The vital environment leads to permanent changes in a company. The executive management is responsible for defining the right answers with a fitting strategy and is accountable for implementation. Strategic initiatives are set up to achieve the formulated business strategy and with this to remain competitive. Companies are able to achieve the desired target state by the integration of program and change management.
The paper is based on PMI® Pulse of the Profession™ reports, PMI's Managing Change in Organizations: A Practice Guide (PMI, 2013b) regarding implementation of strategic initiatives and change management, the latest best practice survey of the Change Management Learning Center - Prosci (Prosci, 2014), and the change and transformation experience of Tiba.
The conclusion is that strategic initiatives to implement formulated strategies are more successful and benefits will be achieved on the one hand by integrated program/project and change management and on the other hand by increased organizational agility and alignment between strategy and programs/projects.
Changing global market conditions, innovation, and cost pressure lead to a complex and dynamic company environment. The executive-driven strategic initiatives to implement the formulated strategies fail often. Why?
There are permanent changes within a company: implementation of new strategies, organizations, systems, culture, and processes. In all of these endeavors change management is crucial for success and acceptance of the results. To be competitive companies must live and manage the constant change.
How could the implementation of strategies be managed in a professional way to achieve the results and the benefits? How can organizations close the often given gap between defined strategies and implemented outputs? What is the miracle of effective program and change management as the reason to be successful in implementing large-scale changes like business transformation programs?
Program and Strategic Initiative – Definitions and Models
A program is a group of related projects managed in a coordinated way to obtain benefits and control not available from managing them individually (PMI 2013a). It is characterized by the following features:
- It is a temporary endeavor with a definite beginning and end.
- It contains related projects and single activities from operational business.
- It may include elements of related work outside of the scope of the discrete projects in the program. It is a temporary endeavor with a definite beginning and end.
- The methodology used to handle programs is program management.
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 foundation for related programs and projects
- Only top management can initiate these improvement processes (exists mostly in the area of business improvement )
- Has impact on one or several management elements (structure, processes, culture, people) and thus always on the business results
- Contains related programs and projects
- Program management as methodology
The Project Management Institute's Pulse of the profession™: The high cost of low performance (PMI, 2014b) clarifies what is a strategic initiative: “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.”
Changes – Definitions and Models
A change is a “From”– “To” journey via programs/projects: “PMI believes that all strategic change in organizations is delivered through programs and projects. Successful organizations lead change by managing their projects and programs effectively” (PMI, 2013b).
Different Change Types/ Nature of Change
PMI differentiates first-order, second- order and third-order changes (PMI, 2013b):
- First-order change:
- Performed processes and procedures
- Adjustment within existing system of the organization
- Is reversible
- Is not considered to be a transformational change
- People are not threatened because their fundamental competencies are not being challenged
- Example: New project management standards (e.g. status reports) that all project managers are expected to use.
- Second-order change:
- Transformational and irreversible in nature
- It requires new learning for employees or a new way of seeing things
- Redefines the way work is conducted or introduces a new concept for organization
- New ways of doing work threaten competencies (Will I be able to perform the new job?) and the individual's results (will they find out I'm not good enough?)
- Example: Organization that adopts program management for the first time: The organization will be projecting, managing, and realizing benefits.
- Third-order change:
- Requires a change in values
- Modifies in a transformational change the founding principles of the organization
- Most difficult type of change to facilitate in an organization
- Requires understanding the behaviors, thoughts, and feelings of people
- Example: Decision to change philosophy of the organization to process improvement. Begin the transformation to a culture of process improvement.
The recipient of what is being changed differs in each category of change. With the differences in the recipient, the difficulty increases and the time to facilitate and sustain the change lengthens.
The integrated program/ project and change management approach helps to plan and execute programs/projects with second- and third-order change objectives. The magnitude and extent of work applied to the initiative needs to be gauged (which steps and depth of change activities).
Change management is an organized, systematic application of the knowledge, tools, and resources of change that provides organizations with a key process to achieve their business strategy.
“PMI views Change Management as an essential capability that cascades across and throughout portfolio, program, and project management" (PMI, 2013b).
Most companies are far away from their target state regarding successful changes. A strategy and benefit-oriented change management is often not established.
Integrated Change Management
Integration of program/ project and change management
Program/project management, the scope of the change, e.g. of the strategic initiative and change management are to be integrated. The scope is always the focus of a project particularly if a change project should be executed. But the supporting processes “Program or Project Management” and “Change Management” are crucial to be successful.
Integrated professional program/project and change management will enable a program or project manager as a temporary leader to manage a change program/project and to achieve the expected results. The change management of the single program/project must start before program/project starts in the period of initiating and continue after the closing of the program/project. Reinforcement and measurement will take place in the application phase.
To successfully implement organizational strategy, companies need project and program managers with the skills to drive and navigate change, while ensuring that those changes are strategically aligned to business goals. The success or failure of a change initiative is not just about initiating, planning, monitoring, executing and evaluating the project that will drive the change. It also involves preparing your organization for transformation, ensuring stakeholder buy-in, and engaging executive sponsors to champion and support the change before, during and after its implementation. (PMI, 2014a)
Integrated organizational and individual change process
Change projects take place on an organizational and on an individual level. Integrated change management is a systematic approach to dealing with change, both from the perspective of an organization and on the individual level (“people side of change”). The two processes “Organizational Change Process” (Projects) and “Individual Change Process” (People) are to be integrated to achieve the desired business results.
Business Transformation Management
Business Transformation as the most complex change
Business transformation is about making fundamental changes in how business is conducted in order to help cope with shifted market demands. Business transformation is a challenge and procedure for most, if not all, organizations.
