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Introduction to Change Management

Video Transcript:

"This is a course in change management. Change is all around us. Change happens all the time at an ever increasing pace. I'm not talking about seasonal change in this course. I'm talking about how organizations address technological change, globalization, climate change, social media, and regulatory and legislative changes including the fiscal crisis which is no longer a third world issue.

Any one of these forces or a gaggle of others can unsettle even the most resilient of business models, but combined the impact is magnified ten fold, a hundred fold, a thousand fold, causing entire industries to change. I don't know how we could've articulated what has transpired in recent years without references to 'The Perfect Storm,' Hollywood's finest contribution to the business world.

Hi there, I'm Blair Cook, and I'm your host for today's course. Like many of you, I've been confronted with change initiatives throughout my career. I owe my first CFO appointment to a change initiative. It was a turnaround situation where change was necessary for the very survival of the company. I'll make reference to this experience throughout the course as we learn about the subject matter.

The goal is to see the theory and practice, the good, the bad, and the ugly, so that we can learn from the experience as well as the theory. Hopefully, my approach to this course will resonate with you as well.

Not so long ago, perhaps only a decade or two ago, companies were structured around the creation of a stable business model. The strategy was find a market niche, serve it, and dominate it forever. Wasn't that what you were taught in business school?

Nowadays, more and more businesses are finding that it's no longer possible to keep on pursuing that sort of business model in today's hyper competitive environment. It's easy to wrap our mind around certain types of technology companies like cell phone companies which invent and reinvent new products every six months, but the same sort of phenomena is happening in old economy businesses like chemicals, manufacturing, and retail for more than just technological factors. Few businesses can wake up each morning and say to themselves our strategy today is to do the same things we did yesterday because if it worked yesterday then it should work today.

The office of the chief financial officer is at the heart of the organization. Few functions have the scope of responsibility and the depth of insight at their fingertips as does finance. So, the role of catalyst is a natural fit for today's modern chief financial officer. A catalyst in this context is someone who makes change happen. While the face of change may be the CEO, the CFO is not far behind driving the change long after it's been first announced.

In this introductory lesson we're going to cover off three items. First, we will identify the need for change. Second, we will discuss the role of the catalyst leader. Finally, we'll explain the change management process at least at a high level.

First, let's identify situations where change management is unnecessary. Many changes don't require formal change management consideration, for example, changing a supplier, hiring or firing a new executive, or introducing a new SKU. The more significant the change is to the organization the more consideration required for change management practices.

The key distinguishing criteria for when you need to consider change management is simple, and there's only one - are groups of people impacted by the decision. In a nutshell, that's what it all boils down to, the people. The more you need groups of people to change the bigger the change management challenge you've got. Groups imply more than one or two people. It could be a dozen people. It could be 10,000 people.

With the highly sophisticated criteria all sorted out, what you will find is that there is a number of common types of corporate initiatives that require change management including reengineering one or more processes of the corporation for any reason at all, effectiveness, efficiency, automation, quality improvement, whatever. Processes neither change themselves nor do they operate in the absence of human interaction, hence we need change management.

Any time you restructure the organization, that is messing with the organizational chart, you've got to consider change management. The rationale should be obvious.

Next, when you're integrating different organizations through a merger and acquisition process, you bet you have change management issues to consider, huge complex ones most often. Also, when you go to execute new strategic directions. New strategies are delivered by the actions taken by people.

Finally, when you set out to change the corporate culture. Is there any aspect of the organization more human than the corporate culture? Really, corporate culture is often a subset of any of the other types of initiatives, so rarely does it stand alone as a change initiative in and of itself.

Let's also start profiling what the CFO looks and feels like in this process. As a direction setter, the CFO along with the CEO will articulate the vision and get the buy in from others. To become a so called transformational leader, the CFO will exemplify the desired changes and will engage the heart and soul of people to follow.

As a change agent the chief financial officer anticipates external factors that necessitate change. The chief financial officer has strong analytical skills to assess the implications for the organization and will use this assessment to help the CEO create a compelling reason to necessitate change, without which people will not feel the need to change.

As a spokesperson the CFO is an advocate on behalf of the organization both inside and out. While the CEO is often the face of change, the CFO is interacting on a daily basis across the organization and beyond with the broader financial community. These audiences need to see and feel the CFO living and breathing the vision and hear a clear and consistent message.

Finally, as a coach the CFO will empower the people to play an active role in the change process enabling them to grow personally, building buy in for the change, and supporting the people in making the desired transition.

Let's set aside the challenges and the details of implementing change management just for a moment and simply look at a conceptual model. This is how typical executives envision change in their mind. It seems so simple at the executive retreat, but each of these three stages require separate and deep consideration.

The existing reality represents the as-is state of the organization. A current assessment requires us to document the processes as they stand now so that we get a solid understanding of where we are today. The temptation is to dive right into the change without fully understanding where we are today, and this is important because unless the pain of the status quo is greater than the pain of the transformation change will not occur.

The future state contemplates the complete implementation of the desired changes. The vision provides a very impactful description of what the future state looks like. There may be copious details required to demonstrate how this future state works, but fundamentally it's a short, concise vision statement which is the most important.

The transition state represents the organization in the process of moving between the two states. While the executives in the board room might be thinking along the lines of a zip line between the existing reality and the future state, the truth is much more treacherous. It's the transition state that most people fear.

I like this quote from futurist Marilyn Ferguson about the transition state, 'It's not so much that we're afraid of change or in love with the old ways, but it's the place in between we fear. It's like being between trapezes. It's like Linus when his blanket is in the dryer.' I think that adequately describes the discomfort people feel during a transition state.

The simplistic conceptual model can be used in a variety of change initiatives. We saw it during strategic management. It can also be used as a simplistic framework for business process improvement.

Like so many things we talk about in the CFO leadership program, there are linkages between the various professional competencies of the chief financial officer. It's never as easy as it looks on paper. No matter how hard you imagine it will all be, you will always underestimate the amount of time required to get things changed and have them stay changed.

In fact, 70% of initiatives fail according to Harvard's Dr. John Kotter. Why do change initiatives fail? Well, there are many, many reasons, which we'll get into in our future lessons. Suffice it to say that change initiatives are almost always underestimated, so keep this statistic in mind the next time you're contemplating a significant new initiative, 70% failure.

In the modules that follow we will learn about the challenges to change, looking at change from the employee's perspective, an approach to change management, and embedding change management into the organization permanently.

Until our next lesson, don't stop until you get to the top, when you get to the top don't stop."


Instructor for this course
Course Syllabus
Introduction and Overview
Challenges, Perspectives, and Approaches
  Challenges of Change15:15
  Change from the Employee’s Perspective6:58
  Approaches to Change Management15:50
  Adapting for Constant Change9:47
Continuous Play
  The Catalyst CFO: Managing Change as a Finance Leader57:30
Supporting Materials
  Slides: Change ManagementPDF
  Change Management Glossary/IndexPDF
Review & Test