to billions

of dollars of leakage from wasted

resourcesrework, opportunity

cost, and lost productivity. Time-

to-value is elongated, return on

investment is diluted, and resistance

to undertake more change grows.

Regardless, one thing is certain:

change is no longer something

that happens periodically. Its

continuous, constant and needs

to be successfully managed.

Portfolios of change are the new

norm and their presence demands

that businesses have some formof resident organizational change

management capability. In order to

ensure that change will be accepted

and embraced, leaders must address

two tough questions: Does my

organization have what it takes to

successfully and effectively execute

change on a continual basis? and

What are our change management

capabilities and how can we leverage

them to contribute to a competitive

market advantage? It is no longersufcient to keep change management

at arms length and expect it to happen

in isolation. At a minimum, sufcient

acumen is needed to leverage and

grow existing internal change

champions and to know when and

how best to engage outside help to

support change work. Either way,

an internal change management

capability is a business imperative.

An internal change managementcapability contributes to two important

goals: it gives organizations a way to

build a culture that is more amenable

to change, and it helps them inject

greater efciency, responsiveness,

1 Source: Mark J. Dawson and Mark L. Jones, PwC, Human Change Management: Herding Cats (2007).

75%of change initiatives fail to fullltheir stated goals and objectives.


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and speed in their change programs.

As a result, change initiatives can

realize a faster time to value as well

as greater value over time. A change

management capability gives an

organization the ability to be more

agile by introducing, implementing,

and sustaining effective change; and

organizations that already possess

agility in other respects stand to

become even greater competitive

threats with a robust internal change

management capability.

Unleashing yourexisting change assets

Market evidence reveals that a growing

number of organizations already have

many elements of a comprehensive

change management capability

in house such as communication

functions, workforce planning

capabilities in HR, learning and

development groups that provide

instructional design and deliver

training, and project management that

can support project work in other areas

of the organization. However, these

elements are, more often than not,

scattered throughout the enterprise

not aligned, not coordinated, and

marginally leverageable to address

a continuous change environment.

Considering that so many

organizations are engaged in multiple

change initiatives concurrently,

existing competencies are likely to

be overlooked or underleveraged.

By not leveraging existing strengths,

companies end up having to reinvent

the wheel, incurring unnecessary

costs and mobilization delays, and

compounding the risksof each

initiative individually and of

all, collectively.

So, building a change management

capability is not only a matter of being

able to leverage (and build on) existing

capabilities that are often beyond

the view of most leaders, but also of

capitalizing on these capabilities

treating them as a key element ofthe organizations responsiveness

and agility. Its about thinking

prospectively about changenot

just about the immediate short-term

needs, but about how to nurture the

capacity for the organizations growing

change management needs. Beyond

the individual change initiatives you

might be undertaking right now,

have you stopped to consider what

your portfolio of changes might look

like over the next few years? Whatmethodologies, processes, capabilities

and people your organization might

need to execute it?

For those organizations that

question the value of internal change

management capabilities, consider the

ramications and costs of any given

change initiative gone awry. Often,

organizations undertaking a large-

scale change initiative feel theyre

already spending enough on the

implementation and frequently skimp

on investing in change management

resources. In the end, projects stall

or derail; these companies typically

end up spending far more than

anticipated, and suffering disruption,

distraction, and lost productivity. Ifthe stakes are high and the initiatives

frequent enough, proactively building

an internal capability is a wise move.

Beyond the individual change initiatives youmight be undertaking right now, have youstopped to consider what your portfolio ofchanges might look like over the next few years


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Three basic modelsfor an internal change

management capabilityHow an organization develops its

change management capability may

vary, depending on the organizations

distinct culture, needs, characteristics,

circumstances, and the skill levels of its

staff. Practically speaking, though, its

rareif everthat an organization has

a blank slate from which to begin.

A good starting point is to look

through the lens of your companys

culture and business model todetermine your general philosophy

about change management and the

people, processes, and tools currently

in place to deliver it. Do you need

a centralized group of people with

a set of change management skills,

methods and tools to serve the needs

of the entire organization? Or do

you want to equip people with the

tools and knowledge to execute

change, deploying those capabilities

throughout the organization with

minimal infrastructure? Or, does

it make more sense to build change

management capability as you go,

project by project, relying on internal

and/or third-party experts to

advance the projects and your

knowledge base and without

building a Center of Excellence

(COE) infrastructure?

