Change management

Business change can come from internal factors, such as restructuring, or external ones, like market instability. It is important to recognise types of change to plan effectively and support staff at individual, team, or organisational levels.

Types of change

Depending on what causes it, business change can be reactive or planned.

Planned change

Planned change is often implemented to improve how your business operates or to achieve specific goals. For example, introducing new products and services or reorganising your structure.

Reactive change

Reactive change happens in response to unexpected events outside your control. For example, reduced demand for your product or service, or a crisis such as the COVID-19 pandemic. A strong response to such events can transform your business, changing how people work, innovate and collaborate. 

In situations like this, follow good change management practices to protect business continuity.

Other types of change

Other types of change include:

• developmental change - ie incremental improvements
• transitional - eg mergers
• transformational - due to major shifts
• remedial - intending to fix issues and problems

Each type of change has a different degree of complexity and uncertainty, and may require different implementation methods and commitment of resources.

Levels of change

Change affects businesses at three main levels:

• individual level - eg change in job assignment, transfer, change in job maturity level, etc
• team or group level - eg changes due to inefficiencies, lack of communication, etc
• organisational level - eg changes due to relocation, restructuring, mergers, acquisitions, etc

Change at one level can affect others. Understand the impact across all levels to plan support and interventions effectively.

Categories of organisational change

Organisational change typically falls into four distinct categories:

• strategic
• structural
• technological or process-oriented
• people-oriented

Strategic organisational change is concerned with the overall goals and purpose of the business, and any changes in the vision and mission of the organisation. Process-oriented change focuses on new technologies, new skills and operating processes, while people-oriented change relates to employee performance, skills, attitudes, behaviours and relationships.

Change in organisational structure

Structural change in an organisation occurs when the business changes its:

• organisational hierarchy
• chain of command
• management systems
• job structure
• administrative procedures

A structural change may involve, for example:

• relocation or adaptation of business premises to accommodate extra staff
• relocation to a cheaper location or one nearer to customers, labour or transport links
• mergers and acquisitions to allow you to enter new markets, seize new opportunities or increase efficiencies
• flattening of your management structure

Read more about the reasons for changing your organisational structure.

Risks associated with change

Any type of major organisational change can be stressful and risky. Challenges may come up around staff retention, redundancies, relocation, staff communication, merging of organisational cultures and processes, or altering your business structure.

Before you initiate change, weigh the benefits against disruption, and follow a change management process to minimise potential disruption and risks.

Change management is a structured approach to help you plan, implement and sustain business transitions. It comprises models, procesess and techniques to help ease the impact change can have on a business.

Change management helps you address key questions:

• What needs to change in your business and why?
• What resources do you need to achieve this change?
• How will you manage and communicate the change?
• What is the impact on your employees and organisation?
• What does it mean for your customers?

You may be rolling out new software, re-engineering processes, redesigning products or transforming your whole business. Follow a structured process to manage significant change effectively.

Importance of change management

Change management helps businesses adapt to shifting markets, customer needs, technology and competition. A strong approach builds resilience against crises and supports planned growth. 

Even without external pressures, businesses often need to change. Effective management turns challenges into opportunities for success, while poor handling risks disruption to staff, teams and operations.

Follow simple change management principles for lasting impact and read more on the benefits of change management.

Ability to manage change in business

There are varying levels of change management capability across organisations. These can range from little or no formal change management (with the highest rate of failure and productivity loss) to complete change management competency (with the highest profitability and continuous improvement process in place).

In between these two, there is a multitude of other approaches to change management, which can be used at the individual project level or with multiple projects, or embedded in organisational standards and methods.

Effectively managing organisational change involves following a sequence of clear, defined steps. Start by assessing changes in your business environment. Then plan and prepare adjustments, implement the changes, and ensure they last.

Key steps in the change management process

Follow these steps for effective change implementation and adapt them, if necessary, to your project's scale:

1. Identify change - understand the problem and what is needed to fix it.
2. Analyse change - check feasibility, time and costs required.
3. Evaluate change - weigh up the benefits and costs and decide if it's worth it.
4. Plan change - assess impact, communicate benefits and create a timeline.
5. Implement change - train staff, assign tasks and roll out the schedule of changes.
6. Sustain change - measure results, review the project and embed changes.

