How to implement a change management program

Robert Spencer is a senior

manager in Andersen Consulting’s

utility change management practice. His work is focused on development

of change programs and leadership teams.

Brian Mountford is manager of Ontario Hydro Retail’s change

management program in support of a call center formation, customer

information system and other transformation projects. His career

has included senior human resource and line management positions.

102

How to Implement a Change Management Program

Change, one of the few true constants in life, is not all bad. Organizations need to institute internal changes to make the most of external changes. But it’s not always easy to get a large organization moving in the right direction unless the change is well managed.

Robert Spencer and Brian Mountford

-

W hether to accommodate a merger, meet a competitive

challenge, or simply increase shareholder value, utilities and other organizations are placing increasing emphasis on their ability to change.

Utilities in general have suf- fered a bad reputation for change. This is unfortunate because utilities have some attributes that make them well suited to take on major changes. For example, most utility employees have a strong public service motivation.

Resistance to change is natural for utilities due to its many disadvantages, and regulation com- pounds those disadvantages. Add to the disadvantages the labor un- ions’ resistance to change-in

both craft and professional groups-plus the relatively static nature of the basic electrical and gas technologies, and you have a sure-fire prescription for modest change histories among utilities. These disincentives have histori- cally led most utility strategists to focus more on franchise requirements than on customer desires.

Still, absence of a need for change should not be confused with an inability to change. Utili- ties and their people have many attributes that suggest they may be more successful than other organizations in taking on major changes. For example, in our experience, most utility employees value public service and the work they do. They are action-oriented,

The Electricity /ownal

but desire to do things right the first time and inherently value process. Most utility employees are willing to delay gratification and work towards a common good rather than personal riches. While these traits have led to enti- tlement cultures and the expecta- tion of long-term employment, the sense of loyalty to their organizations and work teams make most utility employees more in- clined to accept major changes when they are involved.

I n other words, the challenge most utilities face in crafting

and implementing major changes comes from a lack of structure for the change, and the inability to or- ganize change programs. The gains to be made from a well managed change effort can be great, however. Among the outcomes that can be expected, and which we have observed, are: l employees deliver or exceed

target levels of performance on time and onbudget; l stakeholders remain loyal and

new stakeholders are attracted; l risks associated with change

are eliminated or greatly reduced; and l the organization is left better

able to change rapidly and effectively in the future.

Our experience implementing changes at Ontario Hydro Retail and utilities elsewhere has taught us what does and does not work in organizing an effective change management program. Beyond having discipline and staying focused, it is critical to make the right decisions at the right time. The discussion that follows will clarify the decisions involved and identify areas where utilities can

typically make best use of their personnel and gain greatest value from external advisers.

I. Senior Managers Create Focus

Major change needs to be authorized by a senior manager with a clear vision, who can build a sense of urgency and convic- tion. The best visions not only

Instead of taking a proactive approach, many utilities have tried to opevationalize a major change by recruiting someone from a more competitive indust y.

challenge the status quo, but also respond to an immediate external threat.’ Within the utility industry today, the threat of impending competition is widely cited in change initiatives.

There are, however, three additional considerations that are important. First, and perhaps most crucial, is the need for the initiating senior manager to be able to link the organizational vision to expectations for individual behavior. It is not enough to just identify key competencies. Specific, measurable behaviors need to be de- scribed. For example, the utility that envisions a more market-focused future may want to start

with the objective that executives must meet with a counterpart from four major customers each quarter. The aggressive organization might take this farther by specifying information that needs to be gathered in those meetings.

U tilities have struggled with this simple prescription

for more than a decade now. In- stead of taking a proactive approach, many have attempted to operationalize a vision or major change by recruiting someone from a more competitive industry Unless special care is taken to pro- tect these individuals, however, they move on within a few years, leaving little or no lasting effect. The problem is that these individuals invite reaction and resistance, focusing attention on the impacts and away from the vision. Leading-edge utility executives will often follow weekly and monthly “to do” checklists to model and promote behaviors key to the success of their visions.

