THE CHANGE EQUATION
Building your Capability for Change
ORGANISATIONAL CAPABILITY
Cu
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PROJECT
Peter Duschinsky
Managing Director, The Imaginist Company
© Imaginist 2011
The Purpose of this Presentation
To:
 Examine what makes an organisation good at managing
change
 Introduce the key models and tools in the Change Equation
methodology
 Develop the concepts of:
Change Readiness and Capability for Change
 Show how the Change Equation can be incorporated into your
standard practices:
• at project level - to deliver consistently improved project outcomes
• at programme level – to deliver Capability for Change into the
organisation as a key outcome
© Imaginist 2011
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70% of projects fail to deliver
the planned benefits
© Imaginist 2011
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Internal Change Programmes
fare no better
 The Harvard Business School tracked the impact of change
efforts among the Fortune 100 and found that only 30%
produced a positive bottom-line improvement…
 A survey of change programmes in 400 European
organisations quoted by Prof. John Oakland, Emeritus
Professor, Leeds University Business School found that:
• 90% of change programmes faced major implementation problems
• Only 30% delivered measurable business improvements
 A CIPD survey of 800 executives found that reorganisations
failed to deliver real improvement in performance in 40% of
cases
© Imaginist 2011
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Why is it critical to be
good at managing change?
 The world’s private and public sector leaders have reported to IBM
that a rapid escalation of “complexity” is the biggest challenge
confronting them (IBM Global CEO Study 2010)
 Events, threats and opportunities aren’t just coming at us faster or
with less predictability; they are converging and influencing each
other to create entirely unique situations
 They expect this to continue - indeed, to accelerate - in the coming
years:
 “The complexity our organization will have to master over the next five
years is off the charts — a 100 on your scale from 1 to 5.” (Edward
Lonergan, President and CEO, Diversey, Inc)
 They are equally clear that their enterprises today are not equipped
to cope effectively with this complexity in the global environment
© Imaginist 2011
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Why is it critical to be
good at managing change?
 David Snowden, CEO of Cognitive Edge, sees this as as shift:
 “from a world where we can predict probable risks and use risk
management systems to make our plans robust,
 to one where we need to accept that complex and interdependent risks
will occur, and find new ways to cope, building ‘resilience’ into our
organisations”
 A resilient system accepts that failure is inevitable and focuses
instead on early discovery and fast recovery from failure
 This places greater reliance on skilled managers being able to spot,
analyse and respond to an emerging and fast-moving situation - and
to turn it to the organisation’s advantage
 They need to operate within a fast-reacting and resilient organisation
– one that is good at managing change

© Imaginist 2011
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What makes an organisation
good at managing change?
 Are there characteristics we can look out for?
• Strong, visible, empowering, leadership
• Clearly articulated and shared vision
• Attention paid to supporting core values
• High level of trust between managers and staff
– decision-making devolved wherever possible
• People able to give priority to new initiatives – overload issue
managed well
• Innovation encouraged and well managed
• Good communication between departments
• Collaboration with customers and suppliers
• Adherence to standard ways of doing things
• HR benefits and rewards aligned to business objectives
© Imaginist 2011
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What makes an organisation
good at managing change?
 Does your organisation have these characteristics?
