BARELY A DAY goes by without news of another high profile company facing problems because they have become disconnected from their market or consumers. Whether it’s Research in Motion cutting costs to staunch a haemorrhaging flow of money, or M&S getting out of touch with what people want from its clothing lines, the message is clear: companies need to be agile and able to respond to changing consumer tastes in as little time as possible. Speed to market has always been important, but never more so than today.
We undertook research to find out how well FTSE 250, public sector organisations and multinational businesses in the UK were coping with change. Respondents represented around £3.4bn in change programmes – a huge investment – yet a disturbing number were under-resourced, poorly planned and did not engage stakeholders. Less than half (41%) of respondents feel very or extremely confident that projects will run to time or on budget. What’s more, the expected benefits from many of these projects are not being tracked, measured or evaluated. Cost reduction was identified as the biggest driver of change but if nothing is being tracked, how can a business judge if the programme has been successful or not?
However, a change project can be a huge opportunity for the finance function to become a true partner with the business. For finance directors to ensure that money is not wasted during a change programme, it is essential for them to secure stakeholder buy-in at the outset of the project, as buy-in can be the difference between success and failure. And as cost reduction is often a major driver in a change project, this should be of paramount importance to FDs.
FD’s should have a clear understanding of why any change is being made and it’s crucial to communicate this to everyone in the organisation. Lack of stakeholder commitment is the number one reason change projects fail. A good way to start is to go for some quick and easy wins. This shows people some of the benefits of the programme immediately and will help motivate them for the duration of it, and for the changes to be embedded into company culture.
The perspectives of board-level respondents and their direct reports differ throughout the survey. The board feels the organisation is better at coping with change than those working more closely on it, however they are much less confident about the skills of the people undertaking change. This indicates a potential communication gulf between those running the projects and those overseeing them; honest collaboration is needed to ensure success, and this needs to be driven from the board. CFOs and finance directors are ideally placed to build a real bridge between it and the Board. board members and those who report directly to them should work together to ensure a shared and clear understanding of what success looks like and then work to develop a truly collaborative approach to delivering that success.
There are three factors that contribute to boards effectively managing change.
Firstly, board members must take accountability for a programme’s success. Of course board members are working on many different projects simultaneously. But failing to take ownership of a change programme, with each in the survey costing an average of £17m, can leave a business millions of pounds out of pocket.
Secondly, the board must create an environment where honest progress and potential issues can be reported without fear of reprisal. Naturally their focus is more on the strategic level, but it is important to balance this with ‘deep dive’ assurance reviews to validate high-level perspectives.
And finally boards must provide themselves with the right management and governance mechanisms to track change. Transformation projects are not quick fixes. Many take years, and sometimes even decades, to complete. And it doesn’t end with just finishing the project itself. The outcomes and impact also need to be tracked on an ongoing basis, otherwise there is no way of knowing if the project was successful and no way to learn from any mistakes made. Putting it in the ‘too hard’ basket is not good enough. Evaluation and measurement needs to be an integral part of the programme. The board, in consultation with those managing the change, need to ensure that these measurements will be continued, even when they may no longer be with the company.
The tracking and measurement aspect is one area the finance function should embrace and champion. It is this that provides hard data about the impact change programmes have had on the business and ROI from the project. FDs should be shouting from the rooftops about the positive impact change projects have had and how finance has helped with these.
With increasing pressure to change in fiercely competitive markets, those organisations delivering their changes most effectively will be the ones that leave their competitors behind. And CFOs and FDs have a key role to play in keeping their companies growing and succeeding.
Stephen Vinall is managing director at Moorhouse
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