Effectively ‘selling’ the practice of change management to project leaders and executives can often rely on directly connecting change management to project and organisational outcomes. The Prosci ROI of Change Management Model depicts three factors on the people side of change that directly improve or constrain the return of investment (ROI) of a project, linking directly to the ROI of change management. No matter what the project is, if it impacts the ways in which employees execute their role, then ROI can be directly linked to these 3 factors: speed of adoption, ultimate utilisation and proficiency.
Calculating ROI in Change Management
Calculating and forecasting exact figures for ROI is a tricky business that often involves complex calculations. But more often than not, the ROI of a project rarely equals what was expected. At the root of this variation lies the people side of change; the more a project’s results depend on individuals doing their jobs differently, the greater the potential for variation in ROI.
Unfortunately, few executives realise this and they tend to focus their efforts, time and money on the technical aspects of the project rather changing the way impacted employees do their jobs. More significantly, this lack of insight is especially detrimental to the longevity of the company because the most important and strategic changes in organisations tend to have greater dependency on the people side of change.
By incorporating the discipline of change management into the project delivery process, a system for enabling and encouraging these individual changes can be achieved, maximising the ROI that could be realised.
Change – One Person at a Time
Calculating the ROI of change management must be based on the understanding that change is the compounding consequence of the individual as a unit of change; that a project’s success is dependent on a collective adjustment in behaviour of a group of individuals. With change occurring one person at a time, the success of each individual’s transition from the current way of working to the required future state way of working improve or constrain the project ROI. By applying effective change management techniques and disciplines to a project, the three factors derived from the people side of change can be used to maximise ROI potential.
Speed of Adoption
The speed of adoption is how quickly employees adopt a change in the way they do their jobs. Assuming a unilateral and instantaneous adoption by all impacted employees is perhaps somewhat wishful thinking. We cannot just switch a change on, like a light bulb. Experience suggests that the more likely scenario is one of a staggered adoption, with different employees requiring different amounts of time to identify, accept and adopt a change to their role. How quickly, or even if, a group of impacted employees adopt the change has a direct and measurable impact on the return of a project. If the speed of adoption is slower than that identified by project forecasts, the projected ROI figures are affected negatively.
Level of Utilisation
This factor considers the ultimate number of impacted individual employees that adopt a change in the way that they perform their roles. This factor must consider the portion of individuals within the collective group who have either opted-out of change adoption, or have found work arounds. The expected benefits generated by a project are typically calculated on a 100% adoption rate, but the larger the portion of individuals opt-out or find work-arounds, the greater the likelihood that the forecast ROI figures will be unachieved. In reality most projects should achieve their ROI target if 80%+ of the target population adopt the new way of working.
This factor is linked to the how effectively employees are once they’ve adopted the change and how the benefits of the change are realised. By considering the ultimate goal of a change and the potential impact of realising that goal, a measure of employee proficiency can be established. For example: A change in processes to reduce customer handling times by X. The proficiency of change can be determined by measuring the reduction of customer handling times in comparison to X. Longer or shorter handling times would indicate that despite complete change adoption, the project benefits and ROI would not be as expected.
Measuring the ROI of change management and project success first relies on establishing the defined metrics of how each of the three factors could be measured within the terms of each unique initiative and how that can be translated into project success. Next, with the understanding that the more efficient the speed of adoption, level of adoption and proficiency, the higher the project ROI will be. This means that effective change management techniques and practices can be devised and applied to generate optimum levels of each human factor of change, leading to higher levels of Project ROI. As a discipline focused on enabling and encouraging employees to embrace, adopt and utilise a change in role, change management directly contributes to return of investment.
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To find out more about how to apply the 3 people-side ROI factors to your project, in real life, please consider participation in the CMC Prosci Certified change management Practitioner 3-day training program.