Government

Why change management fails

Cliff Notes

  • Why change management fails.
  • Successful change requires placing people at the centre.
  • A smarter approach to cost reduction.
By Anam Rahman
Partner
Apr 2018

In the modern age, there have been multiple barriers and block roads that have been developed when it comes to change management.

 

Some which include: employee engagement, training, recruiting and retention.

 

Most notably, low levels of employee engagement and leadership has been a significant contributing factor towards the drastic 70% failure rate in change management, which may become increasing greater in the next few years as reports from IBM suggests. Government agencies can address these challenges through various organisational change management strategies. In the past few years, the public sector has become exploited as the deficient one of the ‘public vs private’ debate as pipeline problems. Digital disruption, and heightened customer expectations all drive the need for change at government organisations.

 

In order to seek an insight to what can be compelled as a successful solution, a survey was carried out by government employees to see what entails on being a successful change management strategy.

 

Some of the key findings were: Successful change management primarily comes from their adaptability and amenability in implementing change. In addition, there were 3 strategies that were found to minimise the negative impact of change; Changing processes for efficiency, providing training and improving the work culture. They found that successful organisations consistently use their strategies to their advantage. Lastly, they found 3 dominant roadblocks that have led to the downfall of change management. Siloing, flawed communication and the lack of buy-in. These are just a few of the roadblocks and barriers that were found.

 

Among governmental agencies, the top anticipated workforce challenges brought about by change drivers are increasing employee workload, facing critical skill gaps, and experiencing lower workplace morale. As changes starts to be introduced and technology starts to be implemented, previous skills start to be outdated as new skills have to be learnt in order to keep up with the change. As a result, experienced employees feel as if they might become obsolete as their skills may no longer be required at the company.

 

One of the main consequences of this is that it leaves a big skill gap in the workforce due to the lack of expert members. In addition to emotional intelligence being a dominant factor in the increasing the skill gap as some employees may not be willing to accept the change, impending retirements are also a contributing factor towards workplace disruption.

 

 

Organisations are worried about losing their retired employees, who may or may not be replaced by younger workers, due to constrained budgets or other factors. Evidently, the only way in which organisations within the public sector can overcome this problem is by recruiting and holding the biggest talent.  This leads onto the question to what it takes to compel a successful change management?

 

Many private sector organisations have been successful in removing roadblocks and barrier to change and use the support of all leaders and support members. In order to tackle any roadblocks and barrier, organisations within the private sector will always have a change management plan in which they are able to successfully address challenges.

 

Some of the major aspects of this plan include: having dedicated teams in place to steer change management, rely on an ad-hoc team to come together as needed and external help when change arises. Moreover, Organisations within the private sector are easily able to produce such results due to their centralised and flexible structure.

 

However, can the public sector emulate previous successes and provide the same results? The answer to this can be debatable however it clear that they won’t be able to perfectly emulate what the private sector. For example, the option of having a dedicated change management team many not be an option for the public sector as compliance and regulations bind their flexibility and adaptability. Nevertheless, the public sector can still apply strategies that can help them help implement successful change management. The most important element in any successful change management is cross-functional communication. It is an absolute necessity to integrate everyone into the change process.

 

From the leaders at the top to the base level employees. In order for this to happen, leader’s curiosity needs to be the main drive in helping to promote growth. For example, Jack welch from general electrics was successful in implementing change due to his leadership and people skills. As a result, he was able to transform the change into significant profitable numbers and turn GE into a powerhouse in the industry.  When communication is efficient and effective, strategies can be more successful in minimising the impact of changes in the workforce.

 

One of the key strategies is providing training programmes to change processes for efficiency. When employees feel disgruntled about change, training can always give them reassurance and protection as learning new skills will help them to be more adaptable and flexible within the workplace.

 

However, things are not as easy as they sound. For change to be effective, it all depends on the employee’s willingness to change. It becomes awfully hard for managers and staff to get motivated when they believe that their latest project will just be like the previous one and wither away regardless of what they do. Fear makes changes intensely personal as they feel as if everything they have worked for will come to an end. This the exact reason why most change management fail as solutions such as training will become practically ineffective as feelings and emotions will always be omnipresent as a barrier or roadblock.

