What Is Change Management And Why Is It Important?

By Indeed Editorial Team

Updated 26 July 2022 | Published 13 May 2022

Updated 26 July 2022

Published 13 May 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Management of change refers to a set of structured activities that allow a business to continue functioning with minimal disruption whenever they make changes to their operations or business practices. Businesses constantly undergo changes due to new governmental and legislative policies, economic policies, market influences, automation, new technologies or competition. If you are a management student or want to become a change manager, knowing more about the management of change can be beneficial. In this article, we examine what change management is, the most common factors that cause change and the steps for implementing a successful change process.

What Is Change Management?

Change management is a collection of activities that support a group, an organisation or an individual to make a transition toward a new business model, technology or process. The success of the change depends on how its members adopt the new practices. The primary objective of change management is to support the human element of change. It also takes care of reallocating resources and assisting with implementing new technologies. A company may appoint leaders from within their company or hire an external consultant to identify, implement and monitor change-related activities. The main principles of management of change are:

  • Goal identification

  • Organisation

  • Collaboration

  • Communication

  • Implementation

Related: Your Guide To The Functions Of Management

What Are The Common Factors That Cause Change?

A business may face changes due to its internal policies like expansion, losses or digitisation. Change can also happen due to external factors like governmental policies, change in supply or change in consumption patterns. While some factors may affect a business once, some can affect businesses in cycles. The most common factors that lead to inevitable changes in a business model include:

  • Government policies: New fiscal and economic policies, export-import guidelines, tax, labour and environmental laws, safety and compliance regulations, discrimination laws, consumer protection laws and intellectual property and copyright laws can affect a business directly. It is important that a business tracks these laws and ensures compliance to avoid penalties or punishment.

  • Supply and demand: Consumption patterns change frequently and a consumer may not be loyal to a brand if they find better alternatives. A company that tracks the change in consumption patterns and regulates its production and supply chain is more likely to retain its market share and less likely to lose its customer base.

  • New technology: An organisation may consider changing its processes and systems to incorporate new software, automation technology or adopt robotics that can improve efficiency, reduce human error or improve quality. Such transitions may affect the performance of various departments and employees.

  • Repetitive losses: An organisation that faces consecutive losses is likely to revamp its processes, change its strategy, discard loss-making or irrelevant products or services, add new products or services and bring in new management staff to increase profitability. Management can prevent further losses by implementing procedures that can streamline processes and address these changes.

  • Competition: Companies may bring about changes in their products or services by improving features, improving customer service or by reducing prices to gain a competitive edge over their competitors. Companies that are not competitive may eventually lose their market share and may invest more time, money and resources to regain it.

  • Reduction of expenditure: Companies that adopt cost or management accounting can identify the factors that increase costs and reduce profitability. Management may change existing systems and adopt the best practices to reduce expenditure and improve profitability.

  • Organisational change: A business goes through change when it decides to revamp its organisational structure, merges with another company or when another company acquires it. In such scenarios, a business may change its leadership, employee hierarchy and product and service lines to enable a smooth transition to the new model.

  • Natural factors: Natural disasters and pandemics can disrupt an organisation's productivity and workforce deployment. Businesses with protocols to address them can avoid losses and minimise process disruption.

Related: How to Change Careers

How To Manage Change?

The activities that comprise management of change can take anywhere from a few weeks to a few years to implement, based on the factors that cause it, complexity of the project, size of the company and how employees respond to change. The important stages of this process are planning, implementing, feedback and reevaluating. A successful management process involves open communication and encourages collaboration among members of an organisation. These are the crucial steps involved in managing and implementing change:

1. Get the organisation ready for change

An organisation implements a change process to improve a product or a process or to achieve an outcome. The first step in realising the goal is to identify what you want to change and the resources and the teams that can lead the process. Once you have a clear understanding of what you want to improve, you can plan the rest of the system with clarity and ease.

2. Prepare a business case for management and stakeholders

Implementing a change process requires the support of the management team, the finance team and the employees. If you implement change without communicating the reason for change, goals and the outcome you expect, you are likely to face resistance. Each stakeholder may have different expectations, and it is important that the driver of the change communicates the process clearly and patiently to every concerned party.

3. Devise a strategy

Prepare a detailed strategic plan, listing goals and how you plan to achieve them. Communicate to the management about the budget for the change process, the resources you may require, the financial impact of implementation and the project's scope. The plan can outline measurable impacts like targets, incentives, savings or any useful data. Go through the plan multiple times before presenting it to senior stakeholders or upper management staff.

4. Put together a change management team

A management team usually comprises leaders who communicate well and have experience planning and implementing processes. A complex change project is more likely to have more leaders and supervisors to track the information flow and streamline operations. A management team for change generally includes:

  • A sponsor: A sponsor is a high-level member of the organisation, such as an executive officer. They can be an avid supporter of change and can communicate it to other executive members and stakeholders.

  • A project manager: A project manager is the leader of the change team and the project as a whole. They recruit key members and ensure that they perform well within deadlines.

  • Change team leadership: Change team leadership comprises individuals with specific skills in managing change. For example, a financial analyst may track budgeting and resources and an HR manager may identify potential hiring requirements.

  • Change team members: Change team members carry out general tasks related to change and assist with the transition. They may be people who answer employee concerns or intermediate training classes.

Related: A Guide On How To Build A Team That Is Strong And Successful

5. Track resistance, risk and budget

It is normal for employees and stakeholders to resist change. A project works best when you consider the risks and potential resistance, find appropriate solutions and work toward its successful implementation. Poor implementation of a change can lead to delays and you may spend more than what your budget allows.

6. Maintain communication

A successful change process depends on continuous and effective communication. Management may resist change, as it is subject to risks and additional budgets. Employees may be resistant to change, as it could interfere with their career goals and job security. It is the responsibility of a change manager to ensure transparent communication with all stakeholders so that everyone is clear about the goals, risks and impact of a project.

7. Implement your plan

Make the easiest objective the first task on your list. This helps boost confidence in the change management team and motivate others to adopt the change objectives. Constant feedback and evaluation of your approach are necessary to monitor the success of your plan. Much of what you may be doing is convincing members that the problem-solving strategies are moving in the right direction.

Related: What Is Strategic Planning And How To Do It In 6 Steps

8. Perform a post-transition review

The final step of the process is measuring the degree of change in relation to the initial goals. It is important to track the project's progress so that every stakeholder maintains the processes and practices of change. Ensure that they understand the changes you made and their current status and effectiveness. Some metrics that indicate a successful change implementation include:

  • Increasing sales

  • Decreasing number of work-related accidents

  • Increasing social media engagement

  • Reducing number of defective products

  • Increasing number of repeat customers

Why Is Management Of Change Important?

The underlying belief of change is that people change and the cyclical impact of change can lead to organisational change. When employees are willing to make and adapt to changes, it becomes easier for an organisation to achieve favourable results with every transition it makes. If an organisation does not focus on managing change, it can face multiple consequences, including:

  • Decline in productivity

  • Resistance from managers and key stakeholders

  • Lack of faith in vendors and suppliers

  • Drop in employee morale

  • Increase in attrition

  • Drop in brand image and value

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