Effective change management

Change is a constant in business, but it is something that many leaders struggle to manage. Is there a secret to effective change management? A new report from ACCA, Leading the change, attempts to find out.

In recent years the demands placed on leaders to manage extensive change in organisations have increased significantly. Digitalisation, volatile economic and geopolitical conditions, and sustainability requirements forced change on companies and their operating models, to the extent that, as the report says, ‘standing still is a strategic risk’.

Every trend driving change has an impact on finance teams, and finance professionals have a key role to play in driving through change programmes. ‘Finance teams are super-connectors in organisations,’ says the report, ‘having an important reach and scope that embraces all other functions. This creates a new role in supporting a change-enabled culture, one that supports innovation and creativity.’

Few people are natural leaders of change, the report acknowledges, but even so, for a CFO it is a fundamental aspect of the role.

Hard to get right

According to an oft-quoted 2015 study by McKinsey, 70% of all change projects fail. ‘Change management is often said to confuse because it is about people and emotions,’ says the report. ‘As the business environment and ways of working continue to evolve, so must change management. If it is a core skill for finance leaders, how should it be approached?’

The report defines change management as ‘a human activity of helping individuals to accept that an organisation needs to move from one state to another’. In other words, it’s all about people and how they react to potential disturbance to their established way of life.

And while there are multiple methodologies and academic theories available that address change and change management, in the end it is about managing people, their feelings and expectations, and understanding human psychology. Or as the report puts it: ‘Exercising humanity as a leader is one of the fundamental traits needed for driving change’.

Psychological process

The report highlights current trends that are impacting the way in which leaders should approach the management of change, including changes to the way we work and technological change.

It also draws on the experiences and insights of nine professionals with extensive experience in a wide range of environments. Several of these professionals emphasise that change is a psychological process, and that everyone reacts to change in a different way, which means there is no ‘one-size-fits-all’ approach. ‘Dealing with change at an individual level is essential,’ says the report, ‘no matter how time-consuming the intervention needed’.

The report identifies several actions that finance leaders can take to ensure success in change management.

Set the tone

This begins with leadership action – creating and instilling an effective set of strategic goals that will form the basis of everything that subsequently happens. But however good the plan, it is the people who matter.

The report highlights a quote from Peter Senge of the MIT Sloan School of Management: ‘People don’t resist change. They resist being changed.’ Gaining employee support, it says, is a two-way process – and in a world dominated by social media, the role of influencers becomes vital in communicating and delivering change. The leader’s challenge is to identify those that have influence (but not necessarily at the top levels of the organisation), who will help them create ownership of the change plan.

The measurement of change is another enduring challenge and the report stresses that it is not about outcomes, but about progress and sentiment. ‘In a world of constant change, projects often become overtaken by successive initiatives,’ says the report. ‘Measuring behaviours and not outcomes is essential in evaluating the effectiveness of adoption.’

Focus on the individual

The report argues that the need for organisations to be adaptable in a constantly changing world is leading to the conclusion that they should focus on learning for roles rather than for processes or team activities. In practice, that means defining the skills and capabilities that are needed to undertake a role before defining how that role is to be performed.

The report hints that this will mean a wholesale change to learning and development in many organisations: ‘Some learning may be developmental, some may be commercial, but ensuring that the individual is sufficiently flexible and adaptable means that they are prepared for the future.’

An important step for finance leaders, it concludes, is to understand the role that culture plays in change. ‘With an emphasis on culture, change becomes less centred on methodology and more on psychology,’ it says. When change is embedded in culture, it means that employees believe they will always be supported through innovation and change, and that those that find change hard will be supported, while those that champion change will also have a strong role. No one, in other words, is left behind.

Finance leaders are living with constant change and learning to manage it successfully has become a key capability. Recognising the impact that change has on a finance team, and the role of the CFO as a leader of change, is an essential foundation.