Build organizational capability to improve strategy implementation
enterprise change management (ECM) and organizational project management (OPM)
Markus F. Wanner, Managing Partner, Representative of Management
Tiba Managementberatung GmbH, Munich, Germany
- “All strategic change in an organization happens through projects and programs” (PMI, 2014a).
- Successful strategy implementation should be the appropriate answer to permanent changes of a company. But organizations often fail with their strategic initiatives and do not achieve the expected results and benefits.
- The maturity level regarding change and project management is too low to manage changes on a regular basis. Leading organizations are embedding professional project and change management and building a true organizational change capability.
- Based on the Prosci® ECM approach and the Project Management Institute's Organizational Project Management Maturity Model (OPM3)® approach, this white paper delivers the clear message that these two disciplines have to be integrated to be successful by implementing strategies to achieve sustainable, accepted results.
- The paper is based on PMI reports and practice guides regarding Organizational Project Management (OPM) and change management, the latest best practice report of Prosci,® the Change Management Learning Center, and the change and project management experience of Tiba.
- The conclusion is that strategy implementation can be improved. Implemented ECM and OPM (best in an integrated approach) is a prerequisite to building the needed organizational capability.
To be competitive, companies must implement their strategies successfully by programs/projects. They must manage the permanent change. Unfortunately, strategic initiatives to implement strategies fail often! Why? What are the success factors to implement strategies successfully?
Enterprise Change Management (ECM) and Organizational Project Management (OPM) are the preconditions for organizational capability needed for successful strategy implementation.
The purpose of this white paper is to explain how a company can transfer the means, the links, and the differences of ECM and OPM as a precondition for organizational capability that is needed for strategy implementation.
The white paper answers the question, “Is my company and are our people capable and willing to realize the important requirements to implement ECM and OPM?”
ECM, OPM and Strategic Initiative – Definitions
ECM is the discipline and process of deploying change management broadly across an entire organization. Leading organizations are now beginning to make the shift from applying change management in single projects toward embedding change management and building a true organizational change capability.
OPM is the execution of an organization's strategies through projects. OPM is the combination of portfolio management, program management, and project management. It pertains to the translation of corporate strategy into the projects of an organization through portfolio management, and the execution of corporate strategy through programs and projects.
A strategic initiative could be one program with related projects or could contain several programs with related projects. It should be managed with proper program management.
It is characterized by the following features:
- Translating organizational strategy into a specific initiative
- Temporary endeavor as a foundation for related programs and projects
- Only top management can initiate these improvement processes
- Has an impact on one or several management elements (structure, processes, culture, people) and thus, on the business results
- Contains related programs and projects
- Program management as methodology.
“While some projects improve an organization's ability to run the business and don't rise to the level of a strategic initiative, all of an organization's strategic initiatives are projects or programs, which inevitably change the business” (PMI, 2014a).
ECM – Enterprise Change Management
“Successful execution of strategy requires an emphasis on organizational change management. A lack of change management skills are the biggest barrier to successful strategy implementation, according to 38 percent of PMOs. High performers are committed to understanding key factors of successful change such as communications (69 percent versus 54 percent) and stakeholder satisfaction (68 percent compared with 44 percent) (PMI, 2014c).
With the critical nature of success on change projects and initiatives, many organizations are starting to build organizational change management capabilities and competencies. Instead of addressing change management one project after another, these organizations are investing time, energy, and resources to build organizational change management capabilities and competencies.
Organizations are moving from a project-by-project view toward deploying change management broadly across the organization with an enterprise view. With an enterprise perspective, organizations are institutionalizing “effective change management” as common practice on all projects and initiatives.
Tactics like adopting a standard approach, creating a Change Management Office and integrating change management activities into a standard project delivery process are just some of the steps that can be taken to institutionalize change management, making “managing the people side of change” the norm and common practice.
“ECM is the structured and intentional deployment of change management across and throughout an organization. With Enterprise Change Management, effectively managing the people side of change becomes more than a business practice; it becomes a core competency, competitive differentiator and cultural value of the organization” (Prosci, 2014).
Change Management Maturity Model
A company can apply a Change Management Maturity Model for assessment to determine its organizational maturity in change management. With a Change Management Maturity Model and the resulting analysis, a company can accurately and effectively present the state of change management in its organization and create targeted and customized plans to institutionalize change management practices, processes, capabilities, and competencies.
