Critical business decisions such as mergers generally require changes to organizational structures and work roles, infrastructure, and culture. However, if employees are unable to adapt to and embrace these changes, even the most promising decisions may go awry. Increasingly, businesses anticipate these difficulties and attempt to forestall them with Change Management (CM) techniques. However, their success rate is unimpressive: only one-third report positive outcomes. Part 1 of this article identified several shortcomings of CM interventions:
● Insufficient attention to psychological and social dynamics of change
● Underestimating the impact of individual and group inertia
● Inability to test (and refine) the plans for implementing CM decisions.
These difficulties can be resolved by applying the test driving method. Similar to road testing cars, a decision test drive simulates the execution of critical decisions, projecting their likely outcomes. Test driving a CM strategy uncovers its unintended consequences before they can damage the actual business. This enables leaders to replace or refine inadequate plans and dampen, if not avoid, the turbulence generated by many critical decisions. Test drives for CM strategies have three distinctive features: the manner in which CM consultants work with clients; the metrics used to measure performance; and the steps that make up the test drive process.
CM consultants generally interview leaders and other stakeholders to assess the change implications of a critical business decision. They then design a plan to prepare for those changes and coordinate the plan’s implementation with executives and senior managers. By contrast, the test drive process for CM strategies is conducted through facilitated workshops with a change team that includes executives, managers, and respected employees whose attitudes and views influence their peers. The change team supplies situational data and constructs their own CM strategies and implementation plans. CM consultants act as facilitators for the change team, leading discussions and serving as subject matter experts on CM concepts and techniques. Facilitators also run the test drive software tools to model and simulate emerging CM strategies and guide teams in analyzing the projected outcomes of proposed implementation plans and refining them as required. This collaborative team-based approach ensures alignment and ownership. It infuses valuable change expertise into the business, which expedites the execution of the CM strategy and enables the company to address disruptive changes that may arise in future decisions.
Change Readiness Metrics
Conventional CM gauges success in terms of awareness of change initiatives, levels of acceptance, and functional proficiencies with new skills and tools. By contrast, the test drive approach to CM measures personal and organizational readiness to change, tracking 13 metrics grouped into three dimensions:
1. Organizational Mindset metrics gauge social skills and attitudes such as the readiness of leadership to champion, inspire, and direct the CM effort and the readiness of employees to collaborate in teams.
2. Personal Mindset metrics assess not only functional skills, but also emotional intelligence and cognitive factors such as workers’ learning styles and sense of self-worth and empowerment.
3. Business Infrastructure metrics assess functional readiness in terms of factors such as technology upgradeability and adaptability of policies, procedures, and systems to support the disruptive business changes of interest.
The Test Drive Process
A test drive for a CM strategy proceeds as a set of six structured exercises. Facilitators set the context by introducing the central concepts of CM, describing the test drive process, and explaining the change readiness metrics. Each exercise is described below.
To provide a common example for the exercises, consider a test drive that we conducted for a critical decision to replace a company’s compensation system for its union-based workforce. Leaders wanted to shift from providing guaranteed annual raises at rates defined by negotiated contracts to a pay-for-performance system based on annual reviews of individual workers. They anticipated significant opposition to this decision, which they sought to defuse proactively.
Exercise 1. Characterizing the Current Organizational Situation
In this step, a change team describes their business and its history, their critical decision, and the change issues they anticipate arising. The team estimates the company’s ability to respond to the disruptive change by estimating current values for the 13 change metrics. For instance, our example change team assigned a value of 40 for the Personal Mindset metric of Work Preferences on a scale of 1 to 100, where 1 signifies a complete lack of readiness and ability to accept the change and 100 signifies a high level of preparedness and enthusiasm. Estimates for metrics don’t have to be overly precise. What does matter is that their judgments are made by consensus and are supported by concrete examples and rationales. Our example change team explained the value of 40 as indicating moderately strong resistance to changing work roles and styles. They also noted that workers were largely unprepared to shift from a task- to an outcome-based perspective required by the new performance-based review system.
Exercise 2. Defining Vision and Goals
A change team specifies the goals for their CM strategy in two ways. First, they set forth a vision for the end state of their CM efforts—a narrative of what the business would look like if it were to successfully embrace the required changes. Second, they translate that vision into tangible terms by specifying target values for the change readiness metrics. Our example change team set a target value of 80 for Work Preferences, indicating the workers will develop a more flexible and confident attitude toward “switch-hitting” work roles and tasks.
Exercise 3. Planning Implementation of the Change Strategy
A CM plan consists of a set of initiatives for achieving the readiness goals set in the strategic vision. Initiatives are broken down into tasks specified in terms of their purpose, schedule, and impact on the 13 change metrics. This forces the change team to justify each task and to think through the dynamics of change. Facilitators typically use a framework created by John Kotter to structure CM plans. Kotter’s framework identifies eight stages of transformation that are required for CM to succeed:
Create a sense of urgency about the business decision and why change is necessary
Build a coalition of change “agents”
Formulate a vision of the business after it successfully navigates the change
Communicate and educate employees
Empower others to act on the vision
Create short-term wins
Consolidate and further change
The last two stages ensure that the business gives serious attention to the problem of overcoming inertia and achieve sustainable change.