 Then you are likely to have:
• High level of involvement and commitment
• Low resistance to change
• Resilience in the face of challenges
• Able to bring in changes rapidly and effectively in response to need
 Capability for Change
© Imaginist 2011
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Capability for Change
“Stock of capability”
(Rebecca Henderson, Harvard Business School)
 “Attention and resources focused on people and processes,
developing the organisation’s capability and resilience”
• Crucial if you want to respond to the accelerating pace of change
and rising levels of business complexity
• But erodes through natural entropy and neglect, so requires
continual investment and maintenance
 Any Change / Transformation Programme needs this to be
part of its core deliverables, but many don’t
 The Change Equation provides the tools you need
© Imaginist 2011
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The Principles behind the
Change Equation
The Change Equation is based on 3 key contentions:
1. Projects fail when the complexity of the project exceeds the
capability of the organisation to cope
2. The changes needed for a complex project cannot be
achieved within its lifecycle
3. A conventional ’command & control’ approach to
management of complex change projects will not achieve
consistently successful outcomes
Let’s apply these…
© Imaginist 2011
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Contention 1
“Projects fail when the complexity of the project exceeds
the capability of the organisation to cope”
Management typically:
•
•
Underestimates the complexity of its projects
Overestimates the capability of their organisation
So if we want to be able to predict success or failure, we need
to measure project complexity and organisational capability
We do this by undertaking a Change Readiness Assessment
© Imaginist 2011
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Change Readiness Assessment
 The Change Readiness Assessment (CRA) comprises:
• Stakeholder interviews, review of project documentation, analysis,
senior management team workshop, report & recommendations
 It allows us to:
•
•
•
•
identify the underlying causes of low and negative ROI on projects
quantify the barriers to success
predict the success or failure of projects
deliver a Route Map and Action Plan to help clients gain ownership
of the risks and improve performance
 Undertaking a CRA at the planning stage will improve a
project’s outcomes
 Integrating CRA into your standard project planning process
will deliver consistently improved project outcomes
© Imaginist 2011
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Change Readiness Assessment
 We use a number of key models and tools
 We will come back to these…
© Imaginist 2011
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Integrating the Change Equation
into standard practice
1. Audit
• Undertake CRAs on selected completed projects
• Stakeholder face-to-face interviews
2. Analyse
• Identify and quantify key common barriers
• Adapt methodology, terminology
3. Integrate
• CRA into standard project management practice
• Change Equation principles into programme architecture
4. Implement
• Employ project and programme managers with right skill-sets
 Consistent improvement in project outcomes
 Capability for Change
© Imaginist 2011
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Contention 2
“The changes needed for a complex project cannot be
achieved within its lifecycle”
The actions needed to achieve and embed behaviour change
usually have to be linked to a wider programme
Building these into a Change (or Transformation) Programme
will enable the development of an organisation’s Capability for
Change
The Change Equation principles provide the framework
The CRA Route Maps and Action Plans provide the content
© Imaginist 2011
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Contention 3
“A conventional ’command & control’ approach to
management of complex change projects will not achieve
consistently successful outcomes”
 Conventional change management interventions attempt to
impose change…so people give up, fall back on ‘what’s in it for
me’ and the change project fails
In a complex project, newly emergent ways of working and new
forms of organisation need to be recognised, nurtured and
embedded
You need to employ project and programme managers with the
right skill-sets to achieve this
© Imaginist 2011
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Change Readiness Assessment:
Models and tools
© Imaginist 2011
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Change Readiness Assessment:
Models and tools
© Imaginist 2011
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Assessing an Organisation’s Culture
Using the Organisational Culture Evolution model
 There’s an inherent tension between the individual and the
organisation…
 Between the aspirations and motivations of people and the
external systems and controls that they work with…
 Think of this as a pendulum
© Imaginist 2011
Assessing an Organisation’s Culture
 There’s an inherent tension between the individual and the
organisation…
 Between the aspirations and motivations of people and the
external systems and controls that they work with…
 Think of this as a pendulum
 When it swings to
the left, people are
ignored in favour of
rules and
processes…
© Imaginist 2011
Assessing an Organisation’s Culture
 There’s an inherent tension between the individual and the
organisation…
 Between the aspirations and motivations of people and the
external systems and controls that they work with…
 Think of this as a pendulum
 When it swings to
the right, systems
are ignored in favour
of people’ doing
their own thing’
© Imaginist 2011
Assessing an Organisation’s Culture
When the pendulum is at the point of balance, the organisation is
working well…
But any disruption sets the pendulum swinging…
THE ORGANISATION
‘External’ Focus:
• The organisation’s needs
and direction
• Systems and processes
• Efficiency
© Imaginist 2011
Point of
balance
THE INDIVIDUAL
‘Internal’ Focus:
• Culture
• People’s perceptions, attitudes,
motivations, aspirations
• Effectiveness
Assessing an Organisation’s Culture
The evolution of an
organisation’s culture
can be described as a
set of 9 points on a
spiral
Each point or ‘level’
represents a separate,
definable culture
THE ORGANISATION
The
‘External’ Focus:
‘External’ Focus:
•• The
organisation’s
The organisation’s needs
needs
and direction
and direction
Systems and processes
••• Systems
and processes
Efficiency
• Efficiency
© Imaginist 2011
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8
7
6
5
4
3
2
1
Point of
balance
Each culture builds
upon the earlier ones,
progressing up the
spiral
To progress up the
culture spiral we have to
deal with the underlying
tension between:
THE
INDIVIDUAL
The
‘Internal’
Focus:
‘Internal’ Focus:
• Culture
• Culture
• People’s
perceptions,
• People’s perceptions,
attitudes,
motivations, aspirations
attitudes,
motivations,
• Effectiveness
aspirations
• Effectiveness
© Imaginist 2011
9. Empowered
Holistic 8.
7. Creative
Informed 6.
5. Devolved
Efficient 4.
