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Risks and Dangers of Change Management

Risks and Dangers of Change Management

Even with the systematic approach of organizational change management there are certain risks involved, that need to be considered for organizations to successfully implement change management. This article aims to highlight the typical risks associated with change management and how to work around them for a successful change implementation.
Preeti Sunil
Change management is a discipline that lays down a set of processes and tools for dealing with change. The management and leadership of today's organizations are faced with an increasing pace of change. While accepting this reality and preparing for change, it becomes important to be able to predict the risks and pitfalls associated with implementing change management.
What does Change Management Involve
Before we broach the topic of risks, let us understand briefly what the change management process entails. In the corporate setup, change management is initiated to deal with either an evolutionary or a revolutionary change.
  • Evolutionary change  is a gradual process often managed well due to lack of pressing timelines, for example, a culture shift in an organization.
  • Revolutionary change, on the other hand, has to be implemented in a shorter time frame and is usually a one-time effort. This requires people and processes to adapt quickly.
If a company has been through a merger or acquisition exercise, the smaller organizations usually have to quickly scale up to the parent organization's processes. Both types of changes involve overcoming several barriers to change when it comes to their implementation. 

If change barriers are not predicted and overcome in a timely manner in preparation for change implementation, it is certainly going to pose some risks and challenges during what is commonly called the "go-live" phase. While each project or program has a different set of attributes resulting in different risk factors, we can derive certain commonalities among them.

We can broadly categorize two types of risks: risks from a cost perspective and other, let's call them "intangible" risks, for want of a better word. You will find several more categories of risks that experts in project management have formulated, however, let us restrict our scope of this article to just these two very broad categories.

Typical Risk Factors
Cost risks are typically as follows:
  • Delay in achieving milestones and schedule targets due to shortage of resources and/or due to incorrect schedule estimates
  • Budget overruns
  • Cost of rework due to lack of communication between implementation teams or due to certain unexpected challenges that appear along the way (this is especially true for new projects undertaken where there was prior implementation experience, etc.)
  • Costs arising due to a new technology, upgrade in technology or due to a change in the regulatory requirements (like change in government policy, etc.)
  • Costs arising out of lack funds and/or human resources (this would include staff attrition, shortage of skills on the implementation team, etc.)
Other risks that do not directly result in a cost risk would be as follows:
  • Resistance to change: The smallest change is known to present at least a small amount of stress to people. From an organizational change perspective, resistance to change from employees could be both active and passive. Hostility is a general feeling that needs to be tackled in an extremely sensitive manner. For example, layoffs are known to amplify hostility to an enormous extent. It stirs up emotions that have a direct effect not only on attrition, but also results in power struggles within implementation teams. While timely, frequent, transparent and accurate communication is the key to counter this type of risk, at the end of the day after all the efforts, it still remains a real risk.
  • Project put on hold or fully abandoned: This is a major risk which has been proven to be extensively prevalent during tough economic conditions like recession and currency depreciation. There's no doubt this invariably affects costs as also employee morale.
  • Project fails to deliver results: Imagine a situation where the change has been implemented, millions of dollars have been spent, resistance to change has been handled and most other risk factors were dealt with. The project seems to have been implemented successfully but it does not seem to be delivering results as expected. The potential benefits are not realized and everyone's just wondering what went wrong.
Managing Risks during Change Implementation
An effective way to manage the risks mentioned above is to prepare for change implementation in advance and approach it in a systematic fashion. An important activity in risk management is Risk Assessment and Impact Analysis.
Risk Matrix
Risk Matrix: The diagram above is a representation of this standard exercise.
Probability Axis: It is a very simple process where the "Probability axis" denotes the probability of each identified risk. For this, you need to first enlist each risk (refer to the ones listed above) to the smallest detail possible and predict the probability of its occurrence. Now, this would naturally take a lot of experience and expertise but it would be time well spent.

Impact Axis: Next on the vertical "Impact Axis", assign a percentage of impact, in the event that the risk does occur. At the end of this plotting, you would obviously want to focus on the 'red quadrant' on priority. In short, you want to first manage the risks that have a high likelihood of occurring and in the event that they do occur, the change implementation would be affected to a great extent.

Please note that the above risk matrix is not a do-it-once exercise. The matrix should be revisited at regular intervals of change implementation and the risk factors must be reviewed to see if they still exist or need to be moved to a different quadrant. This kind of periodic review will ensure better risk management. Taking timely action on projected risks will ensure greater success of the change implementation process.
Change management is an enormous exercise and the risks and dangers associated with it vastly differ from organization to organization and project to project. We cannot provide a laundry list of risks and risk management solutions for the same reason. It needs to be worked out in every scenario. However, the structured approach of risk management through identification, assessment and analysis will ensure that every challenge during change management implementation, does not make it a nightmarish experience for all the stakeholders. Hope the scope of the article here emphasizes the fact that a successful change management implementation is a result of a thorough process of recognizing and mitigating risk throughout the life cycle of the change.