Accelerating Innovation:  The Human Element in Managing Change

Businesses must adapt in order to merely survive.  To thrive they must do more.  Beyond the widgets, they must invest in the development of their rank and file employees.  Businesses, however, still too often invest resources in technology, systems and hardware related to change efforts, without investing similarly in managing the associated human factors—factors known to increase productivity and maximize individual and organizational achievement. 

This is always a mistake and is always costly. And it can be avoided. 

It is the personnel—the humans—with their feelings, habits, and existing beliefs, that ultimately make or break the success of any change initiative regardless of its seeming importance or the abstract elegance of its design or conception.

The human element

The idiosyncratic biases, impressions and vested interests of those whose daily work activities will change can neither be simply ignored, nor managed by improvisation. When businesses recognize they must change but fail to properly account for the human factors associated with the change, they slow down the process and reduce the adaptability of their organization—and this, by way of the very act of introducing what they intend as innovation or improvement. As a kicker, they also significantly increase the expense of making the change and the even more disastrous effects of an aborted change effort.

All change, whether initially perceived as positive or negative, necessary or unnecessary, produces resistance. People would rather remain consistent than change, even if they perceive a proposed change as beneficial. Change is messy, disruptive, makes us think, and pulls us out of the comfortable groove of well-worn habits.

Basically people don’t like that messiness and more than that they resist it.  They resist it all the more if they have been through change initiatives that have failed or simply come and then go with no result other than inconvenience.  Why, they quite reasonably ask, should they be hassled by another change for change’s sake?  They develop strategies that involve blocking or waiting the next one out.

For a change initiative to be successful, careful consideration, long-range planning, including an informed selection of tactics, is necessary in advance for any change initiative to be completed or produce its intended impact. Decisions as to how to champion, sponsor, introduce, support, and reinforce change must be laid out well before beginning the implementation proper.  Further, the change process must be consistently monitored and modified as necessary throughout the entire period of transition in order to implement the change on time, and at, or under, budget.

If unmanaged, resistance will delay or completely sabotage implementation, and as a result not only create confusion and waste resources, but also add a negative chapter to the company’s change history. This, in turn, will imperil future change initiatives, and simultaneously reduce morale and undermine effective leadership. In an era when organizations must be more adaptable than ever, these are unnecessary, self-defeating outcomes.

What to do?

What to do?  Since in addition to producing resistance change also raises the twin questions “What’s in it for me?,” and “How is this going to affect me?,” these questions must be anticipated and managed in advance. That is, they must be accounted for, and answered before the fact.

Here are three major common changes common to contemporary business along with the responses they typically generate.

Acquisitions and Mergers.  In acquisitions and mergers, employees of both companies are extremely suspicious of the implications of impending changes. In acquisitions the employees of the company being acquired are concerned about whether they will retain a position at all, and whether they will like what their job becomes after the acquisition is complete.

Other questions concern how they will be evaluated, what will be expected of them, whether they can meet these challenges, and whom they will have to work for and adapt to. Emotionally they may feel orphaned by their existing company, suspicious of being the stepchildren of the new organization, or in hostile takeovers they may feel like prisoners of war. In any circumstance they may fear relocation, and the effect that change will have on their personal life and family and “quality of life” considerations.

In mergers, such as Chrysler/Daimler-Benz, employees wonder if the merger is merely window dressing for an acquisition or takeover; this creates another level of intrigue and paranoia. In mergers, even years later their has been no true merging and the business equivalent of a stepfamily exists with pockets of ongoing loyalty to the old ways on each side.

Doubts and uncertainties of this type gravely affect employee performance during the transition. They may reach crisis proportions. If not managed appropriately, the uncertainty produced causes enormous disruption and often as much as 25% of the workforce who are involved in this kind of change leave.

In those who remain, feelings may go unresolved, and even years after the transition, performance may not have reached its former level

Downsizing. Downsizing is a strategic business change that can have immediate positive effect on the bottom line but produce damage in the organization. It must be managed extremely well.

Though the story now seems almost quaintly from a bygone era, especially in comparison to the shifts that have rocked business since, IBM was wrenched by its original downsizing efforts because the culture of Big Blue had promised lifelong employment in exchange for loyalty to the organization. IBM had always been a winner and seemed exempt from forces in play in other organizations.

Executives who spent a career with IBM suddenly faced the dubious opportunity of an unplanned career shift. Many who remained experienced a version of survivor’s guilt.  And no one could ever feel the same about Big Blue even after the correctness of the downsizing later became manifestly evident.

