Bottom-Line Organization Development

Merrill Anderson

• Publisher: Routledge
• Year: 2004
• eBook ISBN: 9781136426148
• Topic: Business
• Subtopic: Business General
• Index: Business

Organization development practitioners have, for over half a century, engaged with organizations to help them grow and thrive. The artful application of Organization Development (OD) has helped business leaders articulate vision, rethink business processes, create more fluid organization structures and better utilize people's talents. While business leaders and OD practitioners intuitively believe that OD provides valuable results, rigorous measurement of the value delivered has long eluded many OD practitioners. 'Bottom-Line Organization Development' provides powerful tools to capture and measure the financial return on investment (ROI) of OD projects to the business. Given the increasing competition for budget and resources within organizations and the requirements of demonstrating tangible results, the need for such OD measurement tools is very high. But in addition to proving the value of OD projects, integrating evaluation into the change management process itself can actually increase the value of the change initiative because it opens up new ways of capturing and increasing the value of change initiatives. In other words, there is an ROI to ROI. Merrill Anderson calls this new way of approaching OD "strategic change valuation." The book explains the five steps in the OD value process - diagnosis, design, deployment, evaluation and reflection. In addition, three case studies take readers through the process of applying bottom-line OD to three types of popular strategic change initiatives: executive coaching, organization capability, and knowledge management. Readers will gain a holistic perspective of how to make the seemingly intangible benefits of these initiatives tangible.

Chapter 1

Introduction to Bottom-Line OD

Business leaders today face a conundrum: making bold moves to increase their company’s value when so much of this value is intangible. Human capital is the new arena for increasing shareholder value. Learning, knowledge management, and the inherent capability of an organization to renew itself and grow are the new sources of competitive advantage. Although these sources offer great promise, they are also elusive. In 1900, all but 5% of a company’s value was locked up in hard, tangible assets. Today, this percentage is less than half (45%). The remaining value of a company consists of intangible assets such as learning, knowledge, leadership, and the full talents of all employees—in short, human capital.

Human capital represents a potent source of competitive advantage. How can business leaders leverage human capital and create competitive advantage when they have such a difficult time measuring the impact and outcomes of human capital initiatives? In other words, how can leaders manage what they cannot measure? Leaders so far have had limited success in trying to do so. Some people may be tempted to suggest that leaders should just resign themselves to an intangible world and accept defeat when it comes to managing human capital. This suggestion cuts leaders off from powerful sources of competitive advantage. It’s too early to throw in the towel.

Bottom-line OD tackles this issue head-on and demonstrates how leaders and change practitioners can tame the intangibles. Section Three of this book contains case studies that demonstrate how seemingly intangible initiatives designed to increase human capital can be evaluated in tangible terms: how these initiatives created monetary value for the business. The evaluation process was also a discovery process. New ways were found to increase the value of these initiatives to the business. In becoming measurable, these strategic initiatives became manageable assets of the business and rich sources of competitive advantage.

Do these case studies capture all of the value of the strategic initiative? Clearly no. Is there still a considerable amount of untapped and intangible value? Clearly yes. This does not mean, however, that the evaluation effort failed—quite the opposite in fact. Combining intangible value with monetary value enriches our understanding of how the strategic initiative created value and expands the horizons for subsequent actions. Business leaders have a more complete picture about how to leverage human capital for competitive advantage. By knowing what works, leaders can take specific actions that increase the value of human capital for the organization.

FLAVOR-OF-THE-MONTH APPROACHES TO CHANGE

Value is the name of the game. Strategic change initiatives are intended to unlock the value of human capital and create value for the business. Unfortunately, business leaders have often been disappointed with the outcomes of the strategic change initiatives they have deployed. Some have been successful while most strategic change initiatives have not lived up to expectations. The response of many business leaders was to immediately launch another strategic change initiative in the hope that the latest initiative would somehow be successful. Soon, the organization was hosting a parade of change initiatives. These became known as the “flavor of the month” or “change du jour’’ programs and were soon regarded by employees with pessimism. This pessimism was fueled by people’s perceptions that this parade of initiatives had little bearing on improving business results. Leaders also began to lose patience—and faith—that these initiatives were going to bear fruit. The ability to clearly demonstrate tangible, significant results can be the difference between the initiative that dies on the vine and the initiative that flourishes.

BOTTOM-LINE OD: BREAKING THE MOLD

This brings us to the crux of the challenge: demonstrating bottom-line value from people and change initiatives. For many strategic change initiatives, the missing piece has been a formal evaluation process that identifies the monetary as well as the intangible value of the initiative. This evaluation process also clarifies the unique contribution that the initiative made to achieve the top goals of the organization. Bottom-line OD takes this challenge head-on. A new process is introduced—the strategic change valuation process—that merges evaluation methodology with change management practices. Leaders and change practitioners have a new way of thinking about maximizing the value from people and change initiatives. Bottom-line OD also presents some practical tools and proven methodologies for measuring—and increasing—the value from strategic change initiatives:

• Formally link top business goals to change initiative objectives. It is not enough to tacitly assume that change initiatives will affect the top business goals. A vague connection of the initiative to the business goals will later lead to a vague understanding about how the initiative added value to the business. Specific, measurable outