Cost-benefit analysis for
change management
The cost-benefit analysis for change management is not unlike other
cost-benefit analyses - you are attempting to show the
relationship between what it costs to manage the people side of
change and the benefits of applying a structured approach to
enabling and encouraging employees to adopt a change. You will
only receive the buy in and investment necessary to apply change
management if you can "tip the scale" by showing that
the real and
tangible benefits of change management outweigh the costs. This tutorial presents
the cost components of change management and five benefit
perspectives you can use to make the case.
The costs of change management
Applying change management on a project is not free. It takes
time,
energy and resources. According to
the Prosci 2011 benchmarking study, the primary cost components of change
management include:
- Change management resource costs
- Salary and
compensation for change management practitioners
- Training costs - Design, development, delivery
and materials
- Communications costs - Design, development,
delivery and materials
In addition to these primary cost components which were
identified most frequently, there were
several secondary cost components identified by study
participants including:
- Consultant costs
- General expenses
- Event costs (workshops, group meetings, “lunch and
learn” events, road shows and town hall meetings)
- Change management materials
- Reinforcement and recognition costs
Estimating costs for change management can be tricky. Several
approaches include:
- Allocating as a percentage of total project budget
- Allocating as a percentage of project FTE (Full Time Equivalents)
- Adding in the nature and complexity of the change to
scale resource requirements (i.e. a small, incremental
change does not require the same change management resources
as a large, dramatic change)
- Estimating work required to complete change management
activities (i.e. creating a work breakdown structure of the
activities in the methodology and estimating time for
completion)
- Drawing on previous experience and examples in your
organization
To "tip the scale" toward buy-in and investment in managing
the people side of change, the benefits of change management
must outweigh these cost components.
The benefits of change management
When articulating the benefits of change management, it is
essential to begin and end with one concept:
achievement of the
results and objectives of the project or initiative. There
are numerous benefit perspectives for change management, but to make a
compelling case that wins the hearts and minds of your audience, you must connect each of these benefits
back to the intended outcomes of the project or initiative.
Change management is only valuable because it increases the
successful implementation of change.
Below are five "benefit perspectives" with the associated
analysis and story about how change management improves the
successful implementation of projects and initiatives.
|
Benefit perspective |
The story |
1. Benefits realization
insurance |
Benefits realization (achievement of results and
outcomes) depends on individuals embracing, adopting and
utilizing a change. If individuals do not change how
they do their job - e.g. use the new technologies,
adhere to the new processes, exhibit the new behaviors -
then the change will not occur and benefits cannot be
realized. This is the reality of change. Change
management is a solution to the reality of change, not
an add-on.
Change management provides a
structured approach to enabling and encouraging the
individual transitions required by a project or
initiative. |
| 2. Likelihood of success |
There is a direct and distinct correlation between
the effectiveness of change management and the
likelihood of meeting objectives, staying on schedule
and staying on budget. Prosci's research over the last
three studies shows that projects with excellent change
management met or exceeded objectives 95% of the time,
while projects with poor change management met or
exceeded objectives 15% of the time.
With more effective change
management, the probability of meeting objectives on
time and on budget increases significantly. |
3. People side factors that
define
project ROI |
Any time a change impacts how employees do their
jobs, there are three people side factors that define or
constrain return on investment. The Prosci ROI of Change
Management Model identifies these three factors as:
speed of adoption (how quickly employees make the change),
ultimate utilization (how many of them in total make the change)
and proficiency (how effective they are when they have
made the change). When the people side of change is not
managed effectively, employees are slower to make the
change, fewer of them make the change and they are less
effective once they have made the change. Each of these
factors directly impacts project ROI.
Effective change management results in
faster speed of adoption, higher ultimate utilization
and greater proficiency, which all drive higher ROI.
|
4. Two costly letters in
implementing
change |
When the people side of change is ignored or
addressed late in a project, the result is a number of
wasteful, non-value adding, costly and discouraging
REs:
redesign,
rework,
revisit,
redo,
reevaluate,
retrain,
rescope,
reschedule. Project
teams absorb these costs in terms of budget impacts and
schedule delays. When the people side of change is
addressed up front, these REs
can be avoided. Effective
change management helps eliminate many unnecessary “RE”
costs that can crush a project and destroy ROI. |
5. Avoiding costs and
minimizing risks |
Poorly managing the people side of change adds
excessive costs and risks at two levels: the project
level and the organizational level. The consequences for
the project include: delays, budget overruns, loss of work by
project team, active resistance, passive resistance, and
resources not being made available. The consequences for the
organization include: productivity plunges, loss of
valued employees, reduced quality of work, morale
declines, stress, confusion and fatigue.
Change management is an
effective cost avoidance and risk
mitigation tool.
|
What is the hold up?