Second, all senior managers need to be involved. Leaders who initiate change, and the project managers they select, can make the mistake of taking on too much responsibility Instead, successful leaders look for opportunities to engage others. For example, in a customer service subsidiary with five senior managers undertaking process reengineering, one manager could be responsible for re- design of accountabilities, another for training development, a third for changes to the performance management system, a fourth for communications, and a fifth for continuous improvement. Such assignments help others demonstrate-and the initiating man-

December 2 997 103

ager reinforce-new behaviors. In addition, they are very effective in building the sense of ownership and interdependency necessary to create a strong executive team.

Finally, the characteristics of change for most organizations are different today and create a special leadership challenge. As Phil Quigly of Pacific Bell has ironically noted, “There are no maps of uncharted territory” Leaders are called upon increasingly to launch changes they may not fully understand themselves; their visions and behavioral priorities can be expected to evolve as both they and their organizations learn.

L earning will not occur, however, where leaders busy

themselves in answering and resolving all the problems their changes generate. The most successful leaders seek to understand the adaptive challenges their organizations face and the level and sources of distress this creates, and to engage people in helping address the most important issues.2 The patience required to listen, understand and suspend judgment places significant pres- sure and stress on leaders. As Ronald Heifetz, renowned Har- vard leadership authority, has observed, “To listen, one has to live with doubt.“3

The most effective leaders tend to have change covlfidcrn ts that help them both listen and manage their personal frustrations. The most effective confidants are internal and have a good sense of the political and personal factors involved in change reactions. They are also likely to be well known by the leader, but most important,

need to be trusted; they are nei- ther likely to be project managers nor to have any vested interests in the change beyond making it succeed for the leader. In other words, the change agenda needs to always reflect the leader’s interests and desires, not those of advi- sors.

Successful change initiatives start with leaders who can help people throughout the organization focus on what is necessary to succeed in the changed environ- ment. The following six questions evoke the key considerations:

Confidants, in turn, can benefit from external consultants. Con- sultants are even more likely to have no change agenda beyond that of wanting to help the client

o Does the change vision de- scribe in measurable and tangible terms the organization you seek? l Has the vision been translated

into specific behaviors expected at each level of the organization? l Will altering behaviors and

skills create a competitive advantage or reduce risks or costs for the utility?

succeed. This detachment is important to help maintain focus on what is required to make the change process as effective as possible. Confidants often find they themselves need reassurance that they are working within the change mandate or agenda and are assisting the leader in appropriate ways. Consultants can draw on the experiences of others to counsel the leader and organizational change agents. The best consultant-counselors are good listeners, have a breadth of cred- ible/relevant experience, and are genuinely focused on the success of the confidant.

l Is the executive team seen as an effective change leader, and does it model the desired behaviors? l Does the key leader have pro-

ject and personal assistance for managing the change? l Do the change leader and

agents have an external counselor to help guide them?

II. Performance Requires Management and Development

S o there you find yourself, a middle manager or depart-

ment head, as the president of the utility is “doing the vision thing” and expressing expectations for new behaviors and results. What do you do after the initial waves of panic begin to subside? The challenge appears impossible, in part because you suspect that a majority of the people you super- vise won’t cooperate.

Major organizational change is always challenging, complex and expensive. It should only be un- dertaken when there is simply no other alternative.

Figure 1: The Change Challenge

In fact, most managers and senior executives needlessly exagger- ate the change challenge. Funda- mentally, there are only two major people-related obstacles” in implementing change: As Figure 1 de- picts, people can be unable or unwilling to implement a change, and possibly both.5 In general, when capability is established, people achieve a new sense of control. Unwillingness can be con- quered when choices are clarified. The challenge is to be aware of the factors that are creating these obstacles to desired behaviors, and then to construct the capability or reinforcement programs necessary to achieve them.

C apability includes all those things that enable a person

to perform new behaviors. Most often this means providing training in new skills to overcome ability deficiencies. Reinforcement, on the other hand, is necessary to overcome willingness deficiencies.

Leaders must ensure that the in- vestments in capability and reinforcement are commensurate

with the amount of behavioral change they desire. If the levels of capability and reinforcement are out of balance, people will be- come discouraged either because they lack the skills or tools necessary to earn new incentives, or they find there are no rewards associated with achieving new performance goals. Utilities have tra- ditionally not needed to provide significant incentives for performance, but managers need to learn that they can radically improve their effectiveness when they focus on delivery of capability and the reinforcements necessary to create the behaviors desired, as depicted in Figure 2. Where utilities do so, they achieve dramatic performance results.

Training and the provision of tools must be deliberately managed in a way that recognizes the difficulty staff and managers face in practicing the new behaviors required. Training should be de- signed with a clear sense of the level of proficiency needed, with an assessment of the skills that exist before and after training, and

with the use of a training strategy that is appropriate for the organizational outcomes desired. As Deming observed, “It is very diffi- cult to erase improper training.“’

A t Ontario Hydro we developed skill assessments and

used them to plan staff training and groupings. The tool we used reviews knowledge and abilities related to customer groups, major processes and general skills, in- cluding systems and conduct (e.g., telephone etiquette) areas. Employees are scheduled only for training they need, and receive feedback on their progress from their supervisors after the training. This approach avoids unnec- essary training, improves the relevance and credibility of what is delivered, and helps employees maintain a clear focus on the behaviors expected of them. It also reinforces the supervisor /employee performance relationship.

In selecting a training approach, change leaders should recognize that there are three different peri- ods during which performance can be optimized: before, during

Figure 2: Integrating Performance Management and Development

Decmber 1997 705

and after a job task is performed. Performance can be aided before tasks are performed by using training approaches that mimic transactions and duties the employee is expected to execute, such as those used in business simulation and goal-based learning techniques. Often the use of multimedia technology helps people prepare at their own rates. In- vestments in practice technologies are often questioned, but pay for themselves many times over by reducing transaction and rework- ing time when the job tasks are performed for real.

A t Ontario Hydro we ap- proached development of

each training strategy by focusing on the levels of proficiency desired, then estimating the value of this relative to the strategies available. Most of the core business processes were being changed, but involved a degree of inter-re- latedness between the call center and field organizations that could not be properly simulated prior to conversion. The optimum strategy in our case was to use a goal- based approach with substantial coaching, implemented at the time of conversion. In other situ- ations, greater use of computer- based training is called for (and in fact is to be used with the same group as a part of a customer information system installation cur- rently underway).

On-the-job performance improvement involves integrating what is often referred to as user performance support, which ranges from design of the work tasks, systems and job aids, to su- pervisory coaching, system help devices and performance meas-

urement. Performance is en- hanced by the after-task recording and sharing of the best practices used, and by development of continuous learning environments.

Several steps are important in designing reinforcement strategies. The first is identification of gaps in individual and team performance that need to be overcome. Second is identification or creation of rewards that are truly “at risk,” such as lump-sum bo-

nuses.7 Third is assessment of the available rewards (and penalties) to ensure they are relevant and proportionate to the behavior desired and the gaps that exist. It is worthwhile to construct a chart, as illustrated in Figure 3, that notes the immediate and longer- term rewards (and penalties) that are available to reinforce performance. The results of this inventory should then be reviewed with employees and managers to ascer- tain which rewards are most val- ued.

Reinforcement and capability focus on performance management and development, respectively Both require that individuals be

engaged and receive adequate feedback, especially as new skills are being practiced. A useful start- ing point is the creation of individual development plans based on the individual’s:

0 career interests, l own assessment of his or her

technical, managerial and inter- personal qualifications, and l personal views on the success

of development actions taken so far.R

The manager’s response will be most effective when it includes: l a review of the person’s ac-

complishments and contributions, l an assessment of the person’s

strengths and development needs, and l career and development rec-

ommendations, given the person’s interests.’

W hen a major organizational shift in direction is

required, a utility can expect to invest 70 percent or more of its change expenditures in activities to develop capability and reinforcement. These activities can benefit from the lessons learned by other companies, both within and outside the industry, and the use of relevant best practices. In- vestments in consulting expertise can yield substantial value by reducing development time and creating more effective solutions.

Successful change initiatives align capability and reinforcement activities to overcome ability and willingness barriers to achieving the change. The following seven questions comprise the key considerations: l Who “loses” if the change

does not happen or work as expected?