 

However, there is always one solution to every problem and that it planning and monitoring. As change can cause disruption within the workforce, it is absolutely essential for the workforce performance to be monitored in the process. By planning before-hand, they are able to use a range of varied methods to try and enhance communication and eliminate any roadblocks. Monitoring the plan is very important for any agency as they are able to test the effectiveness.

 

As the failure rate for change management is on the rise, solutions to tackle problems of change are becoming increasingly faded. Finding the perfect plan for change has become the biggest mission for any agency, hence why a range of methods needs to be taken into consideration to make a strong and concrete plan.

 

For example, a more evidence based approach should be considered instead of a theoretical based approach. The ultimate conclusion we can all agree on is that despite the clear and obvious solutions to help prevent disruption within the workplace, there will always be roadblocks and barriers present to prevent the success story but placing the right personnel in the center will always lead positive results as evidence suggests.

Placing people at the centre

For successful change

In order to have a successful change management scheme, people have to be placed in the centre of any reform. Despite the differences in purpose, culture and the context in which they operate in, the same principle of placing people in the centre of any change reform needs to be applied to both the public sector and the private sector.

 

Resistance to change is a natural phenomenon, so managing change in a structured and controlled manner is essential if the benefits. For many organisations, change is about responding to fluctuations in the dynamic environment within which they operate. An organisation needs to understand the need for change and the nature of the change required. Organisations need to develop the ability to respond to forces that drive change, in a planned and managed fashion. There have been many case studies of when change management had to be used by multinational organisations in order to be saved from being wiped out.

 

Successful – GE, Six Sigma & People

 

When Jack Welch assumed the top position at general electric in 1981, he inherited a company that had a market value of $12billion. By the time he left in 1998, the company was worth more than $280 billion. With the slightest fear of being wiped out, he decided to implement six sigma at GE in 1995. Six sigma is a methodology that aims to reduce defects and errors in all processes, including transactional processes and manufacturing processes.

 

As a result, Welch’s decision to implement Six Sigma had saved them a mammoth $10 billion. More interestingly, Welch claimed to have spent as much as half of his time working on people issues. Multiple reports have written praises on his people management skills however they outline 2 of his key tips on how to manage people. The first is to ‘tell your employees where they stand’. Welch advocates, frequent. Candid performance reviews. 4 times a year at GE, Welch have each of his direct reports an honest appraisal. He told each of them what he liked about their work and what they can improve. He totally contradicts the idea of being ‘too busy’ for reviews when he believes that it should be their ‘number one’ job. Furthermore, he devoted more than 60% of his time to human resources, viewing every meeting.

 

The second is to ‘give employees a reason to choose you’. When you aim to inspire company loyalty, you are essentially courting your employees. Welch believed that you must ‘Tell them a story that makes them want to choose you’. The idea behind telling the story is that it brings a sense of common purpose, which gives employees a sense of excitement and opportunity. This clearly shows that shows that following a very constructed approach will always lead to positive results. General electric were successful in implementing change as they were able to place the correct ‘personnel’ in the middle and consulting the right members by making them feel like they have made the right choice.

 

Additional successful case study: Santander pulling back

 

In 2008, Santander wanted to establish a stronghold in the UK banking sector. Its strategy was to acquire a portfolio of heritage of heritage-centric UK financial institutions. However, it was time chairman Emilio Botin felt like their legacy, that dated far back as 1849, had left them incapable of evolving and growing.

 

In the whole process of buying financial institutions and branding them under one name was not an easy task and for a company of a calibre of Santander had to break down their engrained processes and form them into a formidable retail bank. In order to do this, they would need a fast-track, system-led banking model. Only this could bring as sort of clarity, efficiency and best practice to solutions that had become totally entrenched in ‘their way’ of doing things. During the change programme, there were many opportunities for cultural misunderstandings. This was particularly noticeable when linguistic similarities give a false illusion of commonality.

