More On The Human Factors In ROI
Benefit perspectives on ROI in change management (5)
i) 3 people-side ROI factors, (ie,
- faster speed of adoption (How fast do people adopt the new processes or behaviours?)
- higher ultimate utilisation (How many employees make the change and how many do not?)
- higher proficiency (How effective were employees at following the new processes or behaviours)
These 3 factors can even be used to conduct sensitivity analysis to generate actual numerical values of the impact that people-side factors have on ROI (for instance, if the period of adoption was over 6 weeks instead of 3, and 15% of users did not adopt the system, then the ROI will change).
Generally the people side is ignored and/or erroneous assumptions are used. An example might occur when a large IT implementation gives users new interfaces, while the evaluators
"...might implicitly and erroneously assume that all users (100% ultimate utilisation) will begin expertly using the system (extremely high proficiency) the day the systems go live (instantaneous speed of adoption)..."
Prosci, 2023g
Need to measure rather than make assumptions on the people side.
The 3 people-side ROI can help:
"...i) clearly defined individual changes required by a project at its initiation
ii) calculate the impact of slower speed of adoption, lower ultimate utilisation and lower proficiency - and position change management as a tool for delivering business results in concrete terms
iii) elevate the discussion and document assumptions early on in the process related to the people-side of change..."
Prosci, 2023g
NB - Change management drives project ROI and change occurs at the individual level.
ii) cost avoidance (as poorly managed change can be costly, need to use cost avoidance tactics; some elements of cost that can have a negative impact on the organisation include
- stakeholders such as customers, suppliers, staff, etc
- productivity
- morale
- quality of work, etc.
Other factors impacted include
- resistance (active and passive)
- history of failed change initiatives
- stress, confusion, fatigue, etc
- change saturation, etc.
In contrast, at a project level, it includes:
- project delays
- missed milestones
- project put on hold or abandoned
- resources unavailable
- budget overruns
- obstacles appear unexpectedly
- rework required such as on project design, planning, implementation, etc
- project fails to deliver on objectives, etc.
Some other negative impacts include:
- expenses not reduced
- efficiencies not gained
- revenue not increased
- market share not gained
- waste not eliminated
- regulations not met, resulting in fines, penalties, etc,
"...additionally, the organisation loses the investment made in the project when the project does not deliver results. If change management is applied effectively, these costs are avoided or minimised. Some of the costs are difficult to quantify - such as morale decline - but some of the costs are very concrete and easily quantified..."
Prosci, 2023g)
iii) risk mitigation (change management is a tool that mitigate risks to individuals, projects and the organisation; need to identify potential risks, especially associated with the people side of change; include change management risk with other risk factors such as financial, technology schedule, dependency, etc; if there is a high 'people-side risk', it is best to use a structured approach)
iv) benefit realisation insurance (need to consider
"...How much of the value of the project ultimately depends on people doing their jobs differently; change management provides benefits realisation insurance..."
Prosci, 2023g
Using a structured change management approach can be compared to
"...an insurance policy against the goals and objectives of the project, superficially that portion that depends on on employee adoption and usage..."
Prosci, 2023g
Need to refer back to the objectives of the project and asked the following question, ie 'Is meeting the objectives dependent on people doing their jobs differently?' If the answer is yes, then a follow-up question could be:
' What percentage of these benefits result from people doing their jobs differently?'. This is the amount of benefits you can insure by applying a solid change management approach.
v) probability of meeting objectives (having effective change management increases the chance of meeting objectives, staying on schedule, staying in budget, meeting deadlines, etc.
"...projects with effective change management are 5 to 6 times more successful than projects which did not address the people side of change effectively..."
Prosci, 2023g)
Cost components of change management
These include:
- primary costs (resources, training, communications, travelling, time, material costs, etc)
- secondary costs (consultants, general expenses, events, reinforcement and recognition, etc)