ALM Intelligence: Change Management Consulting

Today's companies are operating in an environment where new customer requirements, market opportunities, and external threats are continuously emerging, creating a constant state of uncertainty and risk. Meanwhile, a slow-growth economy has intensified the focus on productivity, pushing firms to standardize not only technology but also business processes.

To compete in this environment almost always requires a response that involves organizational change, which presents its own challenge. "You can't have a change program every other year," observes David Calfee, Managing Director of Houlihan Lokey Strategic Consulting. "Just the ramp-up and the battle fatigue is going to be too much.

But change itself can be more of a constant. You can and should build it into the organization's DNA, particularly when there's so much talk about agile corporations and the need for speed and adaptability."

Becoming a change-agile organization requires new ways of thinking and making decisions, new approaches to business process design and talent management, and new technologies that enable companies to build flexibility into the organization's architecture. When well-integrated, change agility drives the capacity to seize opportunities faster than the competition and raise employees' comfort with changing priorities.

Engaging the Executive Team

The role of leadership in making change happen is critical, but often overlooked after responsibility for the change effort is delegated. Managing up can be uncomfortable for project leaders, who are typically in more junior roles. They are likely to excuse passive resistance, accommodate the neglect of busy executives, or simply underestimate the role of senior leaders beyond sponsorship of the change effort.

And yet, research consistently shows that executive leadership is a fundamental lever known to drive successful implementation and sustainability of change over time. This may seem counterintuitive in an era of flattened hierarchies, matrixed organizations, and empowered employees, but the message is clear that leadership, and more importantly, the softer skills of leadership, are needed to communicate and disseminate change.

Bob Irvin, Managing Director at Houlihan Lokey Strategic Consulting, is emphatic when he says, "The CEO must clearly and repeatedly articulate the 'what' and the 'why' of the change. That is, what the company needs to change to, and why the change is essential and beneficial. The first is for clarity, the second is for motivation." A key challenge is an overall lack of preparedness to lead change. According to research conducted by Leadership IQ, the number-one reason leaders are fired is because they mismanage change in their organization. Of the board directors surveyed who had ousted their CEOs, 31 percent said they did so because the CEOs had failed to sell the need for change initiatives and did a poor job of motivating employees and managers in the new direction.

"Driving change can require up to two-thirds of a leader's time and requires a number of new skills," says Mark Spears, KPMG's Global Head of People and Change. "Whilst we believe that these are eminently teachable, the reality is that leadership development programs typically don't cover them.

Transforming Change Management

Change management, as it is known today, is in the midst of a transformation that may well lead to its extinction. As companies develop a capability for change that becomes part of their organizational DNA, the time, resources, and resistance typically associated with change management will give way to a business model of agility where change is the norm. The driving forces behind this transformation are data analytics, design thinking, and digital technology. Together, these three developments are impacting every phase of the change lifecycle, leading to greater, more immediate benefits.

"The ROI [return on investment] of change management is tied to being able to drive faster realization of business value with less risk and better outcomes," says Yves Van Dume, Deloitte's Global Leader for Change Management Consulting. "We're now able to show with data and analytics how if certain things don't get done, the client won't realize or capture the value of the business case or synergy targets."

Design thinking is ideally suited to helping organizations understand the root causes of resistance and create collaborative environments for problem solving. Digital technology is accelerating the diffusion and adoption of new tools throughout the organization while also providing a platform for personalized change communications. However, it is the use of intelligent change data before, during, and after an implementation that is having the greatest impact on change management.

"People analytics and data-driven insights are driving a kind of organizational fitness for change," notes Bob Gruman, Global Leader for PwC's Change Management capability. "It's now possible to detect patterns in how change unfolds, such as understanding how stakeholders shift throughout the change journey. Being able to anticipate and make decisions based on data puts leaders in a stronger, more defensible position to handle unexpected change when it comes along."

These three forces are combining to raise the maturity level of organizations' change capabilities, a first step on the road to organizational agility.

Change Management Consulting Marketplace

Provider Profile: The change management consulting landscape is populated by a mix of providers that may differ in orientation, but share a commitment to change management as an enabler of strategy execution through people and culture. Key differentiators include maturity, size, and scope of services; regional, functional and industry specialty; and technical depth in specific aspects of change management (e.g., employee engagement). Against this backdrop, the following emerging trends point to new directions in the delivery of change management consulting.

■ Consulting providers building internal ecosystems. This trend is most evident in strategy & operations consulting firms and management & financial consulting firms, where acquisition strategies have targeted capabilities in leadership development and organizational culture consulting, design thinking, data analytics, and digital innovations in communications, social networking, and collaboration platforms. The internal ecosystem provides differentiation for traditional change management consultants through new approaches that facilitate co-creation and enable precision throughout all phases of the change process.

■ Organizations building internal change capabilities. A general acknowledgement that change management is a required business competency is fueling corporate development of an internal change function. "A lot of organizations have built up their own change management capabilities, which frees us up to provide more strategic services and insights," notes PwC's Bob Gruman. "We can bring a fresh perspective, be it from an agile or cultural standpoint, to help them think differently about their change strategies and to see how they might want to take on more risk as they step up their game in their own market."

■ Value-based pricing arrangements increasing. These internal functions represent a new breed of demanding buyers, singularly focused on realizing economic value from change efforts. The practice of value-based pricing is not uncommon in change management consulting, and many providers have developed success metrics based on decades of experience to assess an organization's readiness for value-based pricing and negotiate terms.