Speaker 1: When we're helping our clients through their digital transformations, we inevitably talk about organizational change management. Now one of the most common things we hear when we're talking about organizational change management is our people are ready for change and we don't need to worry about change management. My name is Eric Kimberling. I'm the CEO of Third Stage Consulting. We're a technology agnostic consulting firm that helps clients through their digital transformations. In today's video, I want to talk about some of the common challenges and mistakes that organizations make as it relates to organizational change management. On any given month, I probably talk to anywhere between 15 and 20 different organizations that are either existing clients or clients that are talking to us about potentially becoming clients. Change management always comes up as a talking point. What's really interesting is when I'm meeting with an executive team or people that have been with the organization for a long time, I'll ask one of the common questions of how do you think people are going to respond to this change? How do you think people will respond to this digital transformation? I would say 70% to 80% of the time, I get a response somewhere along the lines of, oh, they're going to love it. Everyone's excited for it. They hate their old crappy systems. They don't like the green screens or the processes are broken. There's manual processes that they don't like. It creates this perception that organizational change management is going to be easy. People are on board with the change and they're excited for it, so why would we worry about organizational change management? What I want to talk about today is some of the challenges that we commonly see and some of the common mistakes that we commonly see with organizations going through their transformations. There's a number of challenges and mistakes that we see when it comes to change management. Number one on that list is executive misalignment. What I mean by that is the executive team doesn't know what they want this project to be, or in some cases, they don't even know what they as an organization want to be when they grow up. If we don't have those answers clearly defined and articulated and agreed upon by the executive team, we're going to work our way down to a digital transformation and change management is going to be extremely difficult because if executives aren't on the same page, chances are employees aren't on the same page. So I'll give you an example of how executive misalignment can negatively affect a transformation from a change management perspective. Let's just say that the goal of your organization is to scale for growth and to create some common business processes across the organization. Perhaps you've gone out and acquired different companies and now you're trying to integrate those operations into your core operations. So you want to use this digital transformation as an opportunity to drive that commonality and that standardization, that harmonization of business processes across your operations across the world. That sounds great in theory and it could very well be a solid strategy for your organization. But if we manage our digital transformation in a way that suggests that we're trying to skimp on time or we're not going to spend a lot of time on our business process definition or we're not going to invest very much in organizational change management, that's suggesting that we don't want this project to support that vision because we're running the project as though we're going to let people operate the way they've always operated and we're simply going to automate the processes as they are today. So in order for us to get that sort of alignment, what we need to do is ensure that the goals and objectives and the vision of the executive team translate into the goals and objectives and the actions of the digital transformation team. So we need to get that alignment defined up front with the executives and we need to make sure we articulate that alignment and let it cascade down into what the digital transformation needs to be and what it looks like. We need to make sure we have the right implementation strategy and approach, the right focus on business process definition, for example. We need to make sure that everything we're doing in the digital transformation supports that level of executive alignment. One other note I'll make about executive misalignment is oftentimes executives don't understand what their vision means in terms of what the digital transformation looks like. So they may think that this is like a Windows upgrade, we're just going to slam in new technology and how hard can it be? So part of it is educating the executive team of what this means to the digital transformation, how hard it will be and what effort we need to put into defining these new business processes and getting harmonization across the globe. A second common mistake and challenge from an organizational change perspective is the hidden resistance to change. Now at the beginning of the video, I talked about how employees will often say that they're excited for the change, they can't wait to get rid of the old system. And so on the surface, they are excited for the change. They buy into the idea of a new ERP system or a digital transformation. But change and resistance to change in particular is much like an iceberg. If we view this as kind of an iceberg here, here's the water. This is what we see right now. This is where everything's okay. On the surface, people are excited for the change, they want it to happen. But when we get below the surface and we start to drive into our organizational changes and we start to define what our new processes are going to be and how new spreadsheets or old spreadsheets that employees are used to using are now going to go away or that new jobs are going to be imposed on employees or jobs are going to be taken away from employees, all those things are the things that drive anxiety and fear. So this is the stuff that we'll call the unintentional resistance to change. And these are two different things because on the surface, they still want the change. They still are okay with digital transformation and ERP. And now that you're talking about changing their jobs, taking away something from them, creating a certain amount of insecurity in their jobs, now this is where we start to dig in our heels and resist the change. Not because we still aren't on board, but because now you're talking about us personally and we have reason to fear the change. And there's so many different ways that this unintentional resistance manifests itself. It may not be blatant sabotaging of the transformation, but more often it's resisting any sort of process changes or throwing up the red flag anytime there's a new business process that's going to be defined or if a job or role or responsibility needs to be changed, oftentimes that will be resisted as well. So that unintentional resistance is something we really need to be aware of. And we have to recognize that this is always there. I've never had a client where we didn't have unintentional resistance. Even though the executives are looking up here and saying, okay, everything looks all right on the surface, what they don't understand is we are going to get below the surface here and we are going to hit this unintentional resistance iceberg. At some point, it's probably going to be a lot quicker and a lot more severe than you think. So what do we do about it? Now, what we do about it is we help our clients do an organizational readiness assessment to identify these things before we get there so that we can start to mitigate those risks and address those risks head on and start to address that resistance head on before we ever get there. And that's a great way to get ahead of the whole organizational change management curve to assume or to ensure that we address those needs. Now another challenge we see when working with clients on their organizational change initiatives is that change impacts are not well understood or articulated. And what I mean by that is as we define what our new system is going to look like, what the new business processes are going to look like, we too often view that myopically from the perspective of how are we going to design the software? What does the software need to do to work? But we're not thinking about what that means to people that are going to be using the system. So it could be things as simple as we're using a new system and the interface is going to look different. But the bigger challenge is around things that are totally changing a person's job. So an example would be with some of the machine learning capabilities that ERP vendors are rolling out with things like accounts payable and processing invoices. What we're doing now is we're automating what some organizations have multiple FTEs or full-time equivalents focusing on every day. So the question becomes what are we going to do with five or ten full-time account payable clerks that their job is 70 or 80 percent going to be automated by a system now? What are we going to do with their time? And so that's the type of thing we have to figure out and really think through. And it has nothing to do necessarily with the technology itself, but it has a lot to do with our people and our overall business processes. It also has a lot to do with the overall success of the project. So that's something we really need to do through a series of change impact assessments is make sure that we address those change impacts and understand how different individuals and work groups and departments and locations of your organization are going to be affected by your transformation. So in addition to understanding the change impacts, the next thing that we need to look at and understand is that oftentimes software doesn't fit our needs. And this is really important nowadays especially because ERP systems are a lot less mature nowadays than they were five or ten years ago simply because so many vendors are shifting to the cloud as we speak and those systems are still being developed in many cases as we speak. So it's really important that we identify where the software doesn't fit our needs because that's where you're going to see the most resistance to change and the most people problems within an implementation. Now if you're a large organization, multinational with a whole breadth of capability that you're trying to address with your digital transformation, you have a higher risk of having this challenge permeate within your organization. And that's true even if you're implementing S4HANA or Oracle ERP Cloud or D365. I'm just mentioning those as the leading three systems in terms of market share and the ones that are most likely to be adopted by larger organizations. And when we're helping clients through all three of those types of transformations, whether it's S4HANA, Oracle, or Microsoft D365, there are some pretty significant gaps in the software that you would assume the vendors would have already addressed but they haven't yet. So we need to understand what those missing capabilities are partly because we need to understand what we're going to do about it. How are we going to fix it? How are we going to run our operations day-to-day without having that capability in the system? Even if it means we have to integrate with another system or create some kind of manual workaround or God forbid create another spreadsheet. Whatever it is, we need to define what that process and what the related jobs are going to look like. And so the first thing is to understand to get there what areas the software does not quite fit what our capabilities and what our needs are. And that will help us define what our change management needs are. So this is something that we need to do to avoid some of the change management mistakes that we commonly see with clients. Another common problem is that organizations think of change management as training. So that is a big problem because change management is a lot more than training. In fact, I would say training is probably less than 5 or 10 percent of your total change management