Weighing up the cost of change
In our last article, we examined change and the strategies for developing successful change management in a company. Today, we will delve into the cost associated with change for the company and its employees.
In as much as change is the order of the day for businesses to stay competitive, we must not lose sight of the cost related impact of change in a company.
Cost is often associated with the financial capability to obtain something tangible. However, we will also consider another aspect of cost, which constitutes intangible resources, time and effort.
Cost of change to the organisation
Understanding the cost of change to an organisation is important for two reasons:
1. To set aside funds to cover the entire change management process effectively.
2. To mitigate against the cost associated with resistance to change or poor change management techniques.
Some of the major costs associated with change in a company include:
· Training cost: whether the change is as a result of a merger/acquisition or a change in technology, it will require new skills or orientation which will require money.
· Costs associated with structural changes: this may comprise of costs necessary for the change in infrastructure or location.
Cost of branding: change may come in form of a brand makeover or a change in product line. Regardless, it requires a substantial amount of capital outlay.
Communication cost: communication remains a critical component of a business success. Hence, for the successful implementation of change, companies need to invest heavily in communication. For example, remote work requires setting up appropriate communication systems to maintain a smooth workflow.
Other secondary costs associated with communication include:
Consulting costs: companies may require the services of an external party to coordinate and implement certain changes and these professional services come at a cost to the company.
General and administrative costs for example change in suppliers or stationery come at a cost.
Cost of change to employees
Decline in morale: if change is not properly implemented, it could result in issues such as absenteeism, poor focus, poor level of engagement and high employee turnover, which could have a negative impact on other employees and the business.
State of confusion: when change is not properly communicated, the employees will be left without a clear path or direction.
Room for grapevines and resistors: during change, rumours tend to fly and employees may begin entertaining office gossips, which in many cases may jeopardise the success of the actual intended change and ultimately might result in employees forming resistance groups.
How to manage costs associated with change
Set aside a realistic amount of funds to cater for proposed changes and unforeseen events/circumstances.
Encourage change rather than impose it on employees. This reduces the incidence of countereffort from employees
Be aware that change may have both positive and negative impacts and strive to highlight the positive impact and manage the negative impact appropriately.
Conduct a cost-benefit analysis where the relationship between what it will cost to implement a change and the benefits of the change are clearly defined.
In summary, aside from the common and possible cost associated with change, other invisible costs may exist, which pertain to individual companies. It is therefore the duty of the change manager or initiator to identify areas where these costs lie and to manage them.
If you need support with minimising costs associated with change, please email us at www.ovacgroup.com for a free consultation.