Example: Prosci® Change Management Maturity Model™ takes a company through an evaluation of 50 factors, scoring each on a Level 1, Level 2, Level 3, Level 4, or Level 5 scale. A company can find its overall score, its score in each of the five capability areas, and its profile for the 50 factors that constitute organizational change management maturity.
Exhibit 1: Change management maturity model.
The Prosci Change Management Maturity Model presents five capability areas that would be evidence of an organization's maturity at managing the people side of change.
These five capability areas are:
- Leadership – addresses commitment and buy-in for the effort to build change management capabilities and competencies
- Application – focuses on the use of change management processes, tools, and principles on projects and initiatives
- Competencies – centered on the skill sets and individual competencies in “leading change” that exist throughout the organization, from the most senior leaders to front-line employees
- Standardization – addresses the adoption of common approaches and tools, and the establishment of functional groups
- Socialization –focuses on building employee buy-in and commitment for change management throughout the organization, and an organizational dedication to managing the people side of change
The Prosci Change Management Maturity Model is based on an evaluation of 50 factors within the five capability areas. It involves evaluating:
- 8 Leadership Factors
- 8 Application Factors
- 12 Competencies Factors
- 12 Standardization Factors
- 10 Socialization Factors
Exhibit 2: Five CM capability areas.
- Detailed analysis of current situation compared with world's best practice.
- The Prosci Change Management Maturity Model outputs are:
– Overall score
– Capability area scores
– Factor scores
- List of recommended quick-wins with evaluation of impact
- Long-term strategy (1-3-5 years) with evaluation of impact
Exhibit 3: Five CM capability area scores.
The ECM Roadmap is providing guidance for institutionalizing change management practices, processes, capabilities, and competencies. Through the ECM roadmap, a company will create a strategy and set of plans for moving from where it is today in terms of maturity, to a higher level of maturity in change management.
The ECM roadmap is built on the premise that institutionalizing change management is both a project and a change that must be managed. The ECM roadmap contains complete descriptions and action steps for the following core modules:
- Manage project ECM as a project
- Assess current state/initial situation
- Define future state/successful change
- Design transition state: “projects” side
- Design transition state: “people” side
Exhibit 4: ECM roadmap.
OPM – Organizational Project Management
Organizational project management (OPM) is the systematic management of projects, programs, and portfolios in alignment with the achievement of strategic goals.
OPM is based on the idea that there is a correlation between an organization's capabilities in project, program, and portfolio management, and the organization's effectiveness in implementing strategy.
As businesses change at a faster rate, the execution of an organization's strategies through projects is becoming increasingly important. Additionally, due to the broad nature of much of the change, projects are affecting larger parts of the organization. Therefore, just as the need to perform projects is increasing, the complexity in executing them is also increasing.
Organizational project management draws from the broad base of project management and organizational design applications to understand the organizational processes that affect the ability to manage the delivery of projects.
Organizational Project Management Maturity Model (OPM3®)
PMI has established the Organizational Project Management Maturity Model (OPM3®) to help organizations assess and improve the maturity of their organizational project management.
OPM3 is a globally recognized best-practice standard for assessing and developing capabilities in portfolio management, program management, and project management. OPM3 provides a method for organizations to understand their organizational project management processes and measure their capabilities in preparation for improvement. OPM3 then helps organizations develop the roadmap that the company will follow to improve performance.
Exhibit 5: Organizational project management maturity model (OPM3).
Exhibit 6: Components and criteria's of a detailed PM maturity assessment (according to OPM3).
OPM3 offers the key to organizational project management with three interlocking elements:
- Knowledge - Learn about hundreds of OPM best practices.
- Assessment - Evaluate an organization's current capabilities and identify areas in need of improvement.
- Improvement - Use the completed assessment to map out the steps needed to achieve performance improvement goals.
OPM3 is designed to provide a wide range of benefits to organizations, senior management, and those engaged in project management activities. Some of the benefits derived from using OPM3 are as follows:
- Strengthens the link between strategic planning and execution, so project outcomes are predictable, reliable, consistent, and correlate with organizational success.
- Identifies the best practices which support the implementation of organizational strategy through successful projects.
- Identifies the specific capabilities which make up the best practices, and the dependencies among those capabilities and best practices.
Successful Strategic Initiatives to Implement Strategies
“Very few organizations (9 percent) rate themselves as excellent on successfully executing initiatives to deliver strategic results. Consequently, only 56 percent of strategic initiatives meet their original goals and business intent. This poor performance results in organizations losing US$109 million for every US$1 billion invested in projects and programs” (PMI, 2014a).