program. Or at least it should be less than 5 or 10 percent of your total training program. I always like to view end user training as sort of an afterthought. It's not an afterthought in that it's not important, but it should be more of a formality in that we've already conveyed to people how their jobs are changing. We've already worked through the freak out moments that people are going to have when they realize that their jobs are changing. We've already helped them understand what the new roles and responsibilities are. We've defined what the organization is going to look like. We've mapped out all the kinks and worked through the kinks of the business processes. And now people just need that formal training to understand how exactly am I going to do my job in the new system. And when we look at why projects fail and why change management initiatives fail, it's oftentimes because we went straight into training shortly before go live, but we didn't do all the pre-work that needed to be done from an organizational change perspective to make sure that they were ready for the change. So we spend our training sessions and our training time working through the freak out moments when we don't have time for that. We're about to go live. So we need to make sure that we pull forward as much of that change management activity as we can as we get into our digital transformation. Another similar challenge is organizations that think of OCM as a nice to have. So they think that change management is just one of those things that is going to be something we do if we have the time, if we have the budget, if we have the luxury of getting to it. But that's a huge mistake because I've never seen a project succeed that hasn't invested heavily in organizational change management. So it's really important for executives in particular and project team members and others involved in digital transformations to understand and realize that organizational change is not a nice to have. It is a critical success factor. And another data point I'll share is with all the expert witness testimony that my team and I have done over the years, change management has been the number one commonality between every single lawsuit and failure that we've had to either testify for or in some cases we also go in and recover failed projects and help the clients get those projects back on track. Every single case that we've been involved with either as an expert witness or project recovery consultant has been a severe shortage of organizational change management. So keep that in mind as you're developing your change management strategies and your overall implementation strategy and your overall budget for your digital transformation. So the final thing I'll share as it relates to change management and the final mistake I'll share is that organizational design is often overlooked. I often get blank stares and people start to glaze over in their eyes when they hear the word organizational design unless you're a change management practitioner like myself and our team members. But if you're not, this can be overwhelming or intimidating. But it's very important because we can do all the systems work we want and define the perfect technology solution. We can even map out the business processes perfectly and have everything worked out perfectly to where we have a very finely tuned machine on paper as it relates to business processes and the technology. But if we haven't defined what people's jobs are going to look like and what the new organization is going to look like, there's going to be a complete mismatch and it's going to be like putting sand in the gas tank and it's just going to cause things to be severely disrupted. So we need to understand what is that org design going to look like, especially with how much technology is changing today and how big of a jump it is to go from say a mainframe based green screen legacy system to an S4 HANA, an Oracle ERP cloud, or a cloud based D365. That's a huge jump for organizations to make, not just from a technology perspective, but just the impact it has on people and what our organization is going to look like. I mentioned earlier the example of the accounts payable clerks and their jobs becoming automated by technology. There's also artificial intelligence and data analytics and all these capabilities that are great to have, but if we don't define the organization in a way that takes full advantage of them, we're at best going to over invest in shelfware and technology that we'd never use. And at worst, we're going to fail because we haven't figured out how to align the software and processes with the people side of the equation. So it's really important to ask for help and get help to help define what your organizational design is going to be and what the impact of your organization is going to be. So those are a few things to keep in mind and lessons from mistakes of other organizations that have failed in their organizational change initiatives. I hope you found this information helpful, and I encourage you to download some of the content we've included in the description field on the channel here. I've included a link to download our 2019 ERP report, which contains a number of best practices around change management and other types of best practices to help make your digital transformation more successful. I also encourage you to reach out to me if you have questions. I'm happy to be an informal sounding board as you try to figure out how can we position change management on our project, or how can we ensure that we're successful in our change management initiatives. I've included my contact information here, so feel free to reach out to me. And I also ask two favors. One is to please like this video or dislike it, depending on your view of the video. And also provide any comments you have, any thoughts you have around change management, any experiences you've had with resistance to change, or any of the things we've talked about here today. I'd love to hear your feedback on this as well. So hope you all have a great day, and we'll talk to you soon.