SUCCEED AT CHANGE

Implementation of new systems and processes often fails because of uncertainty and resistance from the people who are expected to change. This risk is well known within large companies, but it happens in organizations of every size. Leaders at smaller companies face the same challenges. They not only have multiple, often disconnected, functions and systems, but they may also have placed control of those systems in the hands of third parties. Further, the risks to a small company may be multiplied because of the limited resources available to accomplish the required changes. Aligning traditional project management activities with organizational change management (OCM) activities will increase the likelihood of success.

I remember a project I worked on during the early years after the Sarbanes-Oxley Act (SOX) was passed. Companies were scrambling to develop processes and procedures to comply with the new regulatory requirements. The accounting leaders at the company I worked for requested that a team be put together to transition a group of core processes away from subsidiary company systems to the parent company platform. It was all hands on deck—or so it seemed. Looking back, I’m not sure how well the team understood the ultimate goals, and I could only have speculated on the desires of upper management of the firm.

This isn’t to say the project was aimless or disorganized. Indeed, I witnessed high levels of professional concern and urgency, and the team members did their best with limited resources and knowledge. The team made considerable effort to involve stakeholders, understand requirements, and establish priorities. We proceeded accordingly with everyone duly informed. Though we finally met with compliance success, it came at a higher-than-expected price in the form of delays, a late gap-plugging software substitution, and other expensive mitigation.

ORGANIZATIONAL CHANGE MANAGEMENT

We would have greatly improved our ability to succeed within the requirements of our project if we had applied OCM. A recent IMA® Statement on Management Accounting, Managing Organizational Change in Operational Initiatives, highlights some key points that would have helped us during the project:

1. 60%-75% of change initiatives are believed to fail due to the human dimension.
2. A common message is imperative to the success of the project to ensure all impacted workers understand and accept the benefits of the project.
3. Implementation teams should include at least one dedicated individual whose responsibility is to ensure that the team and the parts of the organization affected by the operational change understand the human aspect of the system and process changes.
4. One of the primary goals of OCM is to identify which audiences need the most time to reach post-initiative success, how to communicate with them, and how to train them so that the initiative is successful within the timeline the project requires.
5. As critical players in most operational change initiatives, management accountants have a clear opportunity to impact OCM activities.

BETTER COMMUNICATION AND ALIGNMENT

There are several areas where we could have applied these concepts to improve the project’s outcome. While we continually communicated status against milestones, we didn’t script a common message for leaders and managers that highlighted the benefits and provided organizational context. Clear messaging would have featured upper management explaining the purpose of SOX compliance and functional leaders outlining expected impacts to and from their teams. This would have helped people engage in meaningful work because they would have better understood the significance.

A greater level of engagement also would have improved overall communication. Thus, among other benefits, we would have understood and placed more weight on the fact that departments weren’t able to manage their daily operations and the demands of the project simultaneously.

We also didn’t have a team member focused on OCM activities and working with all the impacted departments. While we did involve departments impacted by the process change, an individual focused on OCM would have helped us understand that we didn’t always engage them in the right way and at the right time. On the front end, for example, we should have facilitated a more careful departmental review and approval of the initial scope document.

Further, if we had been more focused on the OCM goal of effectively communicating with and training the right people, we would have been better aligned and able to identify which departments were underprepared or, perhaps, confused from the beginning. For example, it would have been very different had we understood that the pricing and tax functions weren’t adequately engaged in the beginning.

Our management accountants clearly communicated the needed internal controls, and, ultimately, they contributed the specifications necessary for implementing and monitoring those controls. But I now recognize the missed opportunities for accounting leaders to have identified and communicated that certain departments were possibly falling short. This would have been entirely appropriate not only because of the accounting department’s prominent role in the particular project, but also because of the high risk of failure without regard to who owned the project.

In an interesting twist, the parent company’s accounting group didn’t assign team members. This gap should have been confronted by the subsidiary company accounting members because it resulted in a project team that lacked the appropriate expertise in the parent company’s system and process. The subsidiary accounting members worked harder to make up for this gap, but it took longer than planned. Meanwhile, the billing department appointed inexperienced team members who failed to communicate their own requirements clearly. Considering all of that, the accounting members who were on the team were in a great position to see the bigger picture, communicate the risks, and bring tremendous value to the project.

Applying these OCM concepts likely would have eased the transition we were attempting. All company leaders should educate themselves about OCM and incorporate it into their project implementation plans. Since smaller businesses may have a more difficult time with similar problems, they need to clearly identify and manage resistance and confusion that could derail critical projects. A dedicated OCM function may not be feasible in a small business, but there should be a leader who applies OCM principles.

SF BEST PRACTICES

Managing Organizational Change in Operational Initiatives defines OCM as it relates to any branch of business and how it applies to management accounting in particular. It’s available for free on IMA’s website: http://bit.ly/1ELbGNN.