106 TIze Electricity ]owwd

l Is there an understanding of the value of proficiency and cost of incompetence? l Does the utility demonstrate a

human capital mindset, willing to invest in people to achieve results? l Will performance develop-

ment give people the flexibility to train at their own pace? l Is there a performance man-

agement program to reward achievement and penalize unwillingness? l What rewards are most val-

ued, and are these available for individuals and teams? l Do supervisors have access to

performance development, support and reinforcement best practices?

III. Involvement Creates Momentum

Utilities sometimes struggle with involvement concepts. The typical approach is to include people from field units in project teams. However, as Figure 4 helps to illustrate, a dilemma is created by project involvement. As people adjust to changes, their issues shift from a focus on personal impacts to the actions they need to take to be successful. As soon as a person joins a project team, personal success becomes related to

project success. People in the organization at large, however, will tend to see no such direct link between the project’s and their own success. The challenge for involvement programs, ironically, is to ex- pose people to the project but to keep their focus on their current business units and departments.

The approach that best main- tains this balance is to use special purpose, short duration task forces. The more a project can be broken into component parts with special opportunities for input, the easier it is to keep involvement focused on work achievement. In addition, task groups make the change more accessible and make it possible to create the kinds of small wins that lead to large change victories. As James Belasco has noted, “. . . Many small steps create change. It’s all too easy to focus on the home run and be disappointed with a single. Singles win games, particu- larly when you get enough of them. Focus on building small wins, making progress consis- tently. They add up in the long run.“”

The authors stimulated a series of small but important wins through a variety of task groups for an Ontario Hydro call center

Immediate Future

Small Thank-you note

Figure 3: Scaling Reinforcements

I Team recognition in company newsletter

Promotion

What impact on me?

What impact on my job’?

T( Why these changes?

Figure 4: How Personal Change Issues Evolve

project. The groups were formed to address a wide range of needs. The key success factors for these task groups included having clear terms of reference, use of field leaders (project staff only facilitated), and maintenance of an issues log to acknowledge concerns and track progress in resolving problems. Project communications vehicles were used to an- nounce the formation of the groups and to assign the mem- bers, as well as to report on their progress and achievements.

0 ur experience reinforces the view that “participa-

tion . . . is an important ingredient in both the quality and acceptance of the change. One of the most fre- quent reasons for resentment and resistance to change is the lack of input by those involved.“” Even though those involved do not always get their points of view ac- commodated to their satisfaction, being heard and respected appear to be more important in helping others accept change.

When the model we have been using is fully expanded (see Fig- ure 5), the inter-connectivity of the main work presents ample opportunity to build purposeful involvement. A cross-section of sen-

ior and junior managers can work together to clarify changes in accountabilities and, if used, performance contracts. This also af- fords the groups most directly involved in the cascading spon- sorship an opportunity to make certain that they are “on the same page” and to test new leadership behavior.

When communication is ap- proached as a two-way process, leaders and staff alike focus not just on understanding the vision but on ways to help the organization achieve the change. Indeed, front-line employees often have a much keener sense of the obstacles to strategic initiatives than leaders, and sometimes than their own bosses. Further, when “people are able to develop a deep understanding of the organization’s issues and why the [organizational] change is needed, [it enables] them to make wise choices regarding which changes need to be made, when, how, and by whom [in their work units].“‘*

A t Ontario Hydro (and elsewhere) we have seen

a variety of circumstances in which utility staff have im- proved the quality of an implementation, as well as their com- mitment to it, just by being more actively involved. As Wellins et al, have noted, the highest quality involvement occurs when “everyone has a role in the team. Despite differences, team mem-

bers must feel a sense of partner- ship with each other. Contribu- tions are respected and solicited, and a real consensus is established before committing the team to action.“‘3

Figure 5: Opportunities to Build Ownership

Finally, performance measure- ments should clarify proficiency requirements for both performance development (capability issues) and performance management (reinforcement issues). The authors facilitated several discus- sions with utility call center and field operations managers that led to the development of more realis- tic and achievable performance targets. Perhaps more impor- tantly however, the work resulted in widespread acceptance of the changes involved, with little or no resentment.

