Right Investment, Right Impact: Creating a Change Management Budget

Reminder: The statistics used in this post come from IBM's 2008 Global Making Change Work study.

The fourth and final finding in IBM's Making Change Work study is called, "Right Investment, Right Impact."  The study found that

Project success rates were 23% higher when the amount invested in change was greater than 11% of the project budget....Organizations that invested less than 11 percent in change had a 35% success rate; those that invested more than 11 percent had a 43% success rate.

Not only does investing this money in change increase your chance of success over competitors that don't invest the money, it also increases your chance of success above the average 41% of projects that succeed in general.

Let's convert this into dollars.  Based on these statistics, a project with a $1M budget must invest a minimum of $120,000 in Change Management (I'm using a 12% investment, since that's just more than 11%).  I've been on projects with much larger budgets that have invested much less in Change Management. 

Why is there such a lack of budget for Change Management?  I think the number one reason is that people don't understand what Change Management is and the value they'll receive on their investment.  I believe that the second most common reason, though, is that many projects don't know how to create a Change Management budget.  They can't figure out what the money would be spent on, so they see no reason to set any money aside.

Although it will vary a bit by project, I've listed the top 5 Change Management line items that require budget.

Budgeting for Change

1. Outside Help: Most companies are not equipped to handle the full range of Change Management activities internally.  We don't expect the finance guy to possess the skills required to do his own coding, so why do we expect he should be able to do his own Change Management?  Although many companies have the best intentions about having members of their project team deal with Change Management, it's a good idea to budget for outside consultants or contractors.  If you're still not convinced, I refer you back to my earlier post on the need for a professional Change Manager to increase your project's chance of success.
2. Training: Training is one of the most expensive activities covered by Change Management.  A one-hour computer-based training course with all the bells and whistles created by an external company can easily cost you anywhere from $15,000 - $45,000.  Even if you go with a more basic approach, good training development and delivery is still extremely costly.  In addition, most companies end up needing to hire contractors to help with the training development.  This cost can quickly add up.
3. Rewards and Recognition: In today's tight economy, with many companies operating with a skeleton crew, employees are being asked to take on more and more responsibility without necessarily receiving an increase in compensation.  Asking (or telling) your employees that they now need to work on a project in addition to completing their day-to-day jobs can result in revolt.  Setting aside a budget to do some simple Rewards and Recognition throughout the project, whether it's holding team dinners or providing small denomination "Thank You" gift cards, can help your employees feel appreciated and motivated.
4. Field Communications: This item won't apply to everyone, but if you have a large set of employees in the field (e.g., Sales People), it's a good idea to set aside budget for communicating with them.  Many companies prefer to meet with these groups in person, which can run up a hefty tab.  Even if all of the communications will be done through remote means, holding webinars and developing quality electronic communications carry a price tag.  I've also found that many companies feel the need to have "fancier" communications and events for their field departments.  If this is true at your organization, make sure to plan accordingly.
5. Sustainability: Many project plans end at Go-live.  A few continue for 2-4 weeks post Go-live.  Very few recognize that just because a change has been implemented, doesn't mean it has been adopted.  To really ensure that a change becomes embedded in your organization,  you need to consider the need for on-going Change Management activities.  What will you do about training new employees or those who were on leave during the project?  How will you communicate and train employees about on-going changes to a system?  What do you do if a month after go-live, you discover people aren't using the new tools and processes?  And who will be responsible for implementing any new Change activities that are required to deal with these issues?

And thus ends my analysis of IBM's Making Change Work study.  If you're not yet convinced that Change Management is a necessary part of any project, please leave a comment explaining why.  If you're a believer, what do you find to be the most compelling argument in favor of Change Management?