Enterprise

Organizational
transformation

John Harvey
Managing Principal, Capco1

Abstract
The 1990’s saw considerable amounts invested in new techno-
logy only to see the promised returns unrealized. The pro-
grams were often well planned, executed, within budget, and
the functionality delivered was exactly what was expected. So
what went wrong? Although the solutions are installed, the
benefits are not realized. This manifests itself where solutions
are not adopted, only partially used, or are not used as
intended. This article examines behaviors that drive change. It
examines guiding principles that can help to create a founda-
tion for a change program, and tackles the most important
issue of all, an organization’s capability to change.

By suggesting ways of integrating a people change manage-

ment program into a program of work it is expected that
organizations will be better positioned to deliver on commit-
ments and not just deliver ‘what’ was promised but also the
associated benefits that were promised.

1 I wish to thank Nick Jackson and Brian Morris for their kind help and advice
with this article. 55
 Organizational transformation

A dilemma facing many senior executives today is that the
promised results expected from investments made in
technology or other programs of work never seem to materia-
lize. The programs were often well planned, executed, within
budget, and the functionality delivered was exactly what was
expected. However, the programs are perceived as failures, the
users are dissatisfied, and the Returns on Investment (ROI) did
not meet expectations. In short the shareholders, employees,
and customers are unhappy.
The above situation is confronted by more and more execu-
tives in today’s environment. The later part of the 1990’s saw
an unprecedented investment in new technologies and
process re-engineering projects only to see the promised
growth, ROI, and improvements in service unrealized. One
only needs to look at the newspaper headlines today to get a
good understanding of the repercussions. Shareholder litiga-
tion, government investigations, senior executive turnover,
and an increasing mistrust by the public in corporate leader-
ship are just some of the symptoms.
Were the initial program assumptions so wrong? Were the
expected results just unrealstic? In most post mortems there
is a recurring theme emerging, there was little wrong with the
initial assumptions or hypothesis, the expected functionalities
were delivered, but the organization and culture did not
change with it. The utilization of new functionality is layered
within existing business practices; in short, the returns have