During the planning exercise, facilitators suggest change techniques as tasks to populate each initiative (i.e., change stage) that are known to “move the dial” for one or more readiness metrics. Our example change team defined four tasks for the short-term wins initiative: creating financial incentives for workers, identifying non-financial motivations, developing a demonstration pilot for the review process, and celebrating results. As a CM plan emerges, facilitators point out any omissions in addressing the readiness metrics. They also ask whether the proposed change tasks will be sufficient to close the gaps between the current and goal values of change readiness metrics. For instance, the example change plan needs to close a wide gap of 40 units on Work Preferences, but the team only identified the tasks from the short-term wins initiative as affecting this vital readiness metric. Following this prod, they added more tasks targeted to improve for this metric.
Exercise 4. Contingency Planning
In developing CM plans, businesses generally assume they will be executed in a static environment. This simplification is necessary at the outset, but tends to make plans brittle, that is, vulnerable to events, trends, and forces that arise during plan execution. In this exercise, a change team tries to anticipate contingencies and assess their impacts on readiness metrics. For example, bringing on vigorous new leadership mid-stream is likely to improve some of the Organizational and Personal Mindset metrics, while layoffs triggered by a market downturn would lower values. Our example change team anticipated that internal resistance by workers and external opposition from the union to the pay-for-performance scheme would lower the values of several readiness metrics in these two categories. To compensate for these negative influences, the team adjusted its CM plan with communications that respond to potential union opposition and proposals for additional worker incentives to maintain morale and trust. Ideally, a change team looks at a range of alternative futures, reflecting the fact that no one can predict the future reliably. This kind of “what-if” exercise is an adaptation of scenario planning and is crucial for anticipating and avoiding unintended consequences.
Exercise 5. Simulation, Analysis, and Refinement
In this pivotal step of the test drive, facilitators simulate the change team’s CM plan against the backdrop of envisaged future contingencies. A software engine “executes” the tasks in the CM plan according to schedule. It projects the estimated impact of each task on the change readiness metrics and takes into account any anticipated contingent events, trends, and forces. Each simulation run generates a trace of the company’s progress from its initial state to the goal readiness state, in terms of changing metric values. A change team compares these projected outcomes to ensure that the CM plan is robust, or achieving the desired level of goal readiness across a range of alternative future scenarios. Simulation enables change teams to practice their CM plans, identifying performance shortfalls for particular readiness metrics, and mitigating these shortfalls by refining or adding change tasks that improve those metrics. Our example change team found that their CM plan met readiness goals for Business Infrastructure (the easiest dimension to improve), fell slightly short on Organizational Mindset, and more seriously short on Personal Mindset (the toughest nut to crack). They revisited their CM plan to strengthen it accordingly. Our example change team reported that the test drive process broadened their approach to CM from a static and tactical perspective to a dynamic and strategic one.
Exercise 6. Monitoring and Adjustment
As with any critical decision, CM plans are vulnerable to unanticipated changes that invalidate prior assumptions. Businesses can reduce these risks by repeating the test drive process during the implementation of their CM plan. A change team should periodically reconvene to monitor completed change activities, update readiness metric values, and revisit plausible future events, trends, and forces. With this updated information, they are in a position to re-project outcomes. This allows a change team to detect any signals of readiness shortfalls (i.e., like an early warning system) and adjust the CM plan as needed.
Organizational change has its own unique characteristics as a critical decision. It can’t be managed like conventional projects, but it can be fostered or enabled. CM can only succeed if it facilitates development of the skills, attitudes, and cultural norms that individuals and groups need to embrace major organizational changes. The test drive method measures readiness to change along three dimensions that reflect these factors: psychological, organizational, and infrastructure. It uses these metrics to assess a company’s initial readiness to adapt to disruptive changes, define a goal state of readiness, and design CM plans to close those gaps. The method requires businesses to think through the dynamics of personal and social change in developing CM plans: how change activities improve (or ignore) particular readiness metrics over time. Test drives also encourage businesses to account for situational dynamics—the forces, future events, and other contingencies that invariably batter a business as it works to adapt to change. This improves the robustness of CM plans in the face of future uncertainties and enables mid-course corrections. Test drive simulations compensate for our limited abilities to analyze and test CM plans in our heads. The collaborative, do-it-yourself workshop approach fosters ownership of CM plans and cultivates valuable knowledge about change that carries over to future critical decisions.
For More Information
My book, Bending the Law of Unintended Consequences, describes the decision test drive method and its application to change strategies in more detail. John Kotter presented his change framework in his paper “Leading Change: Eight Ways Organizational Transformations Fail” (Harvard Business Review, May-June, 1995) and subsequent books such as Leading Change.