Change management is a part of everyday business. Growing a business, downsizing or simply restructuring to better achieve your goals all require change. As do new projects, products, technologies or process improvements. It is how your business manages this change that determines the success of your efforts.
Organisational change management is a discipline that provides a process, strategy and framework for the organisation and the people undergoing change. It helps you to understand the likely effects and the potential risks that the change may cause.
This guide explains the main change management models and steps involved in leading change in a business. It describes the common types of business transformation and the advantages of following a formal change management process to carry it out.
It also tells you how to apply change management principles to your business, initiative or project to mitigate risks and deliver desired results.
Types of organisational change
Many internal and external factors can give rise to organisational change. For example, competition, new technologies, market instability, reorganisation, staff initiatives and many others.
Types of change
Depending on what causes it, business change can be:
Planned change is often implemented with the aim of improving the ways a business operates or to achieve pre-defined goals. This could be, for example, introduction of new products and services or organisational restructure.
Reactive change takes place in response to an event that is not anticipated and is outside of the organisation's control. For example, a fall in demand for a business' product or service, or a crisis such as the COVID-19 global pandemic. A business' response to such an unpredictable event can be profound and can lead to a complete transformation, altering the way people work, innovate, collaborate and integrate different functions to enable business operations. See importance of change management for business continuity.
As well as planned and reactive, change can also be categorised as developmental, transitional, transformational or remedial. Each type of change has a different degree of complexity and uncertainty, and may require different implementation methods and commitment of resources.
Levels of change
There are three main levels where change can occur in a business:
- individual - eg change in job assignment, transfer, change in job maturity level, etc
- team or group - eg changes due to inefficiencies, lack of communication, etc
- organisational - eg changes due to relocation, restructuring, mergers, acquisitions, etc
Each level has its own considerations, although change can affect one or more levels at the same time. It's important to understand the impact of change across all levels, so that you can develop appropriate measures and interventions.
Categories of organisational change
Organisational change typically falls into four distinct categories:
- technological or process-oriented
Strategic organisational change is concerned with the overall goals and purpose of the business, and any changes in the vision and mission of the organisation. Process-oriented change focuses on new technologies, new skills and operating processes, while people-oriented change relates to employee performance, skills, attitudes, behaviours and relationships.
Change in organisational structure
Structural change in an organisation occurs when the business changes its:
- organisational hierarchy
- chain of command
- management systems
- job structure
- administrative procedures
A structural change may involve, for example:
- relocation or adaptation of business premises to accommodate extra staff
- relocation to a cheaper location or one nearer to customers, labour or transport links
- mergers and acquisitions to allow you to enter new markets, seize new opportunities or increase efficiencies
- flattening of your management structure
Read more about reasons for changing your organisational structure.
Risks associated with change
Any type of major organisational change can be stressful and risky. Potential challenges may arise in relation to staff retention, redundancies, relocation incentives, staff communication, merging of organisational cultures and processes, or altering your business structure.
Before you initiate change, make sure that the benefits justify the upheaval. Following a change management process can help you to minimise potential disruption and risks.
What is change management?
Change management is a structured approach to preparing and supporting individuals and organisations in planning and implementing change. It comprises models, processes and techniques to help ease the impact change can have on a business.
Change management helps you consider several critical questions:
- What needs to change within your business and why?
- What resources will you need to achieve this change?
- How will you manage and communicate this change?
- What will the impact be on your employees and organisation?
- What are the implications for your customers?
You could be implementing a new software, re-engineering a process, redesigning a product or pursuing full business transformation. Navigating change, especially a significant one, can be difficult, so it may help to follow a controlled, coordinated and well-established process.
Importance of change management
Change management is critical in today's markets and business environment.
Customers, competition, technology and other external and internal drivers may inevitably force your business to respond to changing conditions. A robust change management approach and agile practices can help your business to survive even the most unexpected crises, such as the COVID-19 pandemic.
Even when circumstances don't impose change, businesses frequently choose to plan and adopt change to encourage growth and improvement. If you want to succeed and stay ahead of the competition, you have to be able to rapidly and successfully manage change. See more on the benefits of change management.
