Transformation programmes and projects are typically large and complex in nature. They commonly involve cross-functional activity, require new thinking of old ideas, must embrace complex change and stakeholder dynamics and often result in a need for innovation and/or technological advancement.
If transformation were simple, businesses would perform them as part of business-as-usual operations with very little assistance and the vast majority would be successful. Unfortunately, over half of business transformations fail to deliver the anticipated outcomes and benefits, often taking far longer, and spending vastly more, than was expected when they were conceived. A key driver of transformation failure rates is that expectations are often unrealistic from the outset. Given that people enter transformations expecting to succeed, what do we find when we examine the reasons why they may be undermined in the early stages of their existence?
Dates are ‘created’ to fit a preconceived notion: target delivery dates may be selected based upon a leader’s best perspective on how long something should take, which dates would be deemed acceptable when the transformation road map is sold to the organisation’s board, or based on a very high-level plan. Another factor is that the expectations of the business, and resulting pressure from key stakeholders, can lead to delivery dates being selected with those pressures in mind but without the support of a realistic, doable plan. Where initial dates are not backed up by a level of transformation experience and subject matter knowledge, the tendency of most people is to be over-optimistic about what they can achieve. Over half of transformations encounter material delays, indicating that expectations around timescales are amongst the hardest to get right.
Tip: let the plan drive the dates, not the dates drive the plan
The business case is not stress-tested: when we are asked to help turn-around struggling transformation initiatives we always review the original business case and seldom find that it was originally challenged in the right way. What do we mean by that? Well, we often find that costs were challenged downwards, but other areas such as timescales, risks and benefits were painted in an overly optimistic light. The best-case scenario is often the one presented whilst the realistic and worst cases are largely ignored. This is especially true of strategic initiatives which organisations have no choice but to do as a cost of doing business (e.g. implementing back-office systems like MRP, ERP, Supply Chain or CRM). In many cases, business case optimism is driven by a desire to achieve approval for the project, and a perception that if the case is not good enough it will not be approved. It is worth considering that if the case is not good enough then it probably shouldn’t be approved.
Tip: make sure that each business case is strong and prioritise the strongest.
Budgets are the easiest things to cut: generally, transformation programmes cost more than originally envisaged, utilising available contingency or over-spending. In many cases, the originally envisaged programme cost would have been enough to ensure its success, however, that budget was deemed to be too expensive as it passed through an organisation’s approval process, resulting in budget cuts. To compounding this, budget reductions are seldom accompanied by a concomitant scope reduction – meaning that the programme starts from a position of inherent weakness – it is already expected to do more with less. In organisations with large change portfolios we have witnessed a tendency to reduce budgets attributed to large programmes, as opposed to removing some projects from the portfolio because the financial (or other) capacity simply does not exist to do everything that requires to be done.
Tip: budgets need to be realistic to do the job – if they aren’t the job won’t get done.
Load the scope: one feature of struggling transformation programmes is that they end up containing more scope than they should, becoming the only delivery vehicle in town. It can become fully loaded with a trailer attached containing all the pet initiatives the organisation has wanted to do but could never find the funding for. The effect of this is can be to overburden the programme as a whole – imagine buying a nice, new, shiny Ferrari and sticking a caravan on the back; the performance of the Ferrari isn’t going to be quite a disappointment. That is the effect of loading pet projects and initiatives that haven’t proven commercially viable in the past into your transformation programme.
Tip: be ruthless with scope – cut out pet projects and those which don’t drive value.
Change overload: large organisations often underestimate the cumulative weight of change. One major transformation programme is perfectly ok for most functions to manage, however, if you have to deliver multiple, simultaneous, cross-functional initiatives, the matrix-effect of change coupled with business-as-usual responsibilities can overburden leaders and staff. The result of doing too much is typically that strategic priorities are adversely impacted by smaller, less important changes.
Tip: look at the cumulative weight of change before you approve additional initiatives – challenge whether all stakeholders can cope with another project being added into the existing mix - be prepared to stop things, as well as start them.
To prevent failure, avoid fixed dates to start with:
Start with a high-level road map which avoids setting expectations about fixed dates, and make sure that every stakeholder understands it is a straw man which required professional planning in order to develop. Undertake a professional planning exercise to fully validate the timescales.
A two-stage business case sign-off process can be really helpful in managing expectations: the first stage grants limited funding in order to full flesh out the proposition, the business case and the plan, enabling everyone to fully understand the commitment being made prior to approval of second stage funding. This is exactly how new start-ups proceed through the initial stages of raising capital - those with an entrepreneurial mindset might see the value in applying this to the ‘start-up’ phase of a business transformation.
Ensure the viability of the business case under stress: probe all dimensions of the business case with some key questions. Does your case for transformation remain viable if...
the costs increase by x%?
the timescale extends by y months, also increasing the costs by z% (or more)?
the benefits leak –with respect to realisation timescales, absolute amounts, or both?
the risks crystallise? Do you have the contingency available to absorb their impacts?
additional scope is identified? Do you have the processes in place to limit scope creep?
the quality of the solutions required to deliver the target operating model starts to degrade? What compensation mechanisms will be required? Might benefits be affected adversely?
Ultimately, a business case under stress might demonstrate that your transformation is not financially viable. It is better to admit that and be up-front about continuing anyway, or not starting, than it is to start with false expectations that may come back to haunt you later.
Manage expectations
Make sure you really have the budget to cater for overruns. If budget contingency is commonly slashed in your organisation’s annual spending cull, make sure you have enough core budget before you need to call upon it
If projects span multiple years, make sure you carry any unspent budget forward from year to year. Many accounting functions struggle with this simple concept and projects lose overall budget very commonly as a result
Ensure stakeholders understand the implications of scope creep, timescale pressure, the risks faced and their potential for disruption, the likely impact of wider changes in the organisation, and the complexities that transformations entail
Be ruthless with scope:
Knock out people’s pet projects up-front: transformations are difficult enough without the burden of things that are not required. Don’t hesitate to kill unnecessary initiatives off; you might be unpopular with a couple of people in the short-term, however, if your stakeholders are clear that one initiative will put the whole programme at risk you should expect their support
De-couple the caravan: pare down the first phase of your transformation to those areas that generate high-performing results, and which enable the achievement of strategic benefits. Subsequent phases can be used to build upon the foundations laid by that first stage. One tip is to create a multi-phase transformation programme road map, to articulate your journey and illustrate how benefits will be released along the way.
Manage your organisation’s capacity for change:
If you run a factory you understand that there is a finite limit to its capacity. A plan to exceed that limit requires either additional investments in facilities, people, etc., or for the limitation to be accepted. The key is to possess the information to know when capacity will be exceeded and have an agreed approach to dealing with it
Many organisations operate a project portfolio to streamline change initiatives, although this approach does not uniformly result in better capacity management. However, what we have observed is that organisations who effectively manage 10 programmes will generate better results than those who execute 20 poorly
Conclusion
Realistic expectations can be hard to define at the outset of a complex transformation programme. We hope you find the tips in this blog useful and that they will help you avoid some of the most common challenges that you will face when getting your transformation off the ground.
Contact Claverton
To talk to us about your transformation needs please visit our website (www.clavertonconsulting.co.uk) or email us at info@clavertonconsulting.co.uk
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