How does resistance to change impact return on investment (ROI)?

Determine the degree of mitigation activities necessary by measuring the gap between the current and target level of change acceptance.

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The goal of change management is the acceptance and adoption of a change that requires new or different behaviors. LaMarsh Global’s Managed Change methodology focuses on the critical factors that contribute to acceptance and adoption while identifying and mitigating risks that could impede or inhibit success.

Resistance to change is a source of risk. Identifying and managing resistance from anyone that is impacted by the change – including employees, leaders and other stakeholders – is one of the core activities of change practitioners.

The return on investment (ROI) of a solution depends on its acceptance and adoption. As such, the ROI of change management has largely been dependent on its ability to drive acceptance and adoption by managing resistance. There has been a shrinking reliance on justifying change management through a strict ROI, but conversations about an ROI can be used to introduce sources of resistance and the critical factors necessary for effective change.

8 sources of change resistance that impact ROI

Based on our years of experience helping organizations and individuals manage change, we know that there are eight major sources of resistance that greatly impact acceptance levels and subsequently impact return on investment.

1. Not wanting to leave the current state.
2. Disagreement with the definition of the desired state or finding the desired state undesirable.
3. Going through the transition from the current to desired states.
4. Perceived lack of willingness or ability of leaders to lead the change.
5. Perceived lack of willingness or ability of change practitioners to do their job well.
6. Reluctance from any affected individuals or groups.
7. Unwillingness to give up current beliefs and behaviors and adopt new ones.
8. Negative perceptions of change that resulted from how previous changes were handled (or mishandled).

The level, degree and impact of resistance perceived by those impacted by the change have a direct correlation to the effectiveness of the change management approach and the ROI.

A greater degree of resistance means more effort and investment to support activities, events and interventions required to shift the resistance to acceptance. The cost associated with the shift from resistance to acceptance becomes increases with higher levels of resistance from those affected by the change.

Focus more on results

If there is interest in calculating an ROI of change management, we recommend reframing the conversation on results by using this simple equation:

R = Qs x A
Results = Quality of Solution x Acceptance

Because we know the acceptance of the solution is key to effectively and efficiently mitigating resistance, we must first agree on the required level of acceptance.

Simply stated: What is the percentage of the total population of impacted employees that must accept the change and adopt the associated new behaviors? The initial response by most leaders to this question is 100%. But we know it is nearly impossible and typically unrealistic to assume the organization can achieve 100% acceptance. Depending on the change, the investment in time and resources follows the law of diminishing returns: to achieve the last 20 to 30% of the change requires the same costs (or more) as the first 70 to 80% of the change.

The leader authorizing the change (the most senior leader to whom all impacted employees report) is responsible for determining the level of acceptance, in addition to:

• Ensuring the resources are in place to achieve the target level of acceptance.
• Requiring those impacted to make the change or accept the consequences.
• Holding the change practitioner accountable for monitoring and reporting the current level of acceptance at key milestones during the lifecycle of the change.

We aim to make these calculations scientific and data-driven, but it is sometimes difficult or expensive to capture all necessary information. Instead, we analyze the state of 13 critical success factors and identify which factors require attention to achieve the targeted level of acceptance.

13 Critical Success Factors for Effective Change

Our approach to change management risk focuses on the factors that are most important to the success of organizational changes. The 13 critical success factors for effective change are:

1. Decision-making structure is operational - The role and responsibilities of all leaders are defined, and the change governance and decision-making structure are clear and operational.
2. Project management is effective - The solution implementation team is engaged, capable and incorporates the change management plan into the overall project plan.
3. Current state case for change is strong - The reasons or purpose for the change are clearly defined and understandable to all impacted people.
4. Impact of history is acknowledged - The causes or perceived history of poorly managed changes in the past are identified, analyzed and mitigated as needed.
5. Impact of culture is acknowledged - The culture of an organization is taken into consideration when planning the change, and this may require change as well.
6. Desired state definition is clear - All elements of the desired state (structure, process, people and culture) are defined and understood by all impacted people.
7. Transition dip is managed - The potential unwanted impacts of the transition are identified and mitigated if possible.
8. Impact of multiple changes is understood - Other concurrent change projects or overlapping changes are identified, and the impacts are analyzed and mitigated as necessary.
9. Leaders at all levels are capable and willing - Every leader involved understands the change and commits to fulfilling their role and responsibilities.
10. Change practitioners are capable and willing - Change practitioners are ready, competent and have the resources necessary to support the change.
11. Affected people are capable and willing - Individuals and groups that are impacted by the change are ready and competent to fulfill their expectations.
12. Risk is identified, analyzed, and mitigated effectively - Potential risks during and after the change are understood.
13. Organization is competent in managing change - The organization has the resources and capability, from internal or external sources, to manage the entire change.

The importance of each critical success factor will vary by project type or organization, but it is vital to determine the level of acceptance required for each factor.

We understand the mitigation of resistance costs money, and the cost associated with resistance mitigation is a factor in the calculation of ROI. The gap between the target level of acceptance and the current level of acceptance is the relationship to be evaluated.

The less ready the organization is in any one of the critical success factors, the greater the potential for resistance and the more mitigation activities that are required. The more resistance mitigation events required, the higher the cost of effectively managing the change and the greater the impact on the ROI calculation.

The ROI of change management depends on the degree of resistance to the change. Proactively identifying and mitigating resistance by assessing the 13 critical success factors improves the likelihood of success and maximizes the investment. ■