It's important to recognise that businesses respond to change in many different ways. Depending on how they manage it, change can either provide a platform for growth and success, or cause problems for individuals, teams and even entire organisations.
You can follow simple change management principles to help you manage change and achieve lasting impact within your business.
Ability to manage change in business
There are varying levels of change management capability across organisations. These can range from little or no formal change management (with the highest rate of failure and productivity loss) to complete change management competency (with highest profitability and continuous improvement process in place).
In between these two, there is a multitude of other approaches to change management, which can be used at individual project level or with multiple projects, or embedded in organisational standards and methods.
Find out more about the PROSCI's change management maturity model.
Change management process
Effectively managing organisational change involves following a sequence of well-defined steps. The process involves assessing the changes in the broader business environment, preparing and planning for the necessary adjustment, implementing the changes and their sustainability within the business.
Key steps in change management process
Managing change involves a number of fundamental activities:
- Step 1: Identify potential change - take time to understand the problem and what is required to remedy it
- Step 2: Analyse change - determine its feasibility, how long it would take to achieve and at what cost
- Step 3: Evaluate change - weigh up the benefits and costs and decide if the change is worth it
- Step 4: Plan change - analyse the impact of change, communicate the benefits and develop an implementation plan
- Step 5: Implement change - establish a schedule, train staff, assign tasks and deploy and communicate changes
- Step 6: Sustain change - validate, measure progress, close the process and set up a follow-up review to evaluate success and failures
See also what is change management.
Implementing change management process in business
Implementation is in the heart of the change management process and often includes:
- communicating the benefits of the change to your employees
- training staff on the appropriate changes
- removing resistance or obstacles to change
- securing organisation-wide buy-in for the change
- coordinating transformative activities to move the business into a new way of working
As every change is different, you may find that you need to organise tasks and responsibilities in the process differently. You may also need to carry out other activities specific to your situation or apply different change management models to manage the process successfully.
Managing change in projects
Change management process is complementary to project management. There are several established change control systems to help you manage changes within a project, focusing on:
- scope - eg where a project customer asks for changes or additions to the project scope
- cost - eg where the price for the items in the scope may increase or decrease
- schedule - eg when timescales are affected or project milestones delayed
- contract - eg when the relationship between the project customer and the supplier changes
Project managers will often use integrated change control as a way of managing proposed changes within the project. See more on integrated change management.
Change management models
Change management models describe the different processes of managing change in organisations. They give you a structured outline you can follow, serving as a blueprint to help you apply the common change management principles.
Many different models exist, however several are considered key and most likely to be used by businesses planning or undergoing change. These are:
- Kotter's 8-step process for leading change
- Deming's Plan-Do-Check-Act (PDCA) cycle
- McKinsey's 7S framework
- Lewin's Unfreeze-Change-Refreeze model
- the ADKAR methodology
Choosing a change management model
Each model has a different approach and applies different principles. Some are more complex than others, and all have their advantages and disadvantages.
When considering which change management model to choose, you should take into account:
- your goals and strategies
- your corporate structure
- your staff attitudes
- the sequence of steps suggested
- the time allotted for the work
- implementation and organisational changes
Depending on the nature of your business, the type of change and the people involved, you may use one or more models or none. Don't feel you have to follow the models precisely. Be flexible, if you need to, in order to create and sustain actionable change.
Change management tools and techniques
In addition to change management models, there are other tools and mechanisms that can help you understand, plan and implement change in your business. For example:
- the Kübler-Ross Change Curve diagram can help you understand how individuals might react to change and how you can support them through the process
- impact analysis can help you uncover unexpected challenges or outcomes of change
- training needs assessment can help you ensure that you give the right skills to the right people at the right time
- stakeholder analysis and management can help you maintain a good relationship and communication with your stakeholders
With so many options available to guide change management, finding the right one for your business can be challenging. However, understanding the change process is key to managing it well.
Regardless of the tools or models you decide to use, there are six essential steps you can follow to lead change effectively. See change management process.
Change management principles
You can follow some tried and tested change management principles to help you transform your business quickly and efficiently. These principles form the basis of organisational change management best practice.
