Project Management

Change management saves money

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For every £1 spent on change management on large projects, organisations get a return of £6.50.  

That’s the headline research from a new study by Changefirst, a company that helps organisations implement change more effectively.  You would expect a change management company to advocate change management, but their study shows massive returns on doing change management properly.

The project started as a discussion on LinkedIn and over time developed into a short survey.  Financial outcomes and ROI are difficult to establish, so survey respondents were asked to look at projects 6 to 9 months after completion to see whether the change had ‘stuck’.  

"Delivering successful change projects is a key strategic issue for organisations and it has a significant impact on the bottom line,” says David Miller, Managing Director at Changefirst. “Our research shows that on large projects over 40% of change managers believe that at least a third of the financial gains could be attributable to change management activities alone.

In my opinion, only the large projects have dedicated change managers.  Otherwise project managers are left to do the change management activities too.  The research still stacks up for small projects: on these every £1 spent on change management generates a return of £2, which is still pretty impressive, especially when you think that dedicated change management budgets are just a small part of what it costs to deliver a project.

Over 77% of the 2,500 respondents reported that the proportion of implementation budgets spent on change management activities was less than 10%. “This is a little under the norm,” says Miller. “The proportion of spend on change management is usually about 15% for the larger £1 million plus implementations. It may reflect the economy and type of projects. But it may also indicate that organisations don’t have to spend huge amounts on change management to get a very attractive return.”

How do you know if the return on investment is purely down to change management activities?  The Changefirst survey looked at that too.  On projects that cost over £1m, the savings generated were about £2.5m after 9 months.  Personally, this seems as if companies are choosing exactly the right projects to work on, if they are getting benefits generated so quickly at such impressive rates.  Over 40% of respondents managing large projects, believe that more than 30% of these results could be attributed to change management activities. Essentially that means that for projects costing over £1m, change management  is responsible for over £800,000 worth of value in the first nine months.  For smaller projects the numbers drop, but they are still impressive.

I’m pleased that the study shows that change management is a good thing, and that as well as helping the outcome of projects to stick, it also contributes to financial return.  But I can’t help feeling slightly sceptical about the survey results.  I don’t doubt that Changefirst is reporting exactly what people answered – they have been very transparent and you can read the whole report here) – but the picture seems overly rosy to me.  Either I’m a cynic, or companies really are getting the hang of portfolio management, and in the middle of the economic downturn, really were working on projects that delivered massive benefits over the short term. Good for them.  What do you think?  Is this the experience you’ve had in your company?

Posted on: July 06, 2010 03:04 PM | Permalink

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