The logic is sound: projects and initiatives ultimately
require individuals to do their jobs differently. The correlation data is clear (from
Prosci and other sources): the likelihood of success increases with
effective change management. The people side ROI factors can be
quantified: you can calculate the impact of speed of adoption,
ultimate utilization and proficiency. Furthermore, there are countless anecdotes and examples of the
costly nature of ignoring the people side of change.
However,
organizations still seem to encounter some reluctance to fully invest and
commit to change management. Many practitioners still face the
situation where the decision to invest in change management is
not occurring. We would like to hear from you.
In your experience, "what is
the hold up?" What reasons have you seen for the lack of
investment and commitment to change management even in the face
of a compelling case for the benefits? Use the form below to
share your thoughts and Prosci will release a tutorial in the
coming weeks to share the results.
|
####
Prosci Change Management Certification
Program highlights:
- Apply the methodology as you learn it on a
real project
- Learn from experienced executive instructors
- Become part of a change management community
- Earn 2.4 CEUs, 24 PDUs and 23.5 HRCI
recertification credits
- Walk away with products and course materials
worth over $1000
Download the certification program brochure
Upcoming sessions with availability:
- Dec 20 - 22, 2011: San Francisco, CA area
- Jan 24 - 26, 2012: San Francisco, CA area
- Jan 24 - 26, 2012: Denver, CO area
- Feb 14 - 16, 2012: Washington, DC area
- Feb 14 - 16, 2012: San Francisco, CA area
- Feb 28 - Mar 1, 2012: Chicago, IL area
- Feb 28 - Mar 1, 2012: Orlando, FL area
- March 6 - 8, 2012: Orlando, FL area
- March 13 - 15, 2012: San Francisco, CA area
- March 13 - 15, 2012: Houston, TX area
- March 20 - 22, 2012: Denver, CO area
- March 27 - 29, 2012: Washington, DC area
Visit the certification training page
|
“The best
training class I have had in years. Goes way beyond
the strategy and framework and focuses on real world
problems and the tools to solve them.”
- Jennifer J., April 2009 participant
“This was
the most effective and engaging course I've ever
taken. I feel that I can truly use this knowledge in
my personal and professional life immediately.”
- Lisa S., February 2009 participant
“Awesome -
truly one of the most beneficial programs I have
ever attended - immediate application on the job!”
- Robin S., March 2009 participant
“This
program absolutely over-delivered my expectations. I
now feel more prepared and better equipped to do my
job.”
- Paul S., January 2009 participant |
|
Offerings for applying Prosci's change management methodologies:
Training:
-
Change
management certification ($2100) - 3-day program where you bring
a project you are working on and apply all of the assessments and
tools as you learn them - taught by former fortune 500 executives at
locations across the US - includes over $1000 in products, including
the Best Practices in Change Management benchmarking report, the
Change Management Toolkit and the Change Management Pilot Pro 2010
-
Train-the-trainer ($2400) - learn
how to teach Prosci change management training programs in your
organization
- Onsite training
- bring Prosci to your location for 3-day certification programs,
4-6 hour executive briefings, 1-day manager programs or 1-day
employee programs - call +1-970-203-9332 for more information
Methodology tools:
-
Change Management Toolkit ($389) - hardcopy 3-ring binder presenting
Prosci's change management methodology, includes templates, checklists
and assessments for managing the people side of change (includes USB drive)
- Change
Management Pilot Pro 2010 ($449) - online tool including Prosci's change
management methodology, eLearning modules and downloadable templates,
assessments, presentations and checklists
-
Change
Management Guide for Managers and Supervisors ($189) -
tools to help supervisors engage and coach their direct reports
through change (includes 4 copies of the Employee's Survival Guide)
-
PCT Analyzer ($149/$349) -
web-based tool for collecting PCT Assessment data, analyzing
results, identifying risks and developing action steps
References and books:
-
Best Practices in Change Management benchmarking report
($289 / quantity discounts available) - journal-style report with lessons learned and best practices
from 650 participants, presented in an easy-to-use format - reads as
a checklist of what to do and what not to do
-
Change Management: the people side of change ($18.95 /
quantity discounts available) - a primer for anyone
involved in organizational change that addresses why manage change,
individual change management and organizational change management
-
ADKAR: a model for
change ($18.95 / quantity discounts available) - the definitive work
on Prosci's ADKAR® Model
-
Employee's Survival Guide to Change ($14.95 / quantity discounts
available) - a handbook to help
employees survive and thrive during change, answers frequently asked
questions and empowers employees to take charge of change
*** Prosci also offers
leadership packages - groupings of products at discounts that
offer you some of the most helpful and common combinations of Prosci
change management resources
Email this page to a friend
Email a Prosci analyst or
call 970-203-9332 with questions about the methodology, its application, or finding the
right resources to support your change management activities.
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