The Costs and Risks of Poorly Managed Change
When the people side of change is ignored or poorly managed, the project and the organization take on additional costs and risks. From this perspective, effective change management is a cost avoidance technique and risk mitigation tactic. Read on to find out which types of costs and risks you can help your organization avoid by applying change management.
Consequences of mismanaging change
Each of us has been a part of a change that was poorly managed, either as the offender or the victim. When projects and initiatives are mismanaged from the "people side of change" perspective, we don't achieve desired results and outcomes. We know from experience that the individual changes that culminate in organizational change do not take place. We know that we have a lower likelihood of meeting objectives, finishing on time, and finishing on budget. And we know that speed of adoption will be slower, ultimate utilization will be lower, and proficiency will be less—all dragging down expected returns.
To extend the discussion on the impacts of ignoring or mismanaging change, we can add two more perspectives: costs and risks. These perspectives play out on two levels: the project level and the organizational level. While some of these costs and risks may seem soft, many are quantifiable and can have a significant impact on financial performance for the project and the organization as a whole.
Project-level impacts relate directly to the specific project or initiative forgoing change management. These projects can impact tools, technologies, processes, reporting structures and job roles. They can result from strategic planning, internal stimuli such as performance issues, external stimuli such as regulation or competitive threats, or demands by customers and suppliers. The initiatives may be formalized as projects with project managers, budgets, schedules, etc., or they may be informal in nature but still impact how people do their jobs.
While these projects can take on a number of different forms, the fact remains that ignoring or mismanaging the people side of change has real consequences for project performance. Below are some examples of the costs and risks at a project level when we do not manage the people side of change.
Rework required on design
Loss of work by project team
Resistance (active and passive)
Project put on hold
Resources not made available
Obstacles appear unexpectedly
Project fails to deliver results
Project is fully abandoned
When we apply change management effectively, we can prevent or avoid costs and mitigate risks tied to how individual employees adopt and utilize a change.
The organizational level is a step above the project-level impacts. These costs and risks are felt not only by the project team, but by the organization as a whole. Many of these impacts extend well beyond the lifecycle of a given project. When valuable employees leave the organization, the costs are extreme. A legacy of failed change presents a significant and ever-present backdrop that all future changes will encounter.
The organizational costs and risks of poorly managing change include:
Productivity plunges (deep and sustained)
Loss of valued employees
Reduced quality of work
Impact on customers
Impact on suppliers
Decline in morale
Legacy of failed change
Stress, confusion and fatigue
Applying change management effectively on a particular project or initiative allows you to avoid organizational costs and risks that last well beyond the life of the project.
A third dimension of costs and risks
There is one final dimension of costs and risks to consider, beyond the project and organizational impacts. When we try to introduce a change without using effective change management, we are much less likely to implement the change and fully realize the expected results and outcomes. This final dimension provides answers to the question: What if the change is not fully implemented?
If the change does not deliver the results and outcomes—in large part because we ignored the people side of change—there are additional costs and risks.
Costs if the change is not fully implemented:
Lost investment made in the project
Lost opportunity to have invested in other projects
Risks if the change is not fully implemented:
Expenses not reduced
Efficiencies not gained
Revenue not increased
Market share not captured
Waste not reduced
Regulations not met