These steps should help you transition individuals, teams and organisations to a desired future state. For more tips, see what is change management.

Implementing change in business

Implementation is at the heart of the change management process and often includes:

• communicating the benefits of the change to your employees
• training staff on the appropriate changes
• removing resistance or obstacles to change
• securing organisation-wide buy-in for the change
• coordinating transformative activities to move the business into a new way of working

As every change is different, you may find that you need to organise tasks and responsibilities in the process differently. You may also need to carry out other activities specific to your situation or apply different change management models to manage the process successfully.

Managing change in projects

Change management works alongside project management. You can use established change control systems to handle updates in the project's:

• scope - for example, when a customer asks for additions
• cost - including price changes for project items
• schedule - for example, delays to reaching milestones
• contract - for example, shifts in customer-supplier terms 

Many project managers apply integrated change management to assess and approve changes within the project systematically.

Change management models outline structured processes for organisational change. They act as blueprints to help you apply the core change management principles.

Many different models exist, however, several are considered key and most likely to be used by businesses undergoing change. These include:

• Kotter's 8-step process for leading change
• Deming's Plan-Do-Check-Act (PDCA) cycle
• McKinsey's 7S framework
• Lewin's Unfreeze-Change-Refreeze model
• ADKAR model (awareness, desire, knowledge, ability, reinforcements)

Other recognised models include Beckhard and Harris's change equation, Burke-Litwin's change model and Leavitt's diamond.

Choosing a change management model

Each model has a different approach and applies different principles. Some are more complex than others, and all have advantages and disadvantages.

When considering which change management model to choose, you should take into account:

• your goals and strategies
• your corporate structure
• your staff attitudes
• the sequence of steps suggested
• the time allotted for the work
• implementation and organisational changes

Depending on the nature of your business, the type of change and the people involved, you may use one or more models, or none. Don't feel you have to follow the models precisely. Be flexible if you need to in order to create and sustain actionable change.

Change management tools and techniques

In addition to change management models, there are other tools and mechanisms that can help you understand, plan and implement change in your business. For example:

• the Kübler-Ross Change Curve diagram can help you understand how individuals might react to change and how you can support them through the process
• impact analysis can help you uncover unexpected challenges or outcomes of change
• training needs assessment can help you ensure that you give the right skills to the right people at the right time
• stakeholder analysis and management can help you maintain a good relationship and communication with your stakeholders

With so many options available to guide change management, finding the right one for your business can be challenging. However, understanding the change management process is key to managing it well.

You can follow some tried and tested change management principles to help you transform your business quickly and efficiently. These principles form the basis of organisational change management best practice.

What are the principles of change management?

The ten guiding principles of change management are:

• active leadership - lead by example by accepting and embracing change or secure senior-level backing, if appropriate
• structured approach - use the change management process and established models where possible
• detailed change plans - specify the change you want to see and what needs to be done to achieve it
• impact assessment - assess and address how the changes will affect your business and your people
• strong team - involve every layer, eg executives, middle managers, project managers and make sure they keep their teams focused during the change
• employee participation and engagement - secure buy-in from everyone involved and affected by the changes, directly or indirectly, train and incentivise your staff
• open and regular communication - consult with staff and tell everyone what has to happen and what their role it
• sustainability - start with small, incremental changes and build momentum as you go
• managing resistance - identify and address common barriers to change
• evaluating progress - identify what was good, what was bad and use this information to improve your change management practice for future projects

By following these principles, you will be able to work with many change management tools and adjust your approach according to the size and nature of the change.

Read more about the importance of communication in change management.

Main hurdles to change management

Change can be difficult, but it is important to get it right. The main hurdles include:

• poor planning
• lack of understanding of the cause and effects of change
• insufficient preparation
• hastened roll-out
• absence of buy-in and support
• lack of communication

Poorly managed change risks financial losses, missed opportunities, wasted resources and low staff morale and performance. Identify and address common barriers to organisational change management to avoid these issues.