 

 

In fact, the cultures of the UK acquisitions were very different , they had developed as regional building societies and their client bases were each unique. This clearly implied that careful management would be needed to integrate the systems, processes and people in different organisations. To avoid any form of cultural collision, those who were going to be impacted by the change were totally briefed; risks and issues were discussed and mitigated. In addition, those that were not going to be directly affected by the change were also informed about the future. The aim of the process was not just for them to understand the change but also to embrace it.

 

In January 2010, Santander UK was launched against unfavourable economic conditions. By 2013, it had become one the country’s leading retail banks and one of the largest providers of savings and mortgages. Evidently, this scenario suggests that ‘placing people in the center of any change management’ is the key to success. 

 

Unsuccessful

 

There have been numerous cases of unsuccessful changes management schemes in both the private sector and the public sector. The main reason why such unsuccessful cases have occurred is primarily due to the missing ‘human’ element. An organisational change generally reflects in a real shift of cultural change. A change in culture means a change in way people behave and think.

 

As a result, it enforces innovative thinking however it also results in a phase of ‘cognitive dissonance’. Employees will generally start testing their ‘self-worth’, as they believe that change will make their skills obsolete and displace them. Such ideas and state of mind arise within employees as changes are most often forced upon them, preventing them from seeing the bigger picture and actually realising that there is a better alternative. As a consequence, employees lose sight of the message the organisation is trying to pursue and then eventually come to a point where they only prioritise personal interest. 

 

However, the question to ask is why is there such a disconnect? The reason being is that many change management schemes are said to already assume that everyone has a common interest. This assumption is completely wrong.

 

On the other hand, any form of change within the workplace can lead to an emotionally unstable phase as it could lead to fear and confusion. As mentioned earlier, testing ones ‘self-worth’ is said to be a side effect of change. As change is often said to be emotionally and physically draining, employees within the workplace may become less willing to change and become more opposed to the change. Change is said to be an integral part of any organisation. It is something that is bound to happen and it is a necessity for both the company and its employees to adapt to.

 

Being resistant to any change is said to be very unhealthy as it shows that you are not adaptable in the business, hence why being adaptable is a skill needed to survive at all costs. In order to increase the adaptability of the workforce, emotional intelligence is a critical factor.

 

Lastly, the 2008-09 financial crisis shifted the focus of change management in many organisations. Many of today’s organisational changes aim for reduction, efficiencies, and competitiveness rather than growth.

 

In order for a change management to be effective, the goal of the change effort must must be aligned with the employee’s value. Referring back to the innovate thinking resulting from change, the innovative thinking will only come if the change remains to be consonant with the reason why they came into the agency in the first place. Typically, there should be 3 phases that needs to be considered for successful change. Firstly, identify the performance. In any change effort, a strong personnel has to be placed in the center to analyse past efforts to determine which had positive effects, which were written off, and why.

 

Moreover, they should hold workshops with other members where they can consult each and come to a consensus. Secondly, set priorities. Outlining remedies with high impact compared to low impact will also help to prioritise tasks. As a result, they are able to quickly implement such remedies and produce the best results. Lastly, managing to implement a programme.

 

This usually involves a committee composed of agency leaders and senior managers of areas particularly affected by the transformation. In the case of General electrics, the importance of personnel was strongly emphasised, as the dominant personnel remained the same throughout the whole change process and had their priorities set. As a result, they were able to successfully utilise the process, which resulted in a saving of $10 billion.

 

By now it should be clear that organisational change is more than drawing charts and moving boxes. For organisations to perform at the best of standards, a number of different factors need to be taken into consideration including: leadership, structure, processes, infrastructure and most important people. All must be integrated and the key to integration is communication.

 

Most failed change management are blamed on a lack of communication. A great level of communication will help to integrate the missing ‘human’ element and produce startling results. This clearly implies that to counteract flawed assumptions, employing a more evidence based approach and not a theoretical based approach will be the best way forward for any organisational change.

