Change Management Viewed as a High Priority and a Key To Successful Transformation Programs, Finds New Booz & Company Global Survey

Most transformation programs include people initiatives, but respondents see room for improvement; North American staffs more open to change than other regions

NEW YORK, June 25, 2008 – Executives believe that making people initiatives a higher priority is essential to successful transformation programs, but feel they often fall short on execution, according to a new global survey by management consulting firm Booz & Company. The study found that change programs, notorious for their failure rates in the past, are increasingly becoming success stories, but only when initiated early and with the full support of senior management.

Booz & Company surveyed senior executives who led major transformation programs in organizations with more than 5,000 employees. The survey found that four out of five (82%) executives included change management initiatives, focused on employees’ skills, behaviors and attitudes, as part of their transformation programs. In addition, 59% of respondents believe that people initiatives were more responsible for a successful transformation than other program elements. The study defines “change management” as the process of engaging people at all levels in the design and implementation of an organization’s transition.

The survey respondents report high success rates for their transformation programs, with 82% indicating that the programs had a positive impact on business performance. However, most executives feel that they could have done better in executing people initiatives. For example, 90% said that, in hindsight, they would have more fully executed the development and alignment of leadership and 71% said they would have begun the process sooner.

“Change management is no longer a niche activity; it now ranks as a boardroom agenda item,” said Andrew Tipping, Partner at Booz & Company. “Executives now understand its critical importance, but need a sharper focus on execution—initiatives need to be implemented earlier on and more fully.”

While companies have integrated more people activities into transformation programs, the executives surveyed still reported high levels of staff resistance, mostly among those on the front lines. Nearly half (46%) of front-line staff was perceived as resisting change, compared with 25% of senior managers. Overall, staff in North America demonstrated the greatest openness to change, compared with Europe and Asia:

  • In the U.S., only 43% of front line staff and 22% of senior managers had any significant opposition to the change;
  • In Europe, front line staff demonstrated resistance 53% of the time and senior managers 28% of the time;
  • In Asia, resistance was reported among 52% of front line staff and 27% of senior management.

“The second generation of change management will focus on the ‘how’, rather than the ‘what’,” said Christopher Hannegan, Principal at Booz & Company. “Leaders need to set the tone – to inspire people to adopt new ways of working, new skills, and new behaviors. HR departments also need to act as enablers, through learning and development programs and the strategic use of recruitment and rewards.”

Additional survey findings

  • According to the survey respondents, the most common reasons for undertaking a transformation program are performance improvement (79%) and cost cutting (62%), followed by the desire to improve customer service (51%).
  • Overall, 83% of respondents felt that their program objectives were met. Moreover, more than two-thirds (69%) reported that these projects came in on time and on budget.
  • Among the people-oriented activities implemented, “development and alignment of the leadership” had the largest impact on the attainment of program objectives, reported 82% of respondents. Communications and stakeholder management is a close second, with 81% indicating significant impact, and the involvement and participation of those affected by the change followed at 79%.

The survey was conducted in January 2008 among more than 350 senior executives who had led major transformation programs for large organizations (5000+ employees).

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