An internal change management

capability usually takes one of three

basic forms: a center of excellence,

a leveraged talent model, or a

project-based change model. But

in most organizations, as well see,

the approach morphs over time

a function of resources, organizational

structure (e.g., command-and-

control or decentralized), or

business environment. Increasingly,

as their capabilities evolve, companies

are applying a hybrid approach that

combines elements of each. Lets

examine each model, and then look

at real-world exampleschiey

variations or hybrids of the three.

Center of excellence (COE).

The COE is a stand-alone change

management function with a dedicated

team to manage change initiatives

wherever in the organization they take

place. It generally reports to a member

of the senior management team.

The COE hires multidisciplinary

resourcesprofessionals in

the discipline of change

managementto manage and

support change efforts across all

functional areas of the organization.

These professionals might include

communication specialists,learning or training specialists,

organizational design specialists,

analysts (to gather and evaluate

trend data, for instance), and others.

The COE develops, promotes, and

maintains the change leadership

philosophy, methodology and

supporting tools to provide a

foundation for the organizations

change efforts. It also provides

training in these methodologies,processes, and tools to build change

expertise. Finally, a COE supports

executives and project managers in

communication, change-readiness

analysis, training, organizational

development and transition, and

stakeholder engagement.

Leveraged talent. In this model,

a change management capability is

built through a talent management

framework, the components of which

are typically managed in concert with

the line organization and human

resources. The capability is distributed

throughout the organization; that

is, the organization either identies

change leaders from throughout the

enterprise to develop change skills and

form a change network throughout

the enterprise, or it develops a dened

set of change competencies in all

associates. It provides training in thecore change leadership competencies

it has identiedcompetencies that

are incorporated into hiring proles,

training programs, leadership

development plans, performance

management guidelines, and pay and

incentive plans. In addition, education,

developmental assignments, coaching

and mentoring are integrated to

transform top-line managers into

competent change leaders. Trained

associates are enlisted for their changeskills whenever they may be needed,

for large or small, formal or informal

change initiatives.

Organizational structures, roles and

responsibilities are often revised

to provide change leaders with the

bandwidth to wear two hats: one

for their day-to-day role and one for

their new role as stewards of change.

This model also involves developing a

change methodology and supportingtools to provide a foundation for the

organizations change efforts. It also

includes continuing education to

maintain and develop skills.


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Project-based change. This

approach brings change management

capabilities to bear in a project-

centric rather than strategic manner.Rather than invest to build the

capability broadly, the organization

often engages thirdparty expertise

to provide or supplement internal

change management capabilities on

an as-needed basis. With project-based

change, the organization denes and

establishes point-of-need change

competencies as each project arises.

Project-based change optimizes the

level of internal change leadership

competencies by assigning change

managers to specic change initiatives.

Not infrequently, companies will use

project-based change and third-party

support to equip their organizations

thorough knowledge transfer

plans, so that the company veries

that methods, tools, processes and

outcomes continue to reside within

the organization. With each newproject, the organization ends up

expanding the number of people

trained in change management skills.

The project-based approach allows

the organization to have a baseline

capability and gain knowledge transfer

without making the commitment to

dedicate resources to change efforts

on an ongoing basis.

There is nothing one-size-ts all

about internal change managementcapabilities. The three models serve

as basic frameworks that most

organizations will need to customize

by combining elements of more than

one. Each model has its pros and cons

(See the following page).

How an organization develops its changemanagement capability may vary, dependingon the organizations distinct culture, needs,characteristics, circumstances, and the skilllevels of its staff. Practically speaking, though,its rareif everthat an organization has ablank slate from which to begin.


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The design of an internal change capability depends on each companys

unique needs, resources, and goals. As a result, the pros and cons of

each model can only be assessed in this context.

This table compares key pros and cons of each basic model for two

companies with different organizational structures and circumstances.