What are the principles of change management?
The ten guiding principles of change management are:
- active leadership - lead by example by accepting and embracing change or secure senior level backing, if appropriate
- structured approach - use the change management process and leverage established models where possible
- detailed change plans - specify the change you want to see and what needs to be done to achieve it
- impact assessment - assess and address how the changes will affect your business and your people
- strong team - involve every layer, eg executives, middle managers, project managers and make sure they keep their teams focused during the change
- employee participation and engagement - secure buy-in from everyone involved and affected by the changes, directly or indirectly, train and incentivise your staff
- open and regular communication - consult with staff and tell everyone what has to happen and what their role it
- sustainability - start with small, incremental changes and build momentum as you go
- managing resistance - identify and address common barriers to change
- evaluating progress - identify what was good, what was bad and use this information to improve your change management practice for future projects
By following these principles, you will be able to work with many change management tools and adjust your approach according to the size and nature of the change.
Main hurdles to change management
Change can be difficult, but it is important to get it right. The main hurdles include:
- poor planning
- lack of understanding of the cause and effects of change
- insufficient preparation
- hastened roll-out
- absence of buy-in and support
- lack of communication
The risks of poorly managed change include financial losses, missed opportunities, wasted resources and diminished staff morale and performance. With such possible consequences, it is vital to try to identify and avoid common barriers to organisational change management.
Benefits of change management
Change management potentially offers many benefits. It supports a smooth transition from the old to the new and gives you a template to follow for helping your staff and your organisation adapt to change. See what is change management.
If you're planning to introduce changes to your business, it can be useful to think about the advantages change management can offer.
Why is change management so important?
Change delivers best results when it's meticulously planned and managed. The benefits of change management allow you to:
- assess and understand the need and the impact of change
- align resources within the business to support the change
- manage the diverse cost of change
- reduce the time needed to implement change
- support staff and help them understand the change process
- plan and execute an effective communication strategy
- improve cooperation and collaboration in your business
- minimise resistance to change
- maintain the routine in the running of your business during change
- maintain or even increase productivity, morale and efficiency
- reduce stress and anxiety associated with change
- reduce disruptive aspects and risks associated with change
- respond to challenges more efficiently
- minimise the possibility of change failure
Finally, change management creates a fantastic opportunity for the development of best practice in business.
To make the most of the benefits of change, you will have to manage many risks and challenges along the way. Find out how to avoid the most common barriers to organisational change management.
Barriers to organisational change management
To develop a successful strategy for organisational change, you must understand the types of barriers your business may face.
It's best to identify potential problems early, as this will allow you to develop a tailored change management approach to overcoming difficulties and hurdles to your business' transformation.
Top reasons for change management failure
In most cases, failure to achieve organisational change is driven by one of the following factors:
- limited understanding of the change and its impact
- negative employee attitudes
- failure to involve employees in the change process
- poor or inefficient communication
- inadequate resources or budget - see cost of change management
- resistance to organisational culture shift
- lack of management support for the change
- lack of commitment to change
- past experience of failed change initiatives
Other practical barriers can involve a lack of skills, lack of staff, difficulties in establishing service, absence of equipment required for the change, or inadequate organisational infrastructure. If key employees leave or move around the organisation, it may also be difficult to maintain changes after you've introduced them.
Consequences of poor change management
The costs and outcomes of poorly managed change can be significant. They include:
- financial losses
- productivity and performance drops
- decline in quality of work
- wasted time and resources
- inability to retain staff
- increase in employee sickness levels
- poor staff morale
- impact on customers and suppliers
- missed opportunities
You should also consider the damage to your business brand, loss of credibility and general change fatigue. See importance of change management for business continuity.
Overcoming barriers to change management
To avoid your project slowing down or derailing, you should follow the basic change management principles. These rely on:
- leading staff through change
- communicating with staff and stakeholders about the change
- understanding the need and the impact of change
- involving all levels of staff in the change process
- sustaining the change and embedding as part of the new norm
Read more about the importance of communication in change management.
