12 May 2012
Only half of the UK’s senior directors or executives working on £10m+ change or transformation projects, seen as critical to the future of the business, claim a better than 70% success rate with these initiatives, and only 7% judge them to be fully successful. Only a third say 70% or more of the stated objectives are achieved, according to new research from transformation consultancy Moorhouse.
The 2012 Barometer on Change from Moorhouse represents a combined investment in change programmes of over £3.4bn by UK organisations, with an average project spend of £17m. It found that many change programmes fail to respond to changes in the market, set off on poor foundations, do not secure the buy-in of key stakeholders and do not have their expected benefits measured or tracked. It spoke to around 200 UK board members, or people reporting into the board, working on transformation projects with a direct value of over £10m. Respondents came from FTSE 250, multinational and public sector organisations.
Less than a quarter (24%) are measuring the benefits of these projects properly after they have finished – equating to some £850m in potentially wasted investment in projects that do not have clear resulting benefits or outcomes.
Less than half (41%) of respondents feel very or extremely confident that projects will run to time or on budget. Only a third (36%) feel that stakeholders and key staff have ‘bought in’ very well to the project’s aims and benefits, and a similar third feel projects are under-resourced at their start.
Stephen Vinall, Moorhouse Managing Director, comments on the findings: “The ability for organisations to manage and drive effective change, often on a vast scale, matters now more than ever. What’s concerning about these results is the risks organisations are taking with projects that are often perceived as critical to the success of the business, and cost significant amounts of financial investment. It is hardly a surprise that most projects overrun and exceed their budget when the evidence shows they are poorly conceived, fail to get buy-in from the people who matter and are unable to cope with changing circumstances. If these steps are taken, then a project has a better chance of achieving its objectives and improving its success rate. What’s more, outcomes are not being tracked. With so much investment at stake, it is simply money being poured down the drain. With the pressure for change rising, this issue will become even more important, and if organisations do not get better at delivering change, then they will struggle to innovate while simultaneously keeping costs low.”
Cost reduction (28% of respondents) was identified as the biggest driver of change. This was closely followed by ICT consolidation (14%) and a redesign of organisational structure (13%) – both of which also usually aim to remove cost from a business. Half of respondents reported that the projects they were working on were business critical and cannot risk failure.
The main threats to undertaking a successful project were seen as a lack of ownership from staff or stakeholders, a lack of experience or skills in the project team and poorly defined objectives. There are also serious question marks over the decision-making abilities of those involved in running projects.
The pressure to reorganise and restructure is increasing; almost three-quarters (72%) of executives and directors working on significant business change and transformation projects feel that the pressure for change has increased over the past two to three years. Over two-thirds (67%) feel this will continue to increase in the next year or so. Almost half (48%) are only ‘quite confident’ in their organisations ability to meet the challenges of change in the next few years.
Vinall adds; “Organisations in every sector need to ensure they have the skills required to deliver change; and this is not always about hiring external resource. Change has finally become the ‘new norm’, and businesses must invest in developing solid project management and transformation skills. Directors and executives are under enormous pressure to deliver change and regardless of whether it’s organisational redesign or ICT consolidation, organisations say a lack of experience in running successful projects is a significant stumbling block to success.”
The 2012 Barometer on Change identifies a number of potential barriers to effective change that organisations need to overcome:
1. Setting programmes off on the right foot: Engaging stakeholders early and properly resourcing change programmes are imperative to success.
2. Measurement of benefits: Respondents in the Barometer represented a combined investment of over £3.4bn by UK organisations; yet less than a quarter (24%) are accurately measuring the benefits of these projects after they have finished, and only just over half (54%) are bothering to track the benefits robustly during the course of the project. If outcomes are not tracked, organisations cannot assess how well money was spent and learn lessons for the future.
3. Agility: In a changing world, goalposts will move; the ability to cope with this must be part of any change project. Respondents say that changes in resource requirement are often unanticipated and less than a quarter (24%) feel their organisations cope extremely or very well with this.
4. Capability: Rather than appoint people who have been in the organisation for many years to lead projects, it is better to foster a core group of skilled project managers who have the right skills to make large-scale change happen and stick.
5. The gap between the board and the delivery team: The perspectives of Board-level respondents and their direct reports differ throughout the survey. The board feel 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 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.
A copy of the 2012 Barometer on Change will be available for download from 12 April 2012 at www.moorhouseconsulting.com