- On the one hand, external changes such as sustainability, technological innovations, globalization, economic conditions, and the changing nature of the workforce have a profound impact on the way organizations execute business.
- On the other hand, internal changes such as product innovation, restructuring, and new business model adoption, also potentially result in large-scale transformation and consequently in a disruption in the workplace.
- Organizations require an excellent transformation process in order to sustain competitive advantages.
Business Transformation Management is
- the holistic management of extensive, complex changes/large-scale transformation initiatives on which an organization's future success strongly depends, like e.g. business model changes, post-merger integration, shared service center implementations, and large ERP implementations (Uhl & Gollenia, 2012).
- an integrative approach, with an emphasis on the balance between the rational and emotional aspects of transformation.
Business transformation is achieved by realigning the way staff work, how the organization is structured, and how technology is used. Typically organizations go through several transforming stages:
- Recognizing the need to change, and gaining consensus among stakeholders that dramatic change is necessary
- Agreeing what form the change should take, the objectives of the change, and a vision that describes a better future
- Understanding what the organization is changing from and what needs to change in detail
- Designing the new organizational way of working and its support and management
- Testing and implementing changes, usually in waves, typically over a number of years
- Reinforcing the change: organization cannot move back to how it was and achieves the intended benefits.
Change/transformation of management elements or of the entire company
A company defines the strategy based on the market demands and internal and external challenges. Strategic initiatives are formulated as a direct response to a change in the business environment.
The target state is an improved situation to achieve stable or better business results. The company as a system to be transformed consists of different elements to be managed and continuously changed.
The implementation by a strategic initiative involves several projects. The scope of these could reflect parts of one management element like processes (e.g. increase of efficiency by optimized single processes), or could handle one entire management element. The most difficult and challenging strategic initiatives are business transformations, if the entire company with several elements should be changed.
Management of Strategic Initiatives
Though executives know what they should be doing – 88 percent say that strategy implementation is important to their organizations – sixty-one percent acknowledge that their firms often struggle to bridge the gap between strategy formulation and its day-to-day implementation. (EIU, 2013) This gap demonstrates a lack of understanding among organization executives that all strategic change happens through projects and programs. Most in the C-suite fail to realize this simple truth. (PMI, 2014b)
There are different components to be reflected by designing and planning a successful change/transformation. All components need to be managed in a structured way to successfully transform an organization.
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 $109 million for every $1 billion invested in projects and programs (PMI, 2014b)
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, 2014b)
The 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).”
Success Factor Sponsorship
One reason for failed strategic initiatives is the wrong assumption that change management is a “soft issue” only. Change management is not the focus of the top management with dramatic consequences particularly for strategic initiatives.
The role of the top management is crucial within a transformation process. A sponsor should lead by clear vision and targets. Active and visible sponsorship is needed in the difficult phases of a change.
But according the latest PMI reports, C-suite executives are often missing in action. Rather than micromanaging, C-suite executives should identify and focus on the key initiatives and projects that are strategically relevant.
Sponsor Responsibilities to the Executive Team
- Understand the organization's culture and values
- Keep projects aligned with the organization's strategy and portfolio direction
- Provide leadership to the project team
- Provide ongoing assessment of the project's viability
- Work with other sponsors
- Focus on realization of benefits
- Seek opportunities to optimize cost/benefits
- Ensure continuity of sponsorship
- Provide feedback and lessons learned to the executive team
Sponsorship is the most important success factor
The sponsor as the face of organizational change (PMI, 2013c) and the latest edition of Best Practices in Change Management (Prosci, 2014) proved:
- Active and visible executive sponsorship is the greatest contributor to success. Ineffective change management sponsorship is the greatest obstacle to success.
- More than three quarters of projects (79%) at high-performing organizations enjoy active project sponsors compared to less than half (43%) at low-performing organizations.
- Active support throughout the process is positively correlated to a successful outcome.
- The sponsor's active and visible support of the change from initiation to completion is important in order to
- Deal with the organization's culture
- To ensure that all stakeholders are represented
- To build alliances with others across the organization
What are the do's and don'ts of a sponsor? The new 2014 edition of Best Practices in Change Management (Prosci, 2014) delivers answers:
Most critical activities of sponsors:
- Participate actively and visibly throughout the project
- Communicate directly with employees
- Build a coalition of sponsorship
Biggest mistakes of sponsors:
- Failed to remain visible and engaged throughout the project
- Failed to demonstrate support for the project in words and actions
- Failed to effectively communicate messages about the need for change
- Ignored the people side of change
- Delegated or abdicated the sponsorship role and responsibilities
Criteria for Successful Strategic Initiatives
The following criteria for successful strategic initiatives summarize the described content of this white paper:
- Preliminary activities before launching a strategic initiative
- Creating the “to be” vision
- Sponsorship engagement
- Role of management (sponsors, line managers, project leader) during transformation
- Define and measure benefits of change/transformation program
- Program/project governance/decision-making
- Integrated program and change management
- Roles and resources for change management
- Change monitoring and controlling
- Effective stakeholder management (“Buy-in”)
- Targeted communication
- Resistance management
- Training and coaching for leading transformation
- Reinforcement feedback and continuous improvements
Conclusion: Need for Integrated Program and Change Management, Organizational Agility, and Alignment of Programs/ Projects with Strategy
A change has high impact to a company. Even major changes organized in strategic initiatives could be managed successfully by applying “Integrated Program and Change Management.” The most important success factor is the involvement of an active sponsor.
The PMI® Report Pulse of the Profession™: The High Cost of Low Performance (PMI, 2014b) proves that 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 in agile organizations two times higher as compared to companies with low agility. A prerequisite to be successful with strategic initiatives is the alignment of projects to organizational strategy.