3. Engaged
Organised 2.
1. Focused on me
THE INDIVIDUAL - ‘Internal’
Focus
THE ORGANISATION - ‘External’
Focus
The 9 Culture Levels
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© Imaginist 2011
9. Empowered
Holistic 8.
7. Creative
Informed 6.
5. Devolved
Efficient 4.
3. Engaged
Organised 2.
1.
Focused
on me
THE INDIVIDUAL - ‘Internal’
Focus
THE ORGANISATION - ‘External’
Focus
Assessing an Organisation’s Culture
We all start by
doing everything
ourselves.
This works for a
while, but…
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9. Empowered
Holistic 8.
7. Creative
As we grow,
we need to
delegate. This
needs rules
and
processes…
© Imaginist 2011
Informed 6.
5. Devolved
Efficient 4.
3. Engaged
Organised 2.
1. Focused on me
THE INDIVIDUAL - ‘Internal’
Focus
THE ORGANISATION - ‘External’
Focus
Assessing an Organisation’s Culture
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9. Empowered
Holistic 8.
This needs
rules and
processes…
The problem
with this is that
it becomes
bureaucratic
and ‘tribal’.
© Imaginist 2011
7. Creative
Informed 6.
5. Devolved
Efficient 4.
3. Engaged
Organised 2.
1. Focused on me
THE INDIVIDUAL - ‘Internal’
Focus
THE ORGANISATION - ‘External’
Focus
Assessing an Organisation’s Culture
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9. Empowered
Holistic 8.
7. Creative
So we
streamline our
processes…
© Imaginist 2011
Informed 6.
5. Devolved
Efficient 4.
3. Engaged
Organised 2.
1. Focused on me
THE INDIVIDUAL - ‘Internal’
Focus
THE ORGANISATION - ‘External’
Focus
Assessing an Organisation’s Culture
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But that didn’t
seem to work
very well.
Why?
© Imaginist 2011
9. Empowered
Holistic 8.
7. Creative
Informed 6.
5. Devolved
Efficient 4.
3. Engaged
Organised 2.
1. Focused on me
THE INDIVIDUAL - ‘Internal’
Focus
THE ORGANISATION - ‘External’
Focus
Assessing an Organisation’s Culture
29
© Imaginist 2011
9. Empowered
Holistic 8.
7. Creative
Informed 6.
5. Devolved
Efficient 4.
THE INDIVIDUAL - ‘Internal’
Focus
THE ORGANISATION - ‘External’
Focus
Assessing an Organisation’s Culture
Perhaps we didn’t
spend enough
time gaining
ownership for the
changes…
3. Engaged
Organised 2.
1. Focused on me
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Assessing an Organisation’s Culture
THE ORGANISATION - ‘External’
Focus
© Imaginist 2011
9. Empowered
Holistic 8.
7. Creative
Informed 6.
5. Devolved
Efficient 4.
3. Engaged
Organised 2.
1. Focused on me
THE INDIVIDUAL - ‘Internal’
Focus
When we involve
people in creating
their future, they
pull the changes
through, instead
of resisting them!
‘Efficiency’ +
people =
‘Effectiveness’
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© Imaginist 2011
9. Empowered
Holistic 8.
7. Creative
Informed 6.
Efficient 4.
5. Devolved
3. Engaged
Organised 2.
1. Focused on me
And when
everyone is
pulling in the
same direction,
we can give
people more
control over
how they
achieve results
THE INDIVIDUAL - ‘Internal’
Focus
THE ORGANISATION - ‘External’
Focus
Assessing an Organisation’s Culture
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Assessing an Organisation’s Culture
THE ORGANISATION - ‘External’
Focus
© Imaginist 2011
9. Empowered
Holistic 8.
7. Creative
Informed 6.
5. Devolved
Efficient 4.
3. Engaged
Organised 2.
1. Focused on me
THE INDIVIDUAL - ‘Internal’
Focus
Now that we
are working as
a team,
communication
flows
undistorted across as well
as up and
down –
so we can
focus outwards
and use realtime
information to
make better
decisions
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© Imaginist 2011
9. Empowered
Holistic 8.
7. Creative
Informed 6.
5. Devolved
Efficient 4.
3. Engaged
Organised 2.
1. Focused on me
THE INDIVIDUAL - ‘Internal’
Focus
THE ORGANISATION - ‘External’
Focus
Assessing an Organisation’s Culture
Now managers
have the
information to
enable them to
make radical
and innovative
decisions
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Now the captain
at the helm can
stop fire-fighting
and intervening
- and start
thinking
strategically
© Imaginist 2011
9. Empowered
Holistic 8.
7. Creative
Informed 6.
5. Devolved
Efficient 4.
3. Engaged
Organised 2.
1. Focused on me
THE INDIVIDUAL - ‘Internal’
Focus
THE ORGANISATION - ‘External’
Focus
Assessing an Organisation’s Culture
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© Imaginist 2011
Holistic 8.
9. Empowered
7. Creative
Informed 6.
5. Devolved
Efficient 4.
3. Engaged
Organised 2.
1. Focused on me
THE INDIVIDUAL - ‘Internal’
Focus
THE ORGANISATION - ‘External’
Focus
Assessing an Organisation’s Culture
Now people can
be empowered
to manage their
own work - the
most effective
organisational
culture
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© Imaginist 2011
9. Empowered
Where are you now?
Holistic 8.
Where do you need to be?
7. Creative
Informed 6.
5. Devolved
Efficient 4.
3. Engaged
Organised 2.
1. Focused on me
THE INDIVIDUAL - ‘Internal’
Focus
THE ORGANISATION - ‘External’
Focus
Assessing an Organisation’s Culture
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Assessing an Organisation’s
Process Management Capability
Where are you?
Where do you need to be?
What’s stopping you?
5. Optimising
Effective process
4. Quantitatively
Managed
Measured process
3. Defined
Standard process
2. Managed
Repeatable process
1. Initial
Ad hoc process
Continuing Improvement
Quality and Productive Improvement
Consistent Execution
Controlled environment
Chaotic
Software Engineering Institute
© Imaginist 2011
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The Organisational Capability Indicator
Management Culture
9. Empowered
8. Holistic
7. Creative
6.Informed
5. Devolved
4. Efficient
3.Engaged
2.Organised
1. Focused on me
© Imaginist 2011
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How should we
measure complexity?
LOW
‘Developmental’
‘Developmental’
e.g.
Complexity
‘Transitional’
‘Transitional’
Apply
management
Replace
oneone
system
oror
Apply
management
Replace
system
improvement
with
another
improvement
techniques to process
process
with
another
techniques
“make
it
“make ittowork
better”
work better”
Little impact on people
Some impact on people
HIGH
‘Transformational’
‘Transformational
Scrap’ whole
operation/business
and
Scrap whole
start again and
operation/business
start again
Major impact on people
Complicated = not simple, but outcomes are ultimately knowable
Complex = not simple and outcomes are never fully knowable
© Imaginist 2011
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Terminal 5
Over 28,000 lost bags, 700 cancelled planes and more than 150,000
disrupted passengers
“The Terminal 5 debacle is a national disgrace”
Daily Mail, 14 April 2008
© Imaginist 2011
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So what went wrong?
1. Shortage of staff car parking
spaces
2. Only one employee security
checkpoint operating
3. Some staff unable to log on
to the computer system
4. Hand-held communication
software running slow
5. No managers on the ground to
re-allocate work
6. Shortage of bar-reading storage
bins
© Imaginist 2011
 Baggage handling staff late in
arriving
 60 staff queue to get into terminal
 6am: 3 planes leave without bags
 Bags pile up, unattended
 By midday 20 flights cancelled
 4pm: baggage conveyor belt
grinds to a halt, BA suspends all
baggage check-in
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“The Perfect Storm”
 In 2004, HP's project managers knew all of the things that could
go wrong with their ERP centralisation programme. But they just
didn't plan for so many of them to happen at once.
 The project eventually cost HP $160 million in order backlogs
and lost revenue—more than five times the project's estimated
cost.
 Gilles Bouchard, then-CIO of HP's global operations, says: "We
had a series of small problems, none of which individually would
have been too much to handle. But together they created the
perfect storm.”
 Complexity is exponential!
© Imaginist 2011
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Complexity is Exponential
”We live in a world that can change exponentially – but we have brains that
are hardwired to plot things out linearly - the software in our brains compels
us to think about progressions as being simple arithmetic ones
So as a species, and a society, we deal poorly with uncertainty in non-linear
domains.” Prof Albert Bartlett, University of Colorado
That’s one good reason why management typically underestimates the complexity of projects!
© Imaginist 2011
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How should we
measure complexity?
If complexity is exponential, we can
build it with just 3 factors: X * Y * Z
LOW
Complexity
‘Developmental’
‘Developmental’
Complexity Factor
e.g.