Service levels

Service level driven

organization

Cost Control
Service levels Service levels

e sevice levels
x imiz
Ma

Optimize
Max
t

imiz
cos

e
ze

co
i
im

nt
n

i ol
Cost Control M
Cost Control

Control driven organization

Figure 1: Three behaviors model
56
Organizational transformation
been smothered by the very things that were to be fixed. Why?
Acceptance of the solutions has not occurred. The organiza-
tion has not transformed to realize the full benefits of the
investments made.
It is important to recognize the difference between completing
a project or program, which is often mistaken as program
success, and benefits realization. For example, are the costs
savings promised realized? Are customers happier? Has produc-
tivity improved? Are controls better? The program is not over
when the change is delivered and installed. Programs need to
extend beyond this to fully realize their promised benefits.
To avoid repeating the mistakes of the past, it is important to
go back to basics. This article will examine the reasons for the
need to change or ‘Why Change?,’ the importance of the
Guiding Principles, and discuss the importance of the single
most significant critical success factor, the one that is most
commonly overlooked, ‘People’. Finally, it will examine ways to
integrate people change management into programs, thereby
improving the chances for the successful transformation of
the organization in order to deliver on the promises made.
Why change?
We examine this question for one simple reason; if the ration-
Existing business Business A
strategies Business B Business C
Organization Location
Definition principles
principles principles
Application architecture
Enabling principles
principles
Optimize change
behaviors Cost Optimized operation
Figure 2: Guiding principles
ale for change is fundamentally incorrect then change will not
be successful. In fact in such case, the program of work should
not even be started. This is consistent with the market princi-
ples of demand and supply. The market for change ‘demand’
must exist. Clearly demand can be stimulated but it needs to
be there if change is going to be beneficial at any level.
It is worth spending a few moments looking at some of the
underlying reasons for change. Typically they can be catego-
rized into 3 behaviors (Figure 1), all of which can be influenced
by both internal and external factors:
■ Cost driven behavior
■ Service level driven behavior
■ Control driven behavior
Historically, a key driver for any organization that is defining a
strategy is to decide which of the above behaviors best meets
their strategic objectives as an operation. Having a focus on
any one behavior normally means a sacrifice in the levels
achievable for the other two behaviors (i.e. a cost focused
organization will normally compromise on service levels and/or
control levels to achieve its cost level objectives). The key is to
optimize all three behaviors (i.e. to find a strategy that maxi-
mizes service and control levels while minimizing costs.
Technology
Operations Financial
Working practices Interaction
principles principles
Change Technical infrastructure
principles principles
Service quality
Control
model
57
 Organizational transformation
Striking the right balance between the 3 behaviors above is
important in ensuring that the foundation for change is firmly
laid. The alternative is that you are building a house on sand.
It is also important that those most impacted (stakeholders)
are engaged early. Defining principles and resulting strategy is
not something that you can do and then get expected accept-
ance later. It is important that there is consensus about the
interpretation and evaluation of the analysis performed. It is
important to recognize that the change process is already
beginning. If you miss this step, then the likelihood that the
changes will be accepted later (and therefore expected bene-
fits realized) is significantly reduced.
At this point it is worth using a real-life example of an issue
facing the financial services industry today ‘the need for
faster transaction processing times.’ None of the behaviors
outlined above can in itself create the necessary demand (or
consensus) to move forward with the required investment
needed to achieve this. The resistance from the financial serv-
ices industry to mandate ‘Control Driven’ programs is evi-
dence of this. However, many financial institutions are still
moving forward with significant investments in processing
technology. Why? While taking each behavior on its own does
not create sufficient demand for change, the investment is
logical when evaluating the benefits of all 3 behaviors. In short
it is not sufficient to build a program on a single leg of the
stool. Although any one behavior may drive change it is impor-
tant that any program of work considers all 3, thereby provid-
ing a firm foundation for future success.
Guiding principles
Consistency in communication and reinforcement of the 3
behaviors needs to be established. For this reason it is impor-
tant that the guiding principles that will be followed through-
out a change program be laid out early on in the process.
These will be constantly referred to during any decision
making process and will become the guide for all subsequent
communications and dispute resolutions. Performing a similar
role to a corporate mission statement, it is important that the
principles can be understood and adopted by all levels of the
58 - The Journal of financial transformation
organization and that they are continually communicated and
reinforced.
Guiding principles should be applied to existing business
strategies and can be separated into ‘definition principles’ and
‘enabling principles’. The application of the guiding principles
to business and operational strategies will result in programs
of work that optimize cost, control, and service quality.
Overview of guiding principles:
■ Organization - How the organization is organized within
itself and relative to its external environment. For example,
it may choose to organize itself in a manner that is
consistent with centralizing operations for efficiency by
centralizing its control and MIS groups and having a
common client relationship organization.
■ Location - Where operations are located. Organizations
may choose to locate their workforce in certain locations
in order to benefit from regulatory or cost
advantages.
■ Working practices - How an organization chooses to
supply its services. This deals with working hours,
telecommuting, etc.
■ Interaction - How individuals interact with their work
environment. Includes use of technology, such as
workflow tools.
■ Application architecture – What applications are used for
processing transactions? For example, the company may
rely on vendor or proprietary technology. Decisions
concerning whether to replace or extend existing systems
needs to be made here.
■ Technical infrastructure – What technology infrastruc-
ture will best support the operations? Here, investments in
