Economy won’t dampen spending on change programmes

A new Economist Intelligence Unit study investigates the state of organisational change management

Despite a lacklustre global economy, companies are increasing their spending on change programmes. An Economist Intelligence Unit survey , sponsored by Celerant Consulting, found that business leaders are responding to the economic slowdown by launching more change programmes and spending more money on them. Although change programmes in the last year have had cost reduction as their primary goal, our survey found that, over the next year, the goal will be organisational flexibility for operational efficiency -- 57% of companies surveyed put this at the top of their agenda.

In spite of this enthusiasm for change, few companies are consistently successful at it. Although change management, as a business discipline, has been around since the 1940s, most companies still struggle to put theory into practice. Of the 607 senior executives polled for this survey, 58% say that, over the past five years, half or fewer of their change initiatives have been successful. The US fares a lot worse with 75% of respondents stating that half or fewer of their change initiatives have been successful.

The element of change management that companies have the most difficulty with is “winning hearts and minds” (51%). This was followed, in second place, by “lack of management buy-in” (31%).

“The tricky element in change management is always people,” says Robin Bew, Editorial Director at the Economist Intelligence Unit. ”Too often, managers think if they get the process and the technology right, the people will follow. Our survey shows that this is rarely the case. Successful agents of change are those who understand the art of persuasion.”

When change management initiatives fail, companies’ blame “lack of clearly defined or achievable milestones” (24%). Next on the blame-list is “lack of commitment by senior management” and “poor communication” (both with 19%). In other words, the ingredients that are required to convince people of the case for change.

Other key findings of the report include the following:

• Successful change management requires a charismatic leader, not a box-ticker. The best leaders of change are not ones who dictate their plans, but those who bring vision; inspire people with a sense of urgency; and then help them to bring their own creativity to the project.
• Culture may seem a smaller challenge in its own right, but it complicates many of the others. Our survey panel ranked cultural issues a distant fifth in terms of difficulties in implementing change successfully. However, interviews with experts indicate that cultural matters can significantly complicate the bigger challenges, such as winning people over.
• Money is rarely the reason for successful or failed change initiatives. On average, companies spend just 0.1% of annual revenues on change programmes and only 8% consider a lack of funding an important reason for their failure in the last year.

For a copy of
A change for the better: Steps for successful business transformation
please contact Joanne McKenna (contact details below).

Press enquiries:

Economist Intelligence Unit
Joanne McKenna, Press Liaison, +44 (0)20 7576 8188, joannemckenna@eiu.com
Clint Witchalls, Senior Editor, +44 (0)20 7576 8243, clintwitchalls@eiu.com

Celerant
Charles Carr, Director of Corporate Affairs, +44 (0) 7887 628985,charles.carr@celerantconsulting.com

Hanover
Enda Joyce, Account Director, +44 (0) 20 7400 4480, ejoyce@hanovercomms.com

About the Economist Intelligence Unit
The Economist Intelligence Unit is the business information arm of The Economist Group, publisher of The Economist. Through our global network of about 650 analysts, we continuously assess and forecast political, economic and business conditions in 200 countries. As the world's leading provider of country intelligence, we help executives make better business decisions by providing timely, reliable and impartial analysis on worldwide market trends and business strategies.

About Celerant Consulting
Celerant is the largest independent global firm working in the operations management sector of the consulting market. It delivers operational transformation and helps leading companies worldwide achieve and sustain world class performance from their business operations.

Celerant’s difference is simple: it believes that once it has fixed a problem for a client, it should stay fixed. The essence of Celerant’s approach is that its consultants work side-by-side with people in the front lines of business – from the boardroom to the shop floor – to ensure the delivery of sustainable and measurable benefits. Celerant embeds long-term behavioural change into the culture of its clients’ organisations – the key to sustainable change – a unique approach called Closework®.

Last year Celerant delivered over €600m/$1bn in annualised sustainable savings to its clients and over the last 20 years it has become the largest independent firm of business operations consultants, with annual revenues of over €110/$170m in 2007.