How Winning Finance Orgs Tackle Change Management

Summary

In this edition, we will be covering the following items:

1. Why the human side of finance transformation can be the trickiest component

2. How to combat the most common causes of failure in finance transformation

3. Kotter’s 8-step process for leading change

Why So Many Teams Struggle With the Human Side of Digital Transformation

With so much work to be done to successfully identify and implement the correct technologies and processes, it can be easy to assume the human element of digital transformation will take care of itself. This can be one of the costliest mistakes in any digital transformation initiative. Navigating the human side of change management means tackling several thorny challenges that can derail your progress if not addressed correctly:

1. Resistance to Change: People resist change for a number of reasons, including fear of the unknown, concern for job security, and a lack of understanding of the new tools and processes.

2. Lacking Training and Support: When the team feels they do not have the training, skills, and support they need to succeed, they can become overwhelmed and disengaged.

3. Poor Communication: When leadership has not clearly (and repeatedly) informed the team on the reasons and objectives of the transformation and each employee’s role within the initiative it can be very hard to secure engagement from the team.

4. Top-Down Mandates: When team members don’t feel involved in the process of shaping the future of the organization, they are unlikely to feel engaged or to develop a sense of ownership for the change they are responsible for creating.

5. Change Fatigue: People can become easily dejected if changes in direction occur too frequently and if previous initiatives have failed to affect the desired results.

6. Inadequate Follow-Through: Members of your organization will fail to respect and implement changes if they are not reinforced by consistent follow-through and diligent management attention.

Combatting the Core Reasons for Failure in Change Management

Understanding the root causes for many organizations’ struggles with change management is the foundation for developing a strategy to counteract them. It takes a lot of dedication and consistency from the management team to get these components right, but they are invaluable tools for your transformation journey.

1. Align Incentives to Adapting to Change: Understanding the root causes of any resistance to change is the first step in addressing it. Employees need to be directly incentivized, as part of performance management, to contribute to and facilitate transformation efforts. Your team needs a reason to buy into your organization’s transformation and the management team needs to empathize with and then address the reasons for any resistance to change among your employees. Having done your homework, you can shift incentives and communication to help your team make the changes it needs.

2. World-Class Training and Support: Taking an audit of your team’s current skillsets and experience can help you perform a gap analysis. Identify what skills, training, education, and support you need to invest in to help your team succeed. Crowdsource this information from your team; you will often be surprised by how closing small “skills gaps” in the team can lead out outsized changes in output.

3. Overcommunicate: Everyone in your organization needs to know what changes are expected of them, why they are important, and who is involved at each junction of the transformation. Your job as the leadership team is to repeat the “what, why, and who” as clearly and succinctly as possible throughout the project’s lifecycle – to ensure that the message sticks. More often than not, great teams simply need to reminders, reinforcement, and clarification to ensure they stay on track.

4. Involve Employees: One of the highest leverage methods you can engage in is including your entire team, to an appropriate degree, in the process, from the very beginning. Front-line employees are the closest to the problems and will have familiarity with issues that senior management may not be aware of. Involving front-line employees in transformation roadmapping also secures their buy-in to the process, because they develop a higher degree of ownership. Finally, including the team in the decision-making process also buys the management team more leniency to shift direction when needed, because there is a sense of a “shared learning” with the team, rather than top-down mandates.

5. Set Priorities and Make Incremental Change: To avoid burning out your team during your transformation, the goal should be to make incremental changes and deliver quick wins wherever possible. The objective is to build a sense of momentum and direction. The team can adapt to small changes in direction if they feel like they’ve built a track record of success and they have momentum on their side. It is much harder to secure an “agile mindset” from the team, when they feel overcommitted to “big boulder” projects that shift gears too often.

6. Follow Through: For the management team, following through, collecting and publicizing key metrics, holding team members accountable, and reinforcing the message are all critical to ensuring success. The team needs to be assured that these changes are important, here to stay, and part of their job descriptions. Once that message is delivered (and repeated), the team can build on its momentum and keep it going.

Next-Level Finance Transformation Using Kotter’s 8-Step Change Management Process:

Luckily for anyone interested in change management, there are some excellent frameworks for the change management process that can help guide your thinking. One of our favorites is Kotter’s 8-Step framework:

1. Create a Sense of Urgency: Motivate people to move from their comfort zone and accept the need for change. Leadership must create compelling reasons for why change is necessary, including highlighting the consequences of failing to make change and the benefits of succeeding. The organization must understand that maintaining the status quo is more dangerous than change.

2. Build a Guiding Coalition: Assemble a group with enough power and influence to lead the change effort and work together as a team. This group should have stakeholders from different levels and different teams to ensure buy-in from each critical player in the organization.

3. Form a Strategic Vision & Initiatives: Develop a clear and concise vision that will guide the change effort and make the direction of the change clear to everyone involved. The vision should be simple enough to be communicated (and repeated) quickly and should resonate with the logical and emotional mindset of your workforce.

4. Enlist a Volunteer Army: Engage and mobilize a large group of people willing to support and drive change. Successful change requires the involvement of many people beyond the guiding coalition. Build broad-based support by enlisting a sizable group of employees passionate about change and willing to drive it forward.

5. Enable Action by Removing Barriers: Identify and eliminate obstacles that hinder progress. Barriers to change can include outdated processes and technologies, rigid hierarchies, and cultural norms. The leadership team needs to proactively identify these barriers and take steps to remove them. This can include restructuring roles or teams, updating processes and technologies, and providing training and resources.

6. Generate Short-Term Wins: Create visible, short-term success to build momentum. Early successes are vital in maintaining support for change initiatives. Shot-term wins provide tangible proof that the change effort is on the right track, boosting morale and motivation. Wins should be planned and achieved as quickly as possible and then communicated widely across the organization.

7. Sustain Acceleration: Use the momentum from early wins to drive more significant changes. Build upon the momentum of your initial wins and leverage the credibility and confidence earned by your initial short-term wins. Use this momentum to tackle larger, more complex challenges and to ensure the team avoids complexity.

8. Institute Change: Embed the new behaviors, processes, and practices into the organizational culture. To make change last, it must become part of your team’s DNA. Leadership plays a key role in ensuring that the new processes, behaviors, technologies, and values become the norm. This can include aligning employee incentives and performance management, revising policies and training, and ensuring employees are socialized to the new culture.

Change management and digital transformation are not easy endeavors. But with the right frameworks your team can stack the odds in their favor and give yourself a strong chance at success.

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