The Dilemma

What about the mythical 70% failure rate for change in organisations? This has been searched for quite dilligently in the literature by Mark Hughes; who concluded that although well reported by very respected reporters, there was very little substantial measurement data to support the reports. Hence it becomes an urban myth. The dilemma is: what is the cause of the myth? Is it a myth about performance in doing change (the reality is that the success rate is much higher); or is the cause in the way success (and hence failure) is defined?

Remember our definition of success for change:

• Delivering the benefits described in the business case, within the timescales and costs in the business case.

If so many organisation changes are considered unsuccessful we can consider two reasons:

1. The organisation really is bad at doing change, the business case is reasonable and considered achievable. This would be an execution failure and is the reason that is usually assumed.
2. The business case was unreasonable and unachievable, so failure was built in the definition of the change.

Lets examine these two possible aspects of the dilemma to see what we might learn.

Organisations perform badly at doing change

There is a very good case for this approach and some data; but there are significant differences in performance between different organisations. Data from an IBM study in published in 2009 on their Insights Forum showed that the main difference in change success was in the people approach and organisation capability to do change. Organisations with high levels of maturity achieved very high levels of success and organisations with the lowest level of maturity had very little success.

Also see our earlier blog on some McKinsey data. The average for failure is still below 70% in the survey. Levels of maturity are described below; more details are on our website.

Level 5	Reflective	reflection and learning, leads to continuous improvement
Level 4	Managed	performance measurement, leads to consistency
Level 3	Structured	organisation wide proactive change management, but variable results
Level 2	Heroic	pockets of proactive change management
Level 1	Chaotic	baseline, no proactive change management

It appears that for some organisations a high failure rate in doing change is very likely. The good news is:

• Many organisations are much better than the myth suggests at doing change.
• We know how to improve the success rate for change in organisations by using a capability model, such as that above.

The bad news for those organisations that are poor at doing change is that to improve they will need to change but that is exactly what they find difficult! Another dilemma!

Organisations define success poorly

Just as most organisations are not as bad at doing change as the myth suggests, there are a number that are doing change in such a way that the outcomes and the process dissapoint against expectations. And we don’t know where the real blame lies. What we can say is that it takes as long as it takes and it costs as much as it costs to do a change. If failure means the actual time and/or cost is bigger than the estimated time and/or cost then we might suspect a failure in estimating. Which is a lot easier to fix than process.
The main tool for estimating the key parameters of a change is the business case. The figures suggest that better success may be achieved with better business cases (ones that reflect more of reality). The best business case will show the benefits achieved, the costs involved and timescales taken exactly as predicted at the start on the implementation. Hence it is the ideal information on which the investment decision is made. Of course that’s a fantasy as well. However, there are a couple of simple techniques that quickly improve the quality of a business case and its ability to better predict the future.

1. Base the estimates of time and cost as much as possible on previous measured experience. This means the organisation must record what they are doing, how much it costs and how long it takes. WIthout that data using the past to help predict the future is as good as a wet finger in the wind.
2. Use good risk management. As well as planning, the main window into the future is based on risk management. Good risk data will inform the data from the past with ideas about the future to improve estimates.
3. Avoid optimism bias in identifying and predicting the benefits of a change. The temptation to hype the benefits to overcome the costs in a business case is almost irresitable. But it must be resisted. If there really is no overall benefit from a change then it is best to use the effort on a change that will give benefits. See our recent blog.

Summary

It appears that the 70% change failure is possibly an urban myth. That doesn’t mean that organisations are not failing to do change and that some organisations may have a 70% (or more) failure rate. There are two things an organisation can do to improve its change success rate: improve their capability to do change and improve the reality of their success criteria in a business case. Actually, improving the business case is a key part of improving a change capability as it also means change resources are better utilised.
Where do you think your organisation sits on the spectrum from poor change performance to poor success criteria? Why not give a tweet with you ideas?
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