Scenario 1:

Large multi-state company; grew mainly by acquisition; units are largely autonomous;few centralized functions

Starting point: a geographically dispersed employee network focused on building a common company culture

Goal: building a change management capability to support a portfolio of primarily strategic initiatives at

the enterprise level

Model Pros ConsCenter of

Excellence

(COE)

Greater potential for strategic impact and

likelihood of success

Consistency

Efcient, sustainable

Ease of accountability

Incubator for innovation

Stafng options

Capacity limitations: Support coverage limited

by size of team

Less stafng exibility re: shifting workload

Managing demand can be challenging; need

to prioritize and rationalize projects

Limited reach due to autonomy and

geographic dispersal

COE structure centralizes knowledge, making

it harder to embed change throughout

Leveraged

talent

Talent pool in place in its culture change

network- Existing network has reach into

siloed facilities; can touch local level

Close to the business; understands business

and challenges

Staffs local-level focus may require negotiating

to enable enterprise involvement. Harder to

manage staff time and priorities

Geographic dispersion and decentralized

relationships complicate development and

consistent application of standardized change

methodology and tools

Role accountability: no easy point of contact

for senior leaders who need help

Need for training is signicant to build

capability throughout organization

Project-based

change

Talent pool in place in its culture change

network- Existing network has reach into

siloed facilities; can touch local level


and challenges

Less efcient; not sustainable:

repeated learning curves and inefciencies

with each project

ever-changing resources complicates

development and consistent application ofstandardized change methodology and tools

reliance on third-party resources may result

in multiple (and incompatible) approaches

Use of third-party resources may not

necessarily prevent disruption or need for

internal resources: third-party resources may

lack sufcient organizational knowledge to

work independently

The pros and consof the three basicinternal change

capability models


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Scenario 2:

Large manufacturer with facilities clustered in one region; grew primarily organically;many support functions (nance, IT, sourcing) are centralized

Starting point: Has several immediate and critical initiatives, but organization has little history in

proactively leading change

Goal: Capability to manage change continuously

Model Pros Cons

Center of

Excellence

(COE)

Same as COE pros for Scenario 1, plus

Geographic containment and consolidated

functions make it easier for COE to reach

into organization

Capacity limitation: coverage depends on team

size

Stafng inexibility; not easy to add or reduce

staff to conform to workloads

Scope limitation: by centralizing knowledge,

embedding change broadly may be difcult

Managing demand can be challenging

Leveraged

talent

Model explicitly recognizes that change is

constant, must be managed effectively, and

is a shared enterprise responsibility


and challenges

Lack of trained resources in house

Need for training signicant to build capability

throughout organization

Stafng inexibility: harder to manage time

and priorities of leveraged resources, given

their core responsibilities

Less efcient and sustainable: dispersed talent

pool may make development and consistent

application of standardized methodology and

tools difcult

Role accountability: no easy point of contact

for senior leaders who need help

Project-based

change

Low-risk approach to developing capability

Can be mobilized quickly for immediate,

short-term needs

Stafng exibility: easy to expand or contact

based on needs

Accountability clear, established onproject-by-project basis

Less efcient; not sustainable:

repeated learning curves and inefciencies

with each project

ever-changing resources complicates

development and consistent application of

standardized change methodology and tools

reliance on third-party resources may result

in multiple (and incompatible) approaches

Use of third party resources may not necessarily

prevent disruption or need for internal

resources: third-party resources may lack

sufcient organizational knowledge to work

independently

Training need is signicant to bring internal

resources up to speed

The pros and cons of the three basicinternal change capability models(continued)


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Hybrids predominate,and for good reason

For most organizations, some

permutation of the three basic

models is generally most appropriate.

The design and evolution of an internal

change capability should be based on

the organizations current, as well as

anticipated futurestrategic needs

and circumstances.

Consider the followingreal-world illustrations.

A Center of Excellenceas a Starting Point(Leading Insurer)

A leading insurance company

approached PwC for help in planning

a sweeping multi-year transformation

of its largest division: aligning more

than 10 different business units

to one operating model. Basically,

the organization wants to use its

technology, business processes,

and data insights in a consistentway across the enterprise for

product development.

In the past, large-scale transformations

at the company had failed, chiey

because the organization had

overlooked the people and structural

barriers to change. For those reasons,

the company decided that a center

of excellence would be a sensible

starting point for its internal change

management capability. Ultimately, thecompany will evolve this capability into

a hybrid of the three models.

PwC was enlisted to help with two

goals: helping the organization assess

its readiness for change by identifying

enablers and barriers; and using those

insights to (among other things) help

it understand how best to develop and

build an internal change capability.