remote technology services may be reflected.
■ Change - Describes how the organization is going to
introduce change into the environment.
To support the guiding principles it is helpful to have ‘sub prin-
ciples’ that can help in the interpretation of governing principles.
Organizational transformation
When establishing the principles it is important that they are
integrated within the existing business strategies. Implemen-
ting ’new’ principles without fully accounting for the existing
strategies will run counter to the culture of an organization.
Therefore there is significant risk that despite the fact that the
principles and resulting programs of work are sound they will
ultimately be rejected by the organization; along with any
fruits of those new programs. Change should not be intro-
duced independently of what is already there. It is important
to recognize early on in the process that the success of any
program of work is a function of the impact on the people
working within the organization. Therefore the biggest critical
success factor to successful implementation is the adoption
(and the capability to adopt) by the people, both within and
without, of the organization. This critical success factor needs
to be addressed by all programs from the outset and is the
focus of much of the remainder of this article.
Capability for change
A key failure point for many programs of work is that organi-
zations have severely over-estimated the capability (be it in
leadership, commitment, drive, organizational capacity) of
their organizations for change. For example, when the cup is
full it overflows and no matter how much more you put in you
will not get anything more out of it. In other words, more
investment does not necessarily mean more output. Therefore
executives should only implement changes that they are seri-
ous about and are willing to stay the course. They will need to
demonstrate commitment at all times throughout the life of
the change.
To quote Charles Darwin:
‘It is not the strongest of the species that survive, nor the
most intelligent, but the ones most receptive to change’
In order to assess whether an organization has the capacity
for change it is necessary to consider early on what impact
proposed changes will have on teams and individuals that
work within the organization. As mentioned earlier, ‘demand’
for change needs to be in place, therefore consider what is in
it for the teams and individuals impacted in order to determine
likely organizational capacity for that change. Consequently,
management needs to find answers to a number of compelling
questions in order to determine the likelihood of acceptance
of change. At the macro-level understanding the purpose of
change, determining the need for change, identification of
payoffs and rewards, and how the change will be perceived is
important. At the team level, the management might find out
whether the change results in shared expertise, a fluid struc-
ture in which staff can cross-over easily between groups, and
to determine whether the existing processes and procedures
are standardized and streamlined or fragmented? At the indi-
vidual level, the management might consider whether change
will allow development of a broader knowledge base and
know-how. Will the individual benefit from cross training, and
does the change promote variety in job?
People
Before embarking on any change program it is fundamental to
have a complete understanding of the impact that change will
have on the people involved and, further to that understand-
ing, be willing to take action to help them prepare for the
changes that are being proposed. People are typically more
comfortable with things that they are familiar with. Therefore,
programs need to recognize upfront that no matter how sound
the idea there will be resistance to change.
Why do people dislike change? The key is control. When people
have control of their current environment they can predict or
influence the outcome of a typical day.
The pace of change can be influenced by the timetables that
are used to evaluate employees. The majority of organizations
have annual performance objectives, scorecards etc; therefore
the pace of change can already be limited by these self-
imposed timetables. For this reason an organization’s reward
structure should also be aligned with the desired outcome of
a change initiative. Organizations, therefore, have the ability
to influence the acceptance of and pace of change through
their HR policies and reward structures.
59
 Organizational transformation
Another key tool that can be used to influence an organiza-
tion’s capability for change is communication. The principles
and strategies need to be communicated at all levels of the
organization in order to increase understanding and therefore
probability of success for organizational transformation.
Managing change
The good news is that resistance and capacity for change can
be understood and actioned. Recognizing the roles individuals
can play in organizational change and understanding and
clarifying responsibilities and accountability with each of
those roles is a key ingredient for successful transformation.
Daryl Conner, author of ‘Managing at the Speed of Change,’
has defined the following roles:
■ Initiating sponsor - Individual or group who legitimizes
the change for everyone.
■ Sustaining sponsor - Individual with proximity who
legitimize the change for specific target(s).
■ Change agent - Individual or group who is responsible for
implementing the change and often plays a critical linking
role between sponsors and targets.
■ Change target - Individual or group who must actually
change and will sustain the future state performance.
■ Change advocate - Individual or group who wants to achieve
a change but does not possess legitimization power.
Firstly, emphasis should be on sponsorship, we have already
mentioned the importance of unflinching resolve from
management in order to help the program achieve its goals.
The cornerstone of successful change is strong sponsorship.
Unless there is adequate support for the change from those
who make decisions, provide resources, and apply conse-
quences no amount of change agent skill or ‘target’ enthusiasm
can lead to sustained success in a major change initiative. It is,
therefore, necessary to identify people who will play sponsor-
ship roles and ensure that they are playing their roles effec-
tively, replacing weak sponsors, as quickly as possible.
Sponsorship needs to be enduring. Therefore, two types of
sponsorship are often identified. The first being the initiating
sponsor and the second being the sustaining sponsor.
60 - The Journal of financial transformation
Secondly, even with the right sponsorship, unless the program
has the right change agents, it will not be successful. Choosing
the right people to implement change is every executive’s
challenge. Some of the things to look for in a successful
change agent include:
■ A thorough understanding of the overall intent and key
objectives of the change initiative.