An organization's success is dependent on high project performance – projects completed on time, on budget, and meeting original goals.
“The lack of alignment of projects to organizational strategy most likely contributes to the result that nearly one half of strategic initiatives (44 percent) are reported as unsuccessful. High Performing Organizations have successful strategic initiatives. They are more likely than their low-performing counterparts to focus on agility and strategic alignment” (PMI, 2014a).
Exhibit 7: Organizational agility and alignment of projects to strategy.
PMI's Pulse of the Profession®: The High Cost of Low Performance (PMI, 2014b) proves:
- “Projects and programs that are aligned to an organization's strategy are completed successfully more often than projects that are misaligned (48 percent versus 71 percent).
- Organizations that are highly agile, nimble, and able to respond quickly to changing market dynamics complete more of their strategic initiatives successfully than slower, less agile organizations (69 percent versus 45 percent).”
Exhibit 8: Effective change management leads to successful strategic initiatives.
Study Findings Regarding Strategy Implementation
According to the Economist Intelligence Unit study, Why Good Strategies Fail: Lessons for the C-Suite (2013), only 18 percent of top executives say “that the hiring of people with the necessary business skills or leadership talent to drive strategy implementation is a very high priority at their firms.”
Changing Change Management, A Blueprint That Takes Hold by The Boston Consulting Group (BCG, 2012) stresses the importance of this transparency: “It has to be easy for leaders to get clear operational insights so that they can respond quickly – before targets are missed – making necessary course corrections across the range of change activities by adjusting critical allocations of resources, time, and their own attention.”
Results of continual assessments of projects, programs, and portfolios need to be provided to senior executives in order for organizations to transfer valuable knowledge gained with each strategic implementation. However, according to the Economist Intelligence Unit's Why Good Strategies Fail: Lessons for the C-Suite (2013), “Only 40 percent of survey respondents say their companies are ‘good’ or ‘excellent’ at feeding back lessons from successful implementation into strategic planning, and just 33 percent when it comes to unsuccessful ones. Worse, 33 percent have no method for doing so, and most companies rely on informal ones—such as an overlap between those who engage in formulation and those who take on implementation.”
Findings from a recent Forrester Research report, Map Your Journey to the Future with Next-Generation Portfolio Management (2013) corroborates this: “Feedback loops, when they exist, provide information about team progress, risk, product quality, measures of application health, and the degree to which products, capabilities, and services satisfy business needs. The lack of transparency into the demand-to-delivery cycle causes companies to toll away efficiently on low-value work rather than focusing on being effective—doing the right work at the right time. Business change happens too quickly and continuously for planning to remain a discrete exercise done annually and reconciled quarterly. Business … leaders need to continuously evaluate opportunities based on changing market conditions and internal capacity (feedback loops) and compare alternatives in order to optimize outcomes.”
Implementation of ECM and OPM as an Integrated Approach
Implemented ECM and OPM will derive benefits to an organization. The capability regarding change management on the one hand and project/program/project portfolio management will be enhanced. Both will contribute to an increased organizational agility as prerequisite to perform strategic initiatives/change projects successfully.
PMI's 2012 Pulse of the Profession® In-Depth Report: Organizational Agility (PMI, 2012) proves: “greater organizational agility leads to better performance—providing organizations with a powerful edge on the competition.”
The best practice to implement professional ECM and OPM in a company is an integrated approach. The common 4 success factors are:
Exhibit 9: Integrated approach for ECM/ OPM implementation and common success factors.
A differentiation between these two interlinked disciplines makes no sense. The consequences are embedded benefit-oriented solutions. The following overview based on the four success factors delivers some examples:
- Human Resources:
- Targeted development of project participants (amongst others: project culture, team spirit, team composition, leadership qualities, mentor concept, lessons learned, methodology skills)
- Target-group-oriented qualification program regarding project and change management
- Competence profiles for leaders and project managers will include change competencies
- Development of a tailored and efficient governance and project organization (amongst others: portfolio boards, decision and communication processes, and process standards to link strategy with projects)
- Clear role descriptions for project and change management (e.g. important role of sponsor)
- Established PMO, which is responsible as well for Organizational Change Management. “High-performing PMOs on the whole have a greater commitment to learning and improving their approach to successful project and programs” (PMI, 2014a).