Even before settling on a COE, thecompany took early steps to build

a knowledge repository containing

change management models and best

practices and tools, and it instituted a

knowledge transfer program to support

continuous improvement.

The COE is designed to reside within

the HR organization, although it

is proactively developing partner

relationships with other areas of

the organization, such as strategicplanning, the enterprise PMO, IT

(as a strategic partner) and with the

senior leadership team that is driving

transformation. The initial focus is on

change communicationsa function

independent of the companys internal

communication function.


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A Leveraged Talent/Centerof Excellence Hybrid(Healthcare corporation)

For highly decentralized organizations,

with largely autonomous units and

no unied culture, a pure center of

excellence approach isnt always

practical. That is the case for a large

regional healthcare organization

that operates multiple hospital

systems throughout several states.

The company grew by acquisition,

so its units are not only geographically

dispersed, but are also culturally

different. Building on what isessentially a leveraged talent model,

the company is creating a hybrid

that incorporates elements of a

center of excellence.

The organization initially focused on

cultivating a common culture through

the development and leverage of a

culture change network. Guided by

a small group of dedicated internal

culture change consultants, the

company has trained and dispersedculture champions throughout the

organization. As the companys culture

work has evolved and expanded, that

small group of internal consultants

has become the heart of change

management for the company. The

team is now expanding its efforts

beyond culture into other critical

strategic initiatives to benet the

whole organization.

When Change CapabilityFuels Demand for Change:The Evolution of a Centerof Excellence (HealthcareServices company)

Five years ago, a Fortune 100 healthcare services company built a center

of excellence in the IT organization

serving one of the two major business

areasthe one generating most of

the companys revenues. The center,

created to support the businesss

growing number of change initiatives

was staffed with a director and eight

direct reports who were supported

by 18 external consultants. In recent

years, the centers success with IT

projects hardly went unnoticed; otherbusiness leaders saw how much more

smoothly projects were going. Leaders

began seeking the help of the COE for

initiatives beyond IT projects. This

led to an expanded scope: supporting

strategic business transformations

such as acquisition integrations. So as

a result of its success with IT projects,

the companys COE actually increased

demand for change management.

More recently, the company decided

to consolidate its IT organizations into

one umbrella IT group, which meant

that change management functions

would be integrated. The change

management director called in PwCto help him assess the capabilities

of the existing center and its ability

to accommodate an increasing

demand for its services, both in

IT change initiatives as well as

business transformations.

Relying on the centers ve-year history

and evolution to broader initiatives,

PwC was brought in to assess existing

capacity and develop a future-state

strategy and road map. The centeralready had a strategy, operating

model, structure, and governance

mechanisms in place, along with

change management methods,

tools, and metrics. PwC interviewed

internal customers and business and

functional unit leaders to identify

key considerations, addressing such

issues as future scalability, accessibility

of services thru multiple channels,

and how to strengthen strategic and

operational capabilities.

PwC was enlisted to help with two goals: helpingthe organization assess its readiness for changeby identifying enablers and barriers; and usingthose insights to (among other things) help itunderstand how best to develop and build aninternal change capability.


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The building blocksof high-qualitychange management

The most important aspect of

any change initiativethe make-

or-break aspectis the human side.

In fact, 98% of critical success factors

for change are people-dependent2:

such as engaging leaders and

mobilizing employees, creating

a governance structure, aligning

people, setting accountabilities,

and sustaining motivation.

Our approach to embedding

successful change management

is therefore fundamentally basedon driving positive change through

people, rather than on driving

people through change. We believe

this is the best way to secure

stakeholder engagement and

create sustainable change.

Figure 1: Building blocks of high quality change

Transformation

vision

Stakeholder

engagement

Leadership

alignment

Cultural

changes

Communication

Change impact

and readiness

Sustainability

Adoption

Training

Workforce

transition

Project and program management

2 Source: PwC Management Barometer.

This building-blocks approachto change management isdesigned to drive positivechange through people ratherthan driving people througha change. The ten buildingblocks combine strategicelements with transactionaltools and methodologies,interacting with andreinforcing each other.