Effective change management improves morale, productivity, and customer perception. It supports a smooth transition from the old to the new, and gives you a template to follow for helping your staff and your organisation adapt to change.

Why is change management so important?

Change delivers the best results when it's meticulously planned and managed. The benefits of change management allow you to:

• assess and understand the need and the impact of change
• align resources within the business to support the change
• manage the diverse cost of change
• reduce the time needed to implement change
• support staff and help them understand the change process
• plan and execute an effective communication strategy
• improve cooperation and collaboration in your business
• minimise resistance to change
• maintain the routine in the running of your business during change
• maintain or even increase productivity, morale and efficiency
• reduce stress and anxiety associated with change
• reduce disruptive aspects and risks associated with change
• respond to challenges more efficiently
• minimise the possibility of change failure

Finally, the change management process creates a fantastic opportunity for developing best practice in business.

Learn how to overcome common barriers to organisational change management.

To develop a successful strategy for organisational change, you must understand the types of barriers your business may face.

Top reasons for change management failure

In most cases, failure to achieve organisational change is driven by one of the following factors:

• limited understanding of the change and its impact
• negative employee attitudes
• failure to involve employees in the change process
• poor or inefficient communication
• inadequate resources or budget - see cost of change management
• resistance to organisational culture shift
• lack of management support for the change
• lack of commitment to change
• past experience of failed change initiatives

Other practical barriers can involve a lack of skills, lack of staff, difficulties in establishing service, absence of equipment required for the change, or inadequate organisational infrastructure. If key employees leave or move around the organisation, it may also be difficult to maintain changes after you've introduced them.

Consequences of poor change management

The costs and outcomes of poorly managed change can be significant. They include:

• financial losses
• productivity and performance drops
• a decline in quality of work
• wasted time and resources
• inability to retain staff
• increase in employee sickness levels
• poor staff morale
• inefficiencies
• impact on customers and suppliers
• missed opportunities

You should also consider the damage to your business brand, loss of credibility and general change fatigue, as well as risks to your business continuity.

Overcoming barriers to change management

To avoid your project slowing down or derailing, follow the core change management principles that focus on:

• clear leadership
• clear communication
• understanding the impact of change
• staff involvement
• embedding changes long-term

Start with a change readiness assessment to spot resistance early. Train managers as change champions to build trust at all levels, and use quick wins, like pilot tests, to demonstrate value and gain buy-in.

Read more about the importance of communication in change management.

Certain factors create a business culture ready for change, such as strong leadership, a focus on continuous improvement and motivated staff. Tailor your approach to overcome specific barriers.

Keep in mind that change often takes time, and resistance is common. Assess the scale of your project realistically and decide if small, incremental changes may work better than a quick, full-scale transformation.

Organisational change costs time, money and resources. It is important to budget carefully to make it worthwhile.

What is the cost of change?

It's important to understand the cumulative costs of change management. Many costs may be hidden or crop up unexpectedly. Common expenses associated with change management include the following.

Communication

It is best practice to explain reasons for change openly and often to staff, customers and suppliers. A formal public relations strategy may be needed in some cases, adding to expenses. If downsizing, you may have a legal obligation to consult your staff, which creates further direct costs. 

Branding

You may need to reflect the organisational change in your branding, eg on stationery or delivery vans. This may happen, for example, in a merger or acquisition situation, or if you relocate, add new product lines, etc.

Training

You may have to retrain your employees or carry out development and cultural change programmes to help them adapt to the organisational change and new business practices.

Resources

You may need to invest resources such as time, effort, new technologies, infrastructure and particularly human resources to help with the organisational changes. This is likely to add to the costs of change.

Restructuring

You may need to consider the costs of restructuring - for example, redundancy payments to staff or costs of relocation to new business premises.

You may also incur additional costs, eg for consultancy, recognition and general expenses. Some of the costs will be difficult to quantify, but others may be easier to measure. Measuring costs accurately may allow you to find ways to reduce or avoid certain costs entirely.

A cost-benefit analysis can offer you a methodical structure for assessing the actual costs of change against the benefits of its desired outcomes.