- Processes & Methods:
- Creation of company-specific process and methodical standards in project management (project goals, milestone plans, reporting, prioritization techniques, risk management, etc.) and uniform, transparent planning, and controlling processes) and change management (sponsor engagement, stakeholder management, communication, resistance management)
- IT/ Software:
- Project management systems (amongst others: project data bank, project reporting system, project documentation system) and collaboration systems/tools for communication
Conclusion: Build Organizational Agility by established, integrated ECM and OPM as a Precondition for Successful Strategy Implementation
A change has high impact to a company. A change to implement a strategy is, according to PMI, a complex second- or third-order change. There is a need to adapt to the market changes but the defined strategy is not realized by the project/strategic initiative. A failed strategy implementation is a mess for an organization. This might jeopardize the success of the entire company.
PMI's 2014 Pulse of the Profession®: The High Cost of Low Performance (PMI, 2014b) proves: “By maturing project and program management capabilities, focusing on change management, and insisting on a benefits realization review (as part of professional program management), high performers successfully complete more projects.”
The probability to run successful strategic initiatives is two times higher in agile organizations as in companies with low agility. A prerequisite to be successful with strategic initiatives is the alignment of projects to organizational strategy.
These findings of the above mentioned PMI report reflects that both disciplines, ECM (Enterprise Change Management) and OPM (Organizational Project Management), are crucial for the success of strategic initiatives.
PMI views change management as an essential capability that cascades across and throughout portfolio, program, and project management (PMI, 2013b). Implemented ECM will establish the needed capability regarding change management.
Implemented OPM provides benefits to organizations; on the one hand for the execution of single projects and programs, and on the other hand, on the strategic level of project portfolio management and strategy implementation. OPM strengthens the link between strategic planning and project execution and identifies the best practices which support the implementation of organizational strategy through successful projects.
The author is convinced that a high level of project orientation produces substantial competitive advantages for each company because there is a proven connection between the degree of maturity of a company's project management and its positioning in the market.
“All strategic change in an organization happens through projects and programs” (PMI, 2014a). The two disciplines are interlinked on an operational level with integrated change and project management (see Wanner, 2013, 2014), and on a strategic level with integrated ECM and OPM.
The best practice is to implement both disciplines together in an integrated approach in one project with the results of the defined success factors:
- Human factors/people
- Processes and methods
The conclusion is that the implementation of ECM and OPM, ideally with an integrated approach in a company, is the basis for improved strategy implementations. Strategic initiatives are more successful and benefits will be achieved by increased organizational capability.
Economist Intelligence Unit. (2013). Why Good Strategies Fail: Lessons for the C-Suite
Forrester Research. (2013). Map Your Journey to the Future with Next-Generation Portfolio Management
Keenan, P., Powell, K., Kurstjens, H., Shanahan, M., Lewis, M., & Busetti, M. (2012, December 19). Changing change management: A blueprint that takes hold. The Boston Consulting Group (BCG).
Project Management Institute. (2012). Pulse of the profession® in-depth report: Organizational agility. Newtown Square, PA: Author.
Project Management Institute. (2013a). A guide to the project management body of knowledge (PMBOK® guide) – Fifth Edition. Newtown Square, PA: Author.
Project Management Institute. (2013b). Managing change in organizations: A practice guide. Newtown Square, PA: Author.
Project Management Institute. (2013c). Pulse of the profession® in-depth report: The impact of PMOs on strategy implementation. Newtown Square, PA: Author.
Project Management Institute. (2014a). Pulse of the profession® in-depth report: Enabling organizational change through strategic initiatives. Newtown Square, PA: Author.
Project Management Institute. (2014b). Pulse of the profession®: The high cost of low performance. Newtown Square, PA: Author.
Prosci – Change Management Learning Center. (2014). Best practices in change management. Loveland, CO: Prosci.
Wanner, M.F. (2012, July) Change Management – Manage changes, achieve and reinforce organizational agility. Tiba Magazin. Munich: Tiba Managementberatung.
Wanner, M.F. (2013, February) Integrated Change Management as a success factor for agile organizations. Tiba Magazin, Munich: Tiba Managementberatung.
Wanner, M.F. (2014, February) Effective and integrated program and change management- the key factors for the successful implementation of strategic initiatives. Tiba Magazin. Munich: Tiba Managementberatung.
© 2015, Markus F. Wanner
Originally published as a part of the 2015 PMI Global Congress Proceedings – London, UK