Finance Transformation Gone Wrong - Inadequate Change Management

Note: Today's post is part of an ongoing series that looks at various pitfalls in finance transformation and what can be done to avoid them.

All to often, a transformation effort focuses on the process and forgets about the humans.  This is particularly true when a transformation effort is accompanied by an ERP implementation or upgrade.  The engagement team is so focused on the successful go-live of the technology they forget that people are needed to make those processes work effectively.  The most successful engagements focus on not only the technology, but also the people.

My experience indicates that change mangement is an area that is often diminished in the planning and budgeting phase of a tranformation effort.  Typically, executives have sticker shock over the cost of a transformation engagement, particulary where this is a large technology component, that they start looking for ways to cut the budget.  And unfortunately, Change Management is typically one of those areas that gets cut first.

This is a mistake.  Without effective Change Management, the risk that a transformation initiative will fail to live up to expectations is high.  In any large transformation effort, a number of people both inside and outside of the organization will be impacted.  Without proper Change Management, these individuals either won't know how to modify their behavior or they won't care.  An effective Change Management program will clearly lay out the behavioral implications of transformation and provide the support mechanisms to understand required behavioral change and the tools to support that change.  This includes, at a minimum, effective communication and training plans.

When companies invest properly in Change Management, they achieve greater results from their transformation initiative and the required behavioral changes stay embedded in the organizational culture.  When this happens, true transformation occurs. 

Surprise: Outsourcing Buyers Look at More than Price

A recent survey conducted by HfS Research shows that buyers of outsourcing services are looking for more than low cost when it comes to outsourcing relationships.  The survey asked purchasers of outsourcing services what they thought was important and compared their responses to what providers of outsourcing services thought buyers wanted from them.

It's no surprise that some metrics like pricing aligned pretty well between providers and buyers.  What is surprising is the degree of difference between the two groups when it came to the soft lever of transformation such as governance and change management.  The survey revealed that buyers placed a higher level of importance on these soft transformational levers. Shown below is a graph which summarizes the survey results:

Source: HfS Research

What is surprising is that outsourcing providers underestimate how much help clients would like in managing change in their organizations.  This is obviously an opportunity for those providers, but they'll need to make their capabilities clear so that buyers clearly understand the value these providers are rendering over the contract lifecycle.

You can read the entire post at The Undisputed Facts of Outsourcing Part 7: Service Culture is the New Differentiator.

Five mistakes that damage the effectiveness of Shared Services and how to avoid them - Part 4

Note: This is Part 4 in a 5-part series.  You can click here to read Part 1, Part 2 and Part 3.

4.  Comprehensive change management is not a priority.

Creating and sustaining change in any organization is difficult.  Too many companies focus on the mechanics of creating a Shared Service Organization with little thought to the human element.  Companies that have successfully reaped the benefits of Shared Services understand that a comprehensive and consistent change management program is essential to the successful deployment of Shared Services.

An important component of change management is identifying and engaging significant stakeholders early in the process.  When discussing Shared Services, the leaders of the company’s business units must be included.  Without engaging the business units in the change effort, the move to Shared Services will be seen as little more than the centralization of support services with only token input from the business units that will ultimately be the customers of the Shared Service Organization.

Creating a sense of urgency for change is important.  The fact is that the bar for efficient finance processes is being continually raised.  What passed for strong performance in previous years is now considered average performance.  As new offshore centers continue to mature, new opportunities to drive out costs appear.  The truth is that many competitors are reducing their cost structure and there is an urgent need to maintain a competitive cost structure.  As part of change management, it's up to the Project Sponsor and those entrusted with the message to effectively communicate the need and urgency of change.

Another essential component of change management is knowledge transfer.  Much of the knowledge in organizations isn't found in a binder.  It's captured in the minds of a company's employees.  It's critical to establish up front which employees are key to a successful transfer of knowledge and to integrate these key resources into the project.  Programs to establish job shadowing to enable the transfer of knowledge is essential.

While there are many other components of change management, the point is the companies that are successful in transferring processes to a Shared Service Organization understand the importance of the human element and incorporate it as an essential part of the overall program.

Communicating Change for Shared Services

I was recently presenting a business case for Shared Services as part of a sales pursuit when I was asked a question: "When should we communicate the concept of Shared Services to our employees and that their job may be impacted?"

As in any communication, my response is to be truthful in your communication and give information to your employees early and often.  That doesn't mean you should tell your employees that you're thinking about moving to a Shared Services concept, or that you hired a consulting firm to complete an analysis of the prospect.  It does mean that you should communicate decisions after you have a clear vision and timetable for a move to Shared Services.  Employees will be understandably concerned about their jobs and they need to know what they can expect, even if it isn't pleasant.  It's not only the right thing to do, it makes good business sense.

I once worked for a client that refused to follow this advice.  They had made the decision to establish a pan-Asian Shared Service Center for their Finance processes.  We were hired to develop the future state vision, build out the Center, train the new employees and migrate the processes.  We were as far along as having the new employees shadow their respective counterparts in the soon-to-be-migrated countries and the company still had not made a formal announcement that they were moving the jobs to an SSC in another country. 

People are not stupid.  They know when senior management is being honest and when they're not.  Companies are better off when they communicate change early, often, and respectfully.  When they do so, the chances of successfully migrating processes to a Shared Service Center are greatly enhanced.