Every several years, the 70% question comes up. What is the change management failure rate? Do 70% of all change initiatives fail?
This question is often asked by customers, consultants, software vendors and organizations that sell proprietary methodologies and training. It is a legitimate question that requires an answer.
In 2008, the Organizational Behavioral Practice arm of the global consulting firm McKinsey, published the report, The Inconvenient Truth About Change Management (Keller and Aiken). It was the result of a survey of over 1,500 global business executives. One of their findings was that only 30% agreed that their change programs were “completely/mostly successful”. The company also confirmed that this was consistent with studies that were done over the 10 years prior within the firm. In December 2021, McKinsey’s People & Organizational Performance and Transformation Practices, issued another report, Losing From Day One: Why Even Successful Transformations Fall Short, which again validated the 70% failure rate. Based on McKinsey’s global reputation and vast network of alumni and clients, the change management failure statistic is in all likelihood accurate.
Over the last 30 years, there has been a lot written about change management. This has resulted in a proliferation of books, whitepapers, change management models, courses, and certifications. Much of this knowledge has been developed for multinational companies that have significant financial and human resources to apply when implementing change. Despite this, the majority of change initiatives still fail. The needle has not moved. The question is why?
Change Management Failure – Poor Planning and Implementation
Implementing transformational change is complex. It involves taking established processes and procedures within a company, and changing them in real time, while meeting the needs of customers and remaining profitable.
When a company decides to implement a major transformational change, it has to make a series of decisions. These include planning, design, and implementation along with budgeting and resource allocation. Many organizations do not have a resident in-house office of change management, or institutional knowledge to successfully implement sustainable. This leads to many companies viewing change through the lens of project management.
Many companies also assume that vendors will point out activities they need to do, or contingencies to plan for. While vendors do care about client success and may mention certain obvious issues, their primary focus is on implementing their products or training, to meet their contractual obligations. Consequently, unplanned activities and hidden costs arise down the road, which can lead to failure.
Change Management Failure – Mismanagement of The Human Element
Employees utilize their specialized skills within formal and informal power structures. They navigate the complexities of performing their roles while interacting with the unique personalities of superiors and coworkers. Consequently, most employees are comfortable performing their roles. There is a degree of certainty which allows them to operate in a predictable manner. When an organization implements major change, it inevitably disrupts the status quo, and introduces uncertainty within its workforce. Unless an organization implements change on a regular basis and has a competency in this area, implementing change is at best, a hopeful endeavor.
When an organization fails at implementing and sustaining a transformational change initiative, it reduces the credibility of the leadership and management team in the eyes of employees. There is usually damage done to professional relationships due to mismanagement and pressure to get results. Careers are sometimes impacted. As well, it usually blights future adoption of other initiatives and impacts the organization’s long term goals.
Some of the more tangible impacts of failure can also include:
- Failure to achieve projected profitability and operational targets.
- Significant cost over runs.
- Loss of customers due to disruptions related to a poor implementation.
- Visible impact on workforce morale and employee efficiency.
- Loss of workforce.
- In some instances, significant operating losses or bankruptcy.
What is Missing?
Many large and mid sized companies lack the organizational experience to plan, develop, implement, and sustain a major transformational change. To further compound the problem, there is very little practical advice or a working model of success to follow when implementing transformational change. Sterile clichés such as “ensure executive agreement”, or “engage employees” do not provide workable tools to company leadership and management for success. If you doubt this, reflect on the fact that the 70% failure rate has remained constant for decades.
Considering these challenges, there are 9 reasons major change initiatives can fail.
- No strategic plan to establish the need for change.
- Poor leadership.
- Assuming all change is the same.
- Ignoring the human element.
- No governance process.
- Assuming change management is a project with an end date.
- Inexperienced Project Manager.
- Flawed vendor review process.
- Inadequate budget.
For the next 9 blogs, I will review each of these reason in depth. In the next blog, I’ll discuss the need for a strategic plan and how not having one, can lead to the failure of your transformational change initiative.
This article is based on my forthcoming book Rethinking Change Management; How To Implement Transformational Change For Long Term Success, which will be publishing later this year. If you find this article helpful, please share and subscribe to our blog and newsletter. Stay tuned for further details.
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