How to... manage organisational change

Research shows that most organisations carry out a major restructuring every three years. Bill McCarthy looks at how this change should be managed

Today’s business model has continual change as its central tenet. In fact, UK companies are obsessed with reinventing themselves. Research shows that most organisations carry out a major restructuring, such as an acquisition or divestment, every three years. On a smaller scale, internal reorganisation is taking place virtually continuously.

But it is only now, as confidence in an economic recovery takes hold, that we find mergers, acquisitions and restructurings back in the headlines. The integration of Granada and Carlton in the new ITV, Safeway’s takeover by Morrisons, Philip Green’s attempted acquisition of Marks & Spencer, and Santander Central Hispano’s pursuit of Abbey are among the better known examples making the front pages.

Yet, if research is to be believed, most of these changes fail to achieve all of their intended objectives.

And in almost all cases the main cause of failure is a lack of attention to people issues. Factors such as the failure to communicate an organisation’s strategy to those at all levels of the business, poor project management and the loss of key talent are, at best, only secondary considerations, and this is why businesses do not realise their goals and fall significantly short of the productivity they anticipated.

A leader in the medical journal The Lancet, written this year, puts the case for responsible corporate change strongly:

“The re-engineering of corporations may sound progressive, especially to shareholders, but the apparent price workers pay is an undercurrent of anxiety and diminished loyalty and commitment, their morale eroded by a chaotic and often dysfunctional work environment in which individuals are devalued or discounted altogether.”

Getting transformation wrong is costly. So what steps should businesses take to ensure that transition projects don’t end in tears?

1) Put people at the top of the agenda

Organisations plan the finance, operations, marketing and selling, review the assets and revalue the balance sheet. But few do this for the people dimension. So planning for people performance is not addressed until the decision is made.

If there is any life in the battered cliché, “Our people are our greatest assets,” then people need to be a top-table subject of discussion at the very earliest stages of the decision-making process.

2) Support the manager

Disregarding line managers will almost certainly lead to failure for the project. A recent research report by Penna has highlighted the pivotal role of managers in winning the hearts and minds of employees. Organisations need to engage and equip line managers to ensure their people are committed to the change journey.

More than 80 per cent of people surveyed who felt a lot better about their company after a recent change said their manager was pivotal to this positive feeling. Leaders should aim to understand and support managers in their own personal transition first, and then assist them in providing clarity and support for their teams.

3) Communicate with staff

Too often during change, communication and employee engagement is mechanical and one-way. It is not uncommon for staff to first hear about job losses, for example, from the media over breakfast.

The forthcoming European Information and Consultation Directive may further erode hierarchical, “them and us” management structures. But it is questionable whether it will bring about the necessary change in employer/employee communication.

We are faced with a workforce that, according to Penna research, is “unsentimental towards its current employer and sceptical about the loyalty it can expect to receive from them”. This workforce wants to be recognised as a legitimate stakeholder. To foster high-trust relationships, which in turn encourage high-performance workplaces, keeping staff involved is vital.

Communication therefore needs to be meaningful, and it is “conversations” with employees that employers should be striving for. While communication is simply the transferral of information from one person to another, in conversation something new is created as a result. As a famous historian once said: “Communication merely reshuffles the cards; conversation creates new cards.”

4) Manage individuals’ career concerns

In times of change, individual agendas are ignored and expectations not managed. In a climate where 69 per cent of employees admit they are always on the lookout for better employment opportunities, an employer that fails to address the “What’s in it for me?” agenda risks breeding insecurity and losing key talent.

Penna’s research has found that the most common reason for people feeling worse about their organisation after a change is concern for their job (29 per cent) and a lack of consultation (24 per cent).

5) Measure employee engagement

Organisations that fail to measure people engagement at any level can react only slowly – if at all – to the consequences of widespread disaffection among employees. Harvard research has established relationships between employee satisfaction, productivity and, ultimately, profitability.

If you fail to measure the satisfaction and morale of your employees when you are changing their world, then it should not come as a surprise if you are unclear about the support they require until it is too late – and this will affect productivity and profitability.

6) Pay attention to project management

The strategy may be excellent, but it is only as good as its implementation. Organisations often fail to appoint a project manager and team that are as competent to engage and instil ownership in the “new world” as they are in managing the logistics of it.

The expert
Bill McCarthy is director of strategic development at Penna, a human capital consultancy. He can be contacted at

Further reading:

  • The Manager Matters – the pivotal role of managers in successful change, Penna, 2004.
  • Itchy Feet – a research report on employee loyalty, Penna, 2003.
  • J L Heskett, T O Jones, G Loveman, W E Sasser and L A Schlesinger, “Putting the service-profit chain to work”, Harvard Business Review, March/April, 1994.