Apply
management
Apply
management
80000
improvement
improvement
techniques
75000
techniques
towork
“make
it
better”
70000 “make it
65000 work better”
60000 impact on people
Little
55000
50000
45000
40000
35000
30000
Simple
25000
project
20000
15000
10000
5000
0
75
© Imaginist 2011
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HIGH
‘Transitional’
‘Transitional’
‘Transformational’
‘Transformational
Scrap’ whole
Replace
oneone
system
oror
Replace
system
with
another
to process
process
with
another
Your project and
operation/business
Scrap
whole
is
too
start
again
operation/business
and 72000
complex –
Some impact on people
A complicated
project –
Not simple
needs an
- needs some experienced
project
project
management
manager
start
again
break
it down
into separate
A complex
projects
Major impact
onand
people
project –
employ a
needs a
programme
dedicated
manager
project team
32400
10800
480
3600
Exponential
Complexity
Model
2 Exponential
3 Complexity
4 Model
5
6
45
The Exponential Complexity Tool
 Which 3 factors? They must be:
• Common to all projects
• Quantifiable by stakeholders
• Good predictors of the complexity of a project
 The Exponential Complexity Tool uses the following 3 factors:
1. Number of people or Stakeholders involved
(More people = more complex = higher risk)
2. Number of business activities or Processes affected
(More ambitious = more complex = higher risk)
3. Elapsed Time to implement (in months)
(Longer to implement = more complex = higher risk)
© Imaginist 2011
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The Exponential Complexity Tool
•
•
•
Think about a project you are familiar with
Where on the scale do you think you are?
Now do the numbers: Stakeholders x Processes x Time
Complexity Factor
20
80000
75000
70000
65000
60000
55000
50000
45000
40000
35000
30000
25000
20000
15000
10000
5000
0
© Imaginist 2011
A complicated
project –
Not simple
needs an
- needs some experienced
project
project
management
manager
Simple
project
200
18 mths
Your project
is too
complex –
break it down
into separate
projects and
employ a
programme
manager
A complex
project –
needs a
dedicated
project team
72000
72,000
32400
10800
480
75
1
2
3600
Exponential
3 Complexity
4 Model
5
6
47
Combining Capability
and Complexity
© Imaginist 2011
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Deliverables: Action Plan
Organisation
Component
Implication
Action required
Management
Culture

The lack of information-sharing, alignment
and empowerment will jeopardise the
success of the project. At the very least it
will mean poor take-up and a lower than
planned level of benefits.

A programme of interaction and dialogue
across the organisation is urgently needed to
improve the management culture. This needs
to include increasing trust, see below.
Process
Capability

The organisation’s process capability is
poor. This means that any projects which
seek to standardise and improve
processes to achieve greater efficiency
will be very difficult to achieve.

Consider carrying out a programme to raise
the levels of process capability ahead of
implementing the project or using the project
itself to inject the necessary disciplines. In
this case it is crucial for the Board to make
compliance to the new processes mandatory.
© Imaginist 2011
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9. Empowered
Holistic 8.
7. Creative
Informed 6.
You need
to be here
5. Devolved
Efficient 4.
You are here
© Imaginist 2011
THE INDIVIDUAL - ‘Internal’
Focus
THE ORGANISATION - ‘External’
Focus
Deliverables: Route Map
3. Engaged
Organised 2.
1. Focused on me
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Deliverables:
Calculation of the Impact
Component
Status
Potential Impact
Benefits
-%
Time/Cost +%
ORGANISATION
1
Management Culture
2
Capability Maturity
Capability Impact estimated at:
PROJECT
3
Clarity of objectives
4
Complexity of project
Project Impact estimated at:
DELIVERY OF PROJECT
5
Visibility of process
6
Distrust factor
7
Benefits Realisation
Delivery of Project Impact estimated at:
OTHER FACTORS
8
Relationship with suppliers
9
IT Solution
Other factors impact estimated at:
Total potential impact on project timescales/costs
© Imaginist 2011
Total potential impact on benefits
+%
-%
Summary

The Change Equation methodology is designed to be
integrated into standard practice:
• at Project level – CRA ensures Change Readiness and
deliver consistent improvement in change project outcomes
• at Programme level – Change Equation principles, Route
Maps and Action Plans provides framework and content to
deliver organisational Capability for Change as a key
outcome

Only with both of these in place can an organisation respond
to the challenges it faces with the speed and resilience it
needs to survive
© Imaginist 2011
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Can you afford not to
find out more?
Peter Duschinsky
Managing Director
The Imaginist Company
‘The Change Equation’
is available from Amazon.co.uk
© Imaginist 2011
Email: [email protected]
Tel: 020 8201 1478
Mob: 07801 802 571
Web: http://www.imaginist.co.uk
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