Whether you’re implementing new ERP software or simply improving your business processes, investing in organizational change management (OCM) is essential. What is change management? Put simply, it’s the process that guides how an organization prepares, equips and empowers its workforce to successfully navigate organizational change.
While you may be familiar with the reasons for change management, the financial details can get a little murky. You may be wondering, how much of my project budget should I allocate to this effort?
Today, we’ll walk through the process of creating an effective change management budget. Calculating these costs ahead of time can save you time, money, and headaches down the road.
Navigating Change with Rick & Christi
Watch these short and sweet videos to learn about change management from the experts! The series features Rick Platz and Christi Trinder from Panorama’s change management team, who share how they develop and implement successful change strategies for clients.
Creating a Change Management Budget: Primary Cost Components
Applying change management requires an investment of energy, time, and resources. Let’s start by taking a look at the primary costs you can expect to incur.
1. Change Management Leaders
First, there are the people behind the movement. Employment costs will make up the bulk of your change management spending, because this is a people-led and people-focused endeavor. If you employ a third party to help guide this effort, you’ll include those costs in this line item, too.
2. Training Costs
One of the most common reasons for low user adoption rates is that workers are unsure how to use the newly implemented technology. That said, we recommend factoring in the costs required for end-user training. This could include course materials, facility rental (if applicable), and other expenditures as required.
Will you pay a consultant to travel to your office and help lead your OCM efforts? What about flying in a trainer or sending your team members to a remote training facility? You might be surprised at how quickly these costs add up. Unless you already have a fully-staffed change management team in-house, it’s smart to plan ahead.
How will you communicate the reasons behind the change to your workforce? What about the actual details surrounding the project? Regardless of the content of your communication, you’ll need to develop a formal public relations strategy or a targeted approach to change management communication.
As you’re factoring in your primary OCM costs, don’t forget to account for the time that change management activities will take. The employees to whom you assign responsibly for OCM will also be responsible for their own, day-to-day job functions, which may require additional hours.
6. Change Management Materials
There are many different types of materials you might create to communicate with employees, executives, and department leaders. These include presentations, reports, tip sheets, and more. Additional material costs might include printing, binding, and assembling.
Secondary Cost Components
In addition to the primary costs listed above, there are also secondary costs to consider. These may occur less frequently, but it’s still important to add them to your OCM budget.
1. Consultant Fees
A change management consultant is well-versed in the field of OCM and can help your company successfully transition employees and manage change resistance. If you decide to bring one on board, be sure to include their service fees in your budget.
2. Event-Related Costs
In the weeks and months leading up to go-live, your change team may hold various events and meetings to maximize excitement and buy-in. These events can range from all-hands meetings to “lunch and learn” events and town-hall-style discussions. Be sure to calculate how much you anticipate spending on materials, food, speakers, and other elements.
3. Employee Recognition Costs
Until your employees are intrinsically motivated to use the new software or embrace new processes, it helps to use extrinsic rewards. For instance, you could recognize an employee for being a “change champion” and going above and beyond to help their colleagues understand the new system. Possible incentives include time off, lunch on the company, a gift card, or any other gift you choose. While these costs are usually nominal, they can add up, so go ahead and include them.
4. General Costs
Of course, you’ll also need a category for other, general costs associated with your OCM efforts. These are costs that might not fit precisely into any of the above categories.
The Importance of Change Management
With so many different costs to consider, you might be wondering if change management is worth it. Undoubtedly, the answer is “yes” because:
- It’s essential for increasing user adoption rates and maximizing the ROI on a new ERP system.
- The costs of poorly managing change are often higher than the cost of OCM.
- Avoiding OCM can cause productivity to plummet and morale to decline. It could even lead to the loss of valuable employees.
- When there’s turmoil within your organization, it won’t take long for these issues to trickle outward to suppliers, partners, and customers.
When developing a change management business case, be sure to quantify not only the cost of OCM but the cost of skipping OCM.
Understanding the True Costs of Change Management
Don’t rely on your ERP vendor to provide a comprehensive change management plan. In our experience, their OCM plans are usually minimal.
Our team of organizational change management consultants can help you set a realistic change management budget that accounts for all the components of a successful OCM plan. Contact us below to request a free consultation.