Demonstrating the ROI of an organisational activity is often an essential consideration when determining future budget spend. Projects and initiatives are scrutinised heavily for their successes; their continuation dependant on financial returns. Enterprise change management as an organisational initiative comprises of an interwoven framework of processes and systems applied to each movement of change within an organisation.
Return of Investment of Change Management
Reflective of it's complex nature, it can be difficult to calculate the ROI of enterprise change management; facing the challenges of justifying the return on budget, time, work and effort required to manage the people side of change.
Implementing change management effectively throughout the entirety of an organisation is not an instantaneous fix; but rather one that is dependent on high levels of employee engagement; senior staff buy-in; time and resource. Achieving high enough levels in each of these to ensure the successful adoption of change management requires considerable commitment of attention and budget share. However, as an initiative it is not one that ROI can be directly calculated. Instead, the return of investment of change management becomes wholly inseparable form project ROI.
As a popular topic of contention it was one that Prosci, global leaders in enterprise change management, gave due consideration resulting in the identification of the following concepts for calculating ROI for enterprise change management.
Analysing ROI for Enterprise Change Projects
At a base level the result of applying change management is the effective achievement of the intended results and outcomes of a project. Therefor the ROI of change management is the additional value created by a project due to employee adoption and usage.
Calculating the return on investment is an analysis process that all project and senior leaders are familiar with; weighing out the ‘expected project benefits’ against the ‘project costs’. When considering the ROI of change management, it is the figures associated with the ‘expected project benefits’ that fall under the greatest consideration. As part of this consideration it becomes important to determine how these benefits can be subcategorised as either: ‘Independent of adoption and usage’ or ‘Dependent on adoption and usage’.
The deployment of a replacement software program has a number of benefits that can be subcategorised accordingly. The requirement of lower licence and maintenance fees are benefits that are achieved independently of adoption and usage by employees. But on the other hand, when used proficiently, the software enables the production of more accurate and timely data, increasing performance and reducing errors. Achieving these benefits is dependent upon the impacted employees effectively adopting and using the replacement software.
It is the benefits dependant on adoption and usage that are realised through increased change management capabilities.
How to calculate the ROI for Change Projects?
Enterprise change management largely focuses on the considerations made to management of the employees operating within a changing environment and the influence this has on behaviours, attitudes and roles. Therefore, it is important to consider the extent of the impact each project will have on the people of your organisation; the larger this impact the greater the necessity of effective change leadership.
This enables the consideration of the question: ‘what would the expected benefits be if adoption and usage were 0’? By establishing figures linked directly to the expected benefits if adoption and usage was 0 the value and the expected benefits contributed to what can be considered the people side the value and ROI of change management can be illustrated.
The final stage would be to divide the people side benefit contribution into the expected project benefits. Creating a model around these figures and calculations results in a percentage figure that represents the weighting of expected project benefits that can be attributed to change management. However, this also operates on the assumption that all other factors have been effectively designed, developed and delivered.
Effective change management is an organisational initiative that can require intensive resource attention during the implementation processes that ultimately lacks readily available results of the tangible nature. This makes calculating the ROI associated with change management difficult; however, by breaking down the expected benefits of a project it becomes possible to subcategorise these benefits into those that are dependent on employee performance and those that are not. It is these benefits which are highly dependent upon effective employee performance which are subjective to change management capabilities and therefore contribute to the ROI of enterprise change management.