Budget for organisational change management

It is a good idea to work out a detailed budget for the business change programme, to avoid any unforeseen expenses that could derail or halt the change. 

Don't feel you need to follow your original plan or budget precisely when implementing any changes to your business. You may need to modify your proposals, policies and procedures to take into account changing circumstances in the business and in the marketplace.

Costs of managing organisational change poorly

Poor change management opens you up to risks of incurring significant costs, both at the project and the organisational level. For example:

• loss of money needed to address staff issues
• loss of investment if the change doesn't deliver the right outcomes
• inability to realise the value you need from the project in the first place

As well as money, poorly managed change may also result in wasted time and people resources, dented morale and confidence, and increased resistance to change.

Planning and communication are critical for organisational change. Getting top management buy-in can significantly improve your chances of success.

Planning organisational change

Planning for any business change will help you to ensure that changes happen the way you want them to and that you identify and control the costs of your project. To plan your organisational change effectively, you should:

• Prepare early. Take time to understand the existing situation, the cause of issues and the need for change, and what the expected impact of the change may be. Follow the tried and tested change management process and models.
• Be flexible. Assess and agree priorities but don't feel you can't change them if your circumstances change. Follow change management principles to help keep your project on track.
• Assess and manage risks. Identify potential problems and barriers to organisational change and find ways to overcome them.
• Draw an organisational chart. This may help you to understand existing processes, workflows and lines of authority. Remember to update the chart if you change your business organisational structure.
• Develop a vision. Take a long-term view of how the change will affect the company and its competitive position. Communicating this vision can be a great motivator for your staff. See how to lead and motivate your staff.
• Set objectives. These will help you to measure the success of the change.
• Plan resources, assign tasks and schedule timing for the change. Assess and identify all the possible costs of change.
• Plan your communication strategy. Consider ways you will communicate the change to your employees - it demonstrates commitment if the managing director or chief executive talks personally to employees.
• Monitor and evaluate. Review the progress regularly against the objectives and make adjustments if circumstances change.

Role of communication in organisational change

Ongoing communication and employee engagement are vital. You should hold regular meetings with managers and employees to explain reasons, processes and impacts of change. Address rumours directly, if necessary, and keep an 'open door' policy for any staff questions. Talk to suppliers, partners and customers as well, and keep them informed of any changes that could affect them. Try to give this information as early as possible.

Consulting employees about the change

Depending on the nature of the change, you may need to consult staff under the Information and Consultation of Employees (ICE) Regulations. Employees can request formal talks on:

• your business's economic situation
• job prospects
• major changes to work organisation

Requests need at least 15 employees or 10% of staff (whichever is greater). The regulations only apply to businesses with 50 or more employees.

If you are planning redundancies as part of your organisational change, you must follow relevant laws.

Pandemics, market volatility, and internal changes to your organisation, people or technology can put your business at risk. Crises can quickly make change management an urgent priority.

Change management and disaster recovery

A structured approach helps you avoid rash changes in your business without proper planning. This prevents business interruption, lost productivity and profits, and even closure.

The aim of change management in business continuity and disaster recovery planning is to:

• minimise potential disruptions to your business
• find a cost-effective way to use resources to achieve change
• reduce the likelihood of returning to pre-change activities

Business continuity efforts are focused on proactively managing your business processes, assets, facilities, supply chains and human resources to ensure that, as far as possible, your business always functions at its highest capacity.

Disaster recovery, on the other hand, focuses on ensuring that contingency plans and procedures are in place to return business to usual as soon as possible after a crisis.

Role of change management in business continuity

Change management is a key activity in combination with both business continuity and disaster recovery planning. Its purpose is to help you introduce and implement changes to your business, product, process or system in a controlled and coordinated way, avoiding issues and risks along the way. As such, change management can:

• boost your business resiliency
• speed up recovery from critical issues
• help you create contingency strategies for situations where change doesn't go to plan

You should review your management plans and processes regularly to ensure they are fit and ready to use if and when you need them.

Address the barriers to organisational change management through risk management and business continuity planning.