Certain factors may nurture a business atmosphere that is conducive to change. For example, strong leadership team, the culture of continuous improvement and motivated staff. However, it is likely that you will need to try and implement different approaches to overcome the different barriers.
Keep in mind that change can take a long time to achieve and resistance is common in many types of change projects. It's important to consider the scale of change realistically and decide if small, incremental changes are more suitable than a quick, full-scale organisational change.
See also benefits of 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.
Importance of communication in change management
Planning and communication are critical for organisational change. Getting top management support in implementing change can significantly improve your chances of success.
Planning organisational change
Planning for any business change will help you to ensure that changes happen the way you want them to and that you identify and control the costs of your project. To plan your organisational change effectively, you should:
- Prepare early. Take time to understand the existing situation, the cause of issues and the need for change, and what the expected impact of the change may be. Follow the tried and tested change management process and models.
- Be flexible. Assess and agree your priorities but don't feel you can't change them if your circumstances change. Follow change management principles to help keep your project on track.
- Assess risks. Identify potential problems and obstacles to change and find ways to overcome them. See risk management and barriers to organisational change management.
- Draw an organisational chart. This may help you to understand existing processes, workflows and lines of authority. Remember to update the chart if you change your business organisational structure.
- Develop a vision. Take a long-term view of how the change will affect the company and its competitive position. Communicating this vision can be a great motivator for your staff. See lead and motivate your staff.
- Set objectives. These will help you to measure the success of the change.
- Plan resources, assign tasks and schedule timing for the change. Assess and identify all the possible costs of change.
- Plan your communication strategy. Consider ways you will communicate the change to your employees - it demonstrates commitment if the managing director or chief executive talks personally to employees.
- Monitor and evaluate. Review the progress regularly against the objectives and make adjustments if circumstances change.
Role of communication in organisational change
Ongoing communication with employees is vital. Meet managers and employees regularly to explain the reasons for the change, how it will be carried out and how it will affect them. Tackle rumours head-on. Make sure that managers operate an 'open door' policy to any employees who may have questions. See employee engagement.
Talk to suppliers, partners and customers as well, and keep them informed of any changes that could affect them. Try to give this information as far ahead as possible.
Consulting employees about the change
Depending on the nature of change, you may need to comply with the Information and Consultation of Employees (ICE) Regulations.
Under the regulations, employees can request that you set up formal arrangements to inform and consult them on a range of key issues, including:
- the economic situation of the business
- job prospects
- major changes in how work is organised
At least 15 employees or 10 per cent of employees, whichever number is greater, must make the request for a formal agreement. The regulations only apply to businesses with 50 or more employees.
If you are planning redundancies as part of your organisational change, you must comply with relevant legislation. See redundancy: the options.
Importance of change management for business continuity
Many things can put your business at risk, including changes to your organisation, people or technology. The current coronavirus (COVID-19) pandemic has put many businesses under unprecedented pressure, and some even teetering on the brink of survival. Crises like this quickly turn change management from a best practice discipline into an urgent and critical business activity.
Change management and disaster recovery
A robust change management approach can help you avoid making unnecessary or rash changes in your business without thorough planning and analysis, thus avoiding negative outcomes such as business interruption, loss of productivity and profits, and even closure.
The aim of change management in business continuity and disaster recovery planning is to:
- minimise potential disruptions to your business
- find a cost-effective way to use resources to achieve change
- reduce the likelihood of returning to pre-change activities
Business continuity efforts are focused on proactively managing your business processes, assets, facilities, supply chains and human resources to ensure that, as far as possible, your business always functions at its highest capacity.
Disaster recovery, on the other hand, focuses on ensuring that contingency plans and procedures are in place to return the business to usual as soon as possible after a crisis.
Role of change management in business continuity
Change management is a key activity in combination with both business continuity and disaster recovery planning. Its purpose is to help you introduce and implement changes to your business, product, process or system in a controlled and coordinated way, avoiding issues and risks along the way. As such, change management can:
- boost your business' resiliency
- speed up recovery from critical issues
- help you create contingency strategies for situations where change doesn't go to plan
You should review all your management plans and processes regularly to ensure they are fit and ready to use if and when you need them.