Cost reduction

A smarter approach

The effectiveness of cost reduction policies varies between the public sector and the private sector. Due to a more decentralised and fragmented structure, the public sector are very exposed to volatile economic shocks. Constant economic changes mean that it is very difficult for a single policy to be effective whereas businesses can easily adjust to economic shocks as they have a more centralised structure, meaning that businesses are not required to implement a combination of policies and can focus on a single policy. Inevitably, the question to ask is ‘Why can’t governments simply just follow what businesses are doing?’

 

Pressure on public sector finances

 

The pressure on governments has been more than ever. Data from the international monetary suggest that many countries are running a deficit greater than 100%. For example, statistics have shown that in 2017, the French public debt represented 96.8% percent of GDP. It was forecasted to reach 97.1% in 2019.

 

As a result, many governments turned to cost reduction strategies on a larger scale to try and reduce such deficits. France have decided to implement extreme policies that caused outrage amongst local civilians , resulting them into being ‘urged’ to protest and take strikes across the country. Some of the measures include: 120,000 job cuts over the next 5 years, a freeze on wage increases and re-evaluation of ironclad civil service job contracts.

 

Many of the cost reduction efforts can prove to be successful however generally tend to fail as research suggest that only 19% were either ‘very or completely successful’. What can be used to explain such events? One reason could be that they are taking the wrong approach. One survey found that governments that make big budget cuts simply to force efficiency improvements are less likely to deliver and sustain the intended cost reduction, perfectly explaining the case for France as their policy was not effective in reducing public sector deficit.

 

Whereas, the UK has a public debt accounting towards 86.58% of total GDP. From having a public sector net borrowing at a value of -£11,649 million to a current public sector in January 2017 to a current net borrowing of £7,209 million, evidently outlines a falling deficit. In recent trends, the substantial upgrade to the health of the public finances that the Office for budget responsibility has made underscores the strength of the government’s fiscal management and the economic recovery since 2010.

 

This has created a stronger and fairer economy – helping people into work and cutting taxes for families and businesses, whilst reducing the deficit. For example, unemployment is at its lowest rate since the 1970’s and wage growth is at its strongest in 10 years. Furthermore, the strength of the jobs market in the last 8 years means that over 3 million more people are in work, and unemployment is lower in all regions and nations of the UK than in 2010. 

 

The government’s balanced approach to the public finances and the hard work of the British people mean that this budget shows the government meeting its fiscal rules 3 years early. As the UK prepares to leave the EU, the government is taking further steps to ensure a positive future by investing in public services, supporting business, and boosting living standards across the country. Such as: funding the NHS for it new five-year settlement until 2023-24, announced by the government in June to celebrate the NHS’s 70th birthday; and providing local councils with additional funding for social care to help older people with care needs and help children to live safely at home, backing businesses with further incentives to invest in the short and long term , with a temporary increase in the Annual Investment Allowance to £1 million and the introduction of a new allowance for investments in non-residential structures and buildings.

 

Using technology to drive cost reduction

 

On the other hand, Tough times in business may lead you to research and implement cost-cutting strategies. Even businesses that are profitable can benefit from cost reduction strategies to create an even higher profit margin on its products or services. Businesses have several options in reducing the costs of the business without sacrificing the quality of its service.

 

There are several cost reduction strategies that proved to be successful. Most notably, digitisation. Technology has allowed businesses to save money and advance in ways that weren’t possible 5 years ago. From teleconference services and online payment services to open-source software and remote desktop applications. Furthermore, another dominant aspect of technology in helping reduce cost is through cloud computing. Beginning with reduced costs for in-house IT staff, cloud computing provides numerous benefits to your business.

 

 

Because cloud-based software and applications automatically update themselves, the cloud has allowed more businesses to outsource their IT support. The cloud also gives employees secure access to information on the go, allowing your workforce to be more mobile. This is especially useful for companies with remote workers and work-from-home policies. On a higher-level, the cloud allows you to have data backups in places that are off-site, just in case you’re on-site servers are ever compromised by a cyber-attack or suffer physical damage. The cloud can have your systems back up and running in hours, not days.

