Guide

Change management

Cost of change management

For the modern business, change is not only healthy but it's also essential for success. However, managing change comes at a cost. You will have to allocate time, money and people resources to plan, implement and sustain change.

What is the cost of change?

It’s important to understand the cumulative costs of change management. Many costs may be hidden or crop up unexpectedly.

The majority of costs associated with change management relate to:

  • Communication - explaining openly and frequently the reason for change and the actual changes themselves. In some cases, a formal public relations strategy can help you keep employees, customers and suppliers informed. In cases such as downsizing, you may have a legal obligation to consult your staff. See importance of communication in change management.
  • Branding - you may need to reflect organisational change in your branding, eg on stationery or delivery vans. This may happen, for example, in a merger or acquisition situation, or if you relocate, add new product lines, etc.
  • Training - you may have to retrain your employees, or support development and cultural change programmes to help them adapt to the organisational change and new business practices.
  • Resources - eg time, effort, new technologies, infrastructure and particularly human resources which you take away from other parts of the business to help with the organisational changes are likely to add to the costs of change.
  • Restructuring - eg redundancy payments to staff or costs of relocation to new business premises.

You may also incur additional costs, such as for consultancy, recognition and general expenses. Some of the costs will be difficult to quantify, but others may be easier to measure. Measuring costs accurately may allow you to find ways to reduce or avoid certain costs entirely.

A cost-benefit analysis can offer you a methodical structure for assessing the actual costs of change against the benefits of its desired outcomes.

Budget for organisational change management

It is a good idea to work out a detailed costing or a budget for the business change programme, to avoid any unforeseen expenses that could derail or halt the change. See more on business budgeting.

Don't feel you need to follow your original plan or budget precisely when implementing any changes to your business. You may need to modify your proposals, policies and procedures to take into account changing circumstances in the business and in the market place.

Costs of managing organisational change poorly

Poor change management opens you up to risks of incurring significant costs, both at the project and the organisational level. For example:

  • loss of money needed to address staff issues
  • loss of investment if the change doesn't deliver the right outcomes
  • inability to realise the value you need from the project in the first place

As well as money, poorly managed change may also result in wasted time and people resources, dented morale and confidence, and increased resistance to change.

Read more about the benefits of change management.