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Whatever approach an organization

chooses, to be robust and sustainable,

the internal change management

capability should be built on a

foundation of ten building blocks

fundamental capabilities that address

these critical human elementsfrom

leaders articulating a vision of the

change programs impact, to assessing

readiness for change and creating

workforce transition plans and training

programs. (See Figure 1 on page 10.)The blocks, a mixture of strategic and

transactional components, interact

to foster and reinforce the behavioral

changes needed to achieve the

desired benets.

Eyes on the prize: The ROIof change management

Building internal change managementcompetence produces multiple

long-term benets. Companies

continue to improve at change

management, yielding more efcient,

more effective, future change

initiativesthus boosting the

ROI of every future initiative.

Although companies rarely measure

the cost of change management,

evidence exists that links the quality

of the change management programto the return on investment of the

change. A study of 40 large-scale

change projects at large companies

showed that change programs

ranked excellent by leaders yielded

an ROI of 143%; programs that were

poor or nonexistent delivered an

ROI of only 35%.3

Getting the maximum ROI from change

management depends on having high-

quality change management practices,

delivered through a mature program

management framework in an agile

organizationthree elements we call

the Change Trifecta.4

Although companies rarely measure the cost of change management,evidence exists that links the quality of the change management programto the return on investment of the change. A study of 40 large-scalechange projects at large companies showed that change programs rankedexcellent by leaders yielded an ROI of 143%; programs that were pooror nonexistent delivered an ROI of only 35%.

3 Source: LaClair, J. & R. Rao, Helping Employees Embrace Change, McKinsey Quarterly,November 2002.

4 Source: The Change Trifecta, PwC 2012.


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Accelerating change,accelerating value

If the ability to respond and

adapt to rapid change matters,

then organizations must be able

to accomplish change fast. A

high-quality change management

capability recognizes the importance

of speed. And faster execution, we now

know, leads to better outcomes. In a

recent study, hundreds of executives

worldwide were asked to rate their

companys overall speed of execution:

dened as both time to value and value

delivered over time. Those executives

who rated their companies fast

enjoyed 40% greater sales growth

and 52% higher operating prot

than those who considered their

execution to be slow.5

How did these companies achieve

speed? The faster companies, it

turns out, didnt get that way by

compressing schedules to accelerate

implementation. Instead, they focused

on the human factorsspecically,

establishing clarity, unity, and agility

(in that order) up front as the basis for

the initiative. These elements feed off

each other, and in combination, foster

openness and innovative thinking

which, in turn, reinforces speed.

Investing in an internal change

management capability helps

organizations gear themselves towardfuture success. Leaders neednt shun

future change because of the fear

of failure. They can be condent in

their organizations proven ability to

navigate change initiatives. Success,

as we saw in the case of the Healthcare

Services company, fuels demand for

change management services. In turn,

as they embrace change more readily,

companies gain agilityand enhance

their competitive advantage. In other

words, companies that invest in thediscipline of change management end

up with an enduring benet.6

As weve also shown, there is no

cookie-cutter approach to building

the internal change management

capability. The path an organization

takes should recognize the

organizations life cycle relative to

its external environment, its existing

capabilities and the resources it has

available, as well as its culture.

What worked ve years ago may

no longer apply. Creating the right

approach involves tradeoffs, planning,

and a keen understanding that

change management, like change

itself, is fundamentally unique to

every organization.

5 Source: Davis, J.R., H. M. Frechette, Jr., and E. Boswell, Strategic Speed: Mobilize People,Accelerate Execution, Harvard Business Press 2010.

6 Source: See The Change Trifecta, ibid.


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To have a deeper conversation about change at

your organization, please contact:

Ed Boswell

Principal

US Leader, Advisory, People and Change

+1 (617) 530-7504

[email protected]

Toni Cusumano

Principal

Advisory, People and Change

US Change Management Leader

+ 1 (415) 307-7376

[email protected]

Paul Joyce

Director


+1 (704) 344-7569

[email protected]

Jenna Rosenberg

Manager


+ 1 (612) 280-7885

[email protected]

2012 PricewaterhouseCoopers LLP, a Delaware limited liability partnership. All rights reserved. PwC reers to the US member frm, and may sometimes reerto the PwC network. Each member frm is a separate legal entity. Please see www.pwc.com/structure or urther details. This content is or general inormationpurposes only, and should not be used as a substitute or consultation with proessional advisors. PH-12-0166

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