■ An understanding of the impact of the change on target
groups and the ability to deal with resistance effectively.
■ An understanding of change management concepts and
principles and knowing how/when to apply them.
■ Time to perform the tasks required by the project along
with other responsibilities.
■ Ability to establish a process to monitor risks and track
progress toward key goals on the project (from a people
perspective).
Finally in order to identify where to apply change manage-
ment it is helpful to have measures. Therefore the need to put
in place leading indicators to measure change is critical. Often
organizations rely solely on ‘trailing indicators.’ Staff turnover
is one example. By that time it is already too late, the people
have left. Both leading indicators (to measure changes in
behavior) and trailing indicators (to measure acceptance of
change) are required.
Integration of people change management
into a program’s methodology
People change cannot be managed as an independent project
or program of work. It must be integrated at all levels of the
program. Therefore change management steps should be
embedded within any project methodology.
Program initiation
Recognizing what role different people play within the organi-
zation from the outset will significantly influence project com-
munication with those individuals. For this reason it is
necessary to develop a ‘current state’ role map that identifies
the key sponsors, agents, and targets of the initiative. In addi-
tion, all affected stakeholders should be identified (this may
Organizational transformation
include businesses supported, regulators, clients, even com-
petitors) and, where necessary, consulted. The consultation
process will result in the development of a shared purpose.
Therefore engagement of the stakeholders needs to be
thought through and a communication strategy should be
developed from the outset.
It is important to identify all the available resources that will
be needed to support change and engaging them in the pro-
gram. Reinforcing the need for ‘initiating sponsorship’ and
securing ‘sustaining sponsorship’ at this stage is a require-
ment. In onboarding the sponsor (note: sponsorship needs to
be created) a strawman solution can sometimes be helpful to
promote clarity of the ‘vision’. Typical tasks that could be
included in this phase include, confirmation of roles and
responsibilities, development of a statement of purpose,
project orientation, process orientation, building the team,
and ensuring that the project is taking full advantage of exist-
ing data and analysis.
Program analysis
Recognizing the objectives of the people within the solution
being developed will help ensure acceptance of that solution.
Therefore at this stage assessment of the target’s readiness or
resistance should occur. As a result of that, a strategy to man-
age the resistance from employees, managers, and other key
stakeholders should be developed.
It is important to engage employees early in a program.
Therefore introducing and explaining the program in the
analysis phase, by providing a program overview, and high-
lighting the affected areas can significantly reduce resistance
to change.
Transformation phases
In order to identify when to apply change management support
and what support to apply it is helpful to break the program
down into ‘transitional phases’. As mentioned earlier, there is
a need for constant communication and reinforcement of the
principles and strategies throughout all of the phases below.
Visioning
At the visioning stage, the team helps to develop the strate-
gies, defines the guiding principles, and crystallizes the pro-
grams of work. The engagement of the key stakeholders early
on in the visioning stage and getting ‘buy in’ is a foundation
for having the changes accepted and benefits realized.
Existing world
During this phase the decisions to implement, based on good
and reliable information, have been made, and implementa-
tion is in the context of the current operating environment. At
this stage it is important to establish what key performance
indicators the project wishes to track. The selection of these
should be influenced by the need for ‘leading indicators’ versus
‘trailing indicators’.
Pre-implementation phase
Still at this stage, everybody is living in the ‘current world’ and
coming to grips with the ‘new world.’ The implementation of
the required indicators and steps to align people’s desires with
the future state through reward structures and continual com-
munication is critical in this phase. Implementation of ‘defensive
measures,’ such as retention packages, and new communica-
tion forums are also useful tools that should be used in this
phase.
Early implementation or ‘early stages’ phase
During this phase, solutions are being developed and new
manager are being appointed. The future state orientated
leaders will be driving the change and making choices around
people, technology, process, organizational design, and cul-
ture. At this stage communication to targets indicating the
start of the building of the ‘new world’ intensifies. There is also
ongoing growth of understanding, which may be supplemented
by relevant training programs.
Late implementation or ‘later stages’ phase
By this stage pilot solutions will be demonstrated and organi-
zational announcements will be made. Some employee jobs
will change. There is a balance between the new and the
existing world. During this phase there is an opportunity to
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 Organizational transformation

compare the new world metrics with those of the old and
demonstrate change effectiveness leading to greater accept-
ance. There is a need to maintain a strong ‘pull’ from the
future in order to create ongoing momentum for change.

Future world
The final transformation stage has all new processes and
employees in place and the changes are transparent to the
clients.

Conclusion
Promised results expected from investments made in
technology or other programs of work are rarely fully realized.
For change or new ideas to be accepted there needs to be
demand for them, alongside that there also needs to be ‘capa-
bility’ for change. This is a constraint that is typically over-
looked in most programs and recognizing it early in the
process is a critical success factor of any program.

Typically most projects devote sufficient time towards execu-

tion of a project but insufficient resources to manage the dis-
ruption that will be caused by a project’s implementation. It is
essential to manage this not just for the success of the pro-
gram of work being implemented but also to protect the exist-
ing productivity/standards that are already in place.

Organizations often do not apply people change management

to technology projects. All projects impact people inside and
outside the organization. Therefore people change manage-
ment solutions should be integrated into any program early on.

62 - The Journal of financial transformation