People adapt to change at different rates. The key is to help them re- gain a sense of control, which includes providing and clarifying the choices available. The six questions below cover the key considerations for utilities trying to involve their staff in change initiatives: l How will accountabilities

have to change to achieve the desired levels of proficiency? l Who are the change’s key in-

ternal and external stakeholders?

l Are there strategies to involve key stakeholders throughout the change process? l Is there a means of identifying

real issues and barriers to change? l Are there performance metrics

to guide performance development, support and management? l Do you have access to lessons

and best practices from other in- dustries to promote change?

IV Putting It All Together: Change Is a Journey

Perhaps the greatest change management challenge utility leaders face is in helping their organizations accept that change is now a constant. With open access looming for North American utilities, the volume and pace of change is accelerating with no re- lief in sight. It is telling that when most utility leaders today ask for change assistance, it is not just to secure an investment in a single project but to enable the organization to change more and more quickly

Complicating this situation is the fact that utilities are by their nature event-driven organizations: the power is restored, the bill rendered, the contract established. As a consequence, many utility people look for the end of change, and are quick to interpret additional change as a sign of leadership failure or unwillingness to share “the real agenda.”

In addition, the structures of utility processes and organizations are evolving, but at the same time are complicating change efforts. The days when most utilities could afford to carry vast transformer invento- ries at each local service center are behind us, but this type of change has increased the amount of interdependency. New systems have brought with them the necessity for consistent and uniform processes; local operations can no longer go their own way “But these new inter- connections greatly complicate transformation efforts, because change happens much more eas- ily in a system of independent parts,” as Kotter observes.14 Hence, while the volume and pace of change demands have increased, the capacity to change rapidly has decreased.

T his situation is bad enough, but coupled with it comes a

relentless stream of local, depart- ment-level initiatives that only serve to make matters worse for the average employee and line manager. What is to be done?

The challenge underlying the event/volume/pace issue is to in- stall mechanisms that will control the amount of change in an organization and ensure its align-

ment with utility priorities. When organizations inventory the change projects actually underway or planned, they are almost always surprised at the sheer volume involved.

To work their way out of this, an increasing number of utilities are finding it helpful to distin- guish among four basic kinds of changes. The first is establishment of a new business imperative, the kind of undertaking without

which the utility’s very survival is threatened. This category nor- mally includes development of major new revenue sources or lines of business, such as offering insurance or credit options to customers. Second is a major restructuring or downsizing. Many un- bundling efforts fall into this category The first and second options both have a strategy focus,

Third is initiation of a significant business improvement. These changes are associated with significant returns, but are not strategically significant. Examples

for this category include any form of restructuring that does not have a firm underpinning in cor- porate strategy Formation of a call center that reduces costs or improves functionality by 20 percent would fall in this category, if not clearly related to strategy On the other hand, if the utility in- tends to maintain market share by creating a value-added telemar- keting organization, this change would fall into the first or second category

I nto the fourth category fall any number of “good ideas”

that, while limited in scope, can generate attractive returns. These might include special safety initiatives, local process improvements and other worthy efforts. The point of drawing these distinc- tions is to balance the number of change impacts and challenges key stakeholders face so that what is most important for the utility is always achievable. It is valuable to recognize that these are four very different journeys that require different change management approaches to be successful.

Andersen Consulting has developed for utilities a Change Navi- gation Workbench, which is especially useful for monitoring the number of change initiatives and their relevance to strategic goals. Major change always involves un- expected twists and turns; thus, the challenge is not accurately pre- dicting the future but posturing the organization during its change journey to be able to take advantage of new opportunities that arise. The Change Navigation Workbench also allows utilities to prepare contingency plans around major risks and priorities.

Decmber 2 997 109

Figure 6: Andersen Change Journey Framework Model

Change management frame- works such as this are most likely to come from an external partner, who should be able to provide a wealth of examples of both successful and failed strategies. Most important is to select a framework that is easy to understand, is comprehensive, and includes a wealth of experience and implementation guidance. Ideally, change leaders should develop related models that provide a checklist and assist management throughout the organization to evaluate their change efforts and plans.