 

For example, technology has allowed for businesses to reduce pollution costs. As a result, they are now able to save more money and invest in R&D. The investment in R&D allows them to expand and find more effective ways of reducing costs and ultimately leading to an increase in profits. This clearly suggest that technology plays an integral part in the reducing costs for a business. If the policy is working for businesses then it should work for governments too?

 

The Challenge of cost reduction technology in the public sector

 

One of the main reasons to why governments are unable to successfully imitate what businesses are doing is primarily due to the difference in structure of the two sectors, private and public sector. Decision making is decentralised and fragmented meaning coordination and implementation of cost saving digital initiatives do not materialise.

 

On the other hand, businesses within the private sector have a more centralised structure, meaning that they are quick to implement strategies and maximise profits. As a result, the debate has now shifted to privatisation. Recent study has found that it will produce a panoply of significant improvements. Such as: boosting efficiency and quality of remaining government activities, reducing taxes, and shrinking the size of the government. In the functions that are privatized, they argue, the profit seeking behaviour of new, private sector managers will undoubtedly lead to cost cutting and greater attention to customer satisfaction.

 

This could be a ‘perfect’ strategy however there are many criticisms, suggesting that there is no single policy that can help to reduce public debt and only a combination of policies can help to reduce costs.

 

Decision making & implementation: Private sector vs public

 

In addition, decision making and implementation of cost saving initiatives is said to be another reason to why public sector cost reduction strategies are not effective in comparison to the private sector. Generally speaking, managerial decisions making can be enhanced through providing appropriate decision support.

 

The nature of that support depends on a number of variables, including organisational context of the decision (public vs private sector), the quality of information available, of course, the willingness of decision makers to utilise such support. Evidence suggests that since public and private sector decision makers operate in different decision making contexts and employ different decision processes, their support needs differ.

 

Technology changes have played an integral part in helping promote cost efficiency for both sectors. For the public sector, it usually finds itself stuck between cost efficiency and focusing on providing real value to citizen needs.

 

Departments in the public sector are also seeking to recoup as much return on investments at a minimum cost. Often, they will turn to many different technologies to fulfil their needs, and more often than not, many technologies do not achieve the specific system needs.

 

However, the UK government has taken an ambitious step towards using technology and has made significant impact. The DVLA handles over 44 million applications for vehicle tax renewals each year. When the department needed to updated their system, they implemented the Electronic Vehicle Relicensing (EVL) system. This was designed in a way to make the whole process of renewing vehicle tax easier. The entire process took a year to complete but the improvement seen was instant.

 

Each week 273,500 motorists buy and renew their tax electronically. As a result of this costs have been cut by almost 30%. . In addition, as healthcare costs continue to rise, the digitization of some medical services allows government agencies to provide high quality care while keeping expenses under control. The U.S navy recognises that healthcare digitization represents tremendous opportunities for reducing healthcare costs by providing sailors with what the navy hopes will be a ‘frictionless experience’ that leverages both telehealth solutions and apps.

 

Whereas, businesses within the private sector are using technology in the form of cloud computing which provides numerous benefits to their business. Because cloud-based software and applications automatically update themselves, the cloud has allowed more businesses to outsource their IT support.

 

On a higher-level, the cloud allows you to have data backups in places that are off-site, just in case you’re on-site servers are ever compromised by a cyber-attack or suffer physical damage. The cloud can have your systems back up and running in hours, not days. Most often private-sector has found itself in a better position when it comes to utilising the effectiveness of technology in cost reduction strategies as they are able to respond effectively to financial downturns quickly as they are able to quickly identify the businesses, products, and capital programs they want to maintain, those they need to rein in or stop, and those in which they want to invest.

 

They proactively prune their portfolio, allowing favoured priorities to flourish. In the public sector, a more nuanced approach is needed, since there are many activities that the government must continue because of legislation or for reasons of fairness; governments also lack the flexibility of a business, which can simply decide to stop serving an expensive-to-reach segment of the population. However, these constraints should not prevent a detailed review of expenditure. This clearly suggest that the government faces multiple constraints in decisions they can and cannot make.

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