Downsizing creates enormous mistrust, generates fear, reduces risk-taking and creativity, and badly damages employee loyalty and morale. After downsizing many more people leave, others begin operating protectively and defensively and/or shopping their resumes. Some studies have demonstrated that downsizing often fails to bring about expected savings.

The rollout of New Office Technology or Systems.  Adopting new ways, new equipment, and new systems always meets with resistance. “If it ain’t broke, don’t fix it,” sentiments arise reflexively and employees resist both overtly and covertly.

Overtly, they give logical-sounding “reasons” the change will not work or cannot be implemented.  Covertly, they drag their feet on the implementation in a variety of ways, finding fault with the new and continuing to adhere to the old, seemingly hoping the change will go away or that their resistance will eventually break the resolve of the change agents and that the initiative will be dropped.

Others, convinced that change is necessary overall, will beg that they personally or their particular department be exempt from implementing the change. Others still, willing to change at some point, create a delay or ask for a delay citing that a different time, much later, would be much better for implementing the change.

It is typically the case that the touted benefits of new software installations are never embraced or utilized despite expensive training programs because employee resistance is often not addressed or managed.  Both anecdotal accounts and research suggest that many of the features of expensive software installations such as SAP go unused.  Moreover, few employees tap a small fraction of what is built into Outlook.

Managing the implementation of change

For all three types of strategic business changes mentioned above, implementation management is crucial to the successful completion of the change initiative and to the ongoing health of the organization.

A case in point: In April of 1998, the then privately held auctioneers and appraisers, Butterfield & Butterfield, acquired Dunning’s, the preeminent local auction house in Chicago and a family-run business.

For Butterfield & Butterfield, then the third-largest auction house in the U.S. behind Sotheby’s and Christie’s, this acquisition fit their overall plan of expansion and eventual desire to go public. It was for them, however, a new and unusual move. Their operations began and were still headquartered in San Francisco. Expansions into Los Angeles, Seattle, and Portland markets were all begun from scratch as satellite operations. The change was viewed as positive, but a major shift in direction.

Their initial feelings about the acquisition fit a classical pattern for positive changes, i.e., uninformed confidence. Their planning was simple, minimal, and overly optimistic. They were undoubtedly right in their appraisal of this acquisition as a business opportunity. They were undoubtedly wrong in their assessment of the ease with which they could transform this closely-held, 50 employee business, into a Butterfield’s.

I talked with John Gallo, the president of Butterfield’s after he returned from his first visit after the acquisition to the former Dunning’s. He had gone to address the staff and reassure them of their continued employment and his organization’s good intentions.

He marveled that despite his speech, everyone he met with privately wanted to know if they would continue to have a job and if so, whether they would receive an increase in pay. He also began to see the first signs of resistance to Butterfield’s computerized system of tracking auction items and to the introduction of the first system of computerized financial records, including monthly balance sheets.

Mr. Gallo’s frustration and amazement suggested he was beginning to move from uninformed confidence to informed doubt about the ease of making this acquisition work.

At Dunning’s, on the other hand, change had been looming for some time, and it was of course considered threatening and negative. Resistance was complex and involved two types of employees with three very different frames of reference—that of the seven family members who felt cut adrift by the sale, that of the owner who had sold the business, and that of the employees.

All were perplexed and alarmed by what they feared would be a loss of their culture—the way of doing things that they had grown accustomed to. Many felt that though they had previously been underpaid, at least they knew what was expected of them.

All had in their own ways passed through classic stages of loss including immobilization, denial, anger and bargaining, yet still had considerable apprehension. Their culture had been rocked, and all employees, including the relatives, had no special guarantees of continued employment. At that moment no one had yet quit but all were considering their options and performance had become erratic.

Only by surfacing and addressing these issues could the acquisition move forward as planned.

Back to the fundamental Issue

Businesses must adapt in order to survive. That is a certainty. But in the largest picture, businesses must adapt the way they manage transitions if they are to be nimble in a business climate where reasoned change is imperative. Only by taking the inevitable resistance to change into account, planning for it, and managing it from the inception of the change initiative will businesses be able to thrive or even survive in this new millennium.

In those cases where the human cost of change is factored in and directly planned for and managed, the pace of innovation within the organization is not only accelerated in terms of a particular change but the effects permeate the organization in general, producing an organization with a history and consequently a culture of accelerating innovation.