T he framework presented in this paper was drawn from

Andersen Consulting’s Change Journey planning model, shown in Figure 6. It was developed to help utilities leverage key strengths by navigating less pain- fully through leader-driven changes. This process is facilitated by placing value on capability development and communications, and highlighting critical change management risk factors (e.g., lack of a clear focus on behaviors and reinforcement).

The Change Journey model re- flects, in the larger scale, the need to manage macro (the top half) and micro (the bottom half) change activities. The activities on the left half tend to facilitate or supply change, and those on the .right half tend to create demand, or pull, for change. Underlying this model are a wide variety of methods, tools and experience that utilities can use to success- fully manage their change journey,

In conclusion, to construct and navigate increasingly aggressive change journeys, the change leader must prepare the utility and its staff. The following six questions will help guide this process: l Are the change initiatives de-

signed and paced so the most important business targets can be met? l Is the investment in change

targeted to areas where the greatest benefits can be realized? l Do the utility and its people

have the capacity and discipline to undertake the proposed changes? l Have the cultural, organiza-

tional, and job impacts associated with the changes been diagnosed? l Has an ongoing program

been established to monitor and manage change risks? l Do the change leaders have

access to a variety of methods, models and work plans that will enable them to achieve their

change objectives? It’s possible to get large utility

organizations moving in the right direction But it takes discipline, focus and the ability to make the right decisions at the right time. In the end, this is the difference be-

tween making change happen and making change work. n

Endnotes:

1. JOHN I’. KOTTER, CORI’ORATI! CUI,TURE

AND PERFORMANCE (Free Press 1992).

2. RONA1.D A. HEIFETZ, l.FADERSHIl‘ WITH-

OUT EASY ANSWERS, 254-63 (Belknap Press 1994).

3. Id. at 271.

4. There are many other reasons for change failures, such as misaligned strategies, projects with too much com- plexity, poor risk management, and numerous factors unrelated to change management.

5. DARYL R. CONNER, MANAGING AT THE

SPEED OF CHANGE: GUIDELINES FOR RPSII:

IENCE IN TURBULENT TIMES, 127-31 (Ran- dom 1993).

6. MARY WALTON, THE DEMINC, MANAGE-

MENT METHOD, 68 to 69 (Putnam Pub- lishing Group 1986).

7. EDWARD E. LAWI.ER, 111, THE ULTIMATE

ADVANTAGE: CREATING THE HI(;H IN-

VOLVFMENT ORGANIZATION, SCC, cs/&‘-

cinlly, 196-99 (Jossey-Bass 1992).

8. GARY D. KISSl.ER, THF CHANC;I; RIDERS:

HOW TO SUCCESSFU1.I.Y MANAC;F THT:

POWER OF CHANGE, 152-53 (Addison- Wesley 1991).

9. Id.

10. JAMES A. BELASCO, TEACHING THE E1.F.

PHANT TO DANCE: THF MANAGER’S C;UIDF

TO EMPOWERING CHANGE, 258 (NAL- Dutton 1991).

11. DONALD L. KIRKPATRICK, HOW TO

MANAGE CHANGE EFFECTIVELY AI’-

PROACHES, METHODS AND CASE EXAM-

PLES, 140 (Jossey-Bass 1985).

12. ROBERT W. JACOBS, REAL TIME STRATE-

GIC CHANCE: HOW TO INVOLVE AN ENTIRE

ORGANIZATION IN FAST AND FAR-REACH-

ING CHANGE, 31-32 (Barrett-Koehler 1994).

13. RICHARDS WELLINS, WILLIAM C. BY-

HAM AND JEANNE M. WILSON, EMI’OW-

ERED TEAMS: CREATING SELF-DIRECTED

WORK GROUPS THAT IMPROVE QUALITY,

PRODUCTIVITY AND PARTICIPATION, 189 (Jossey-Bass 1991).

14. JOHN I? KOTTER, LEADING CHANGE,

134 (Harvard 1996).

110 The Electricit!/ ]olrrrml

How to implement a change management program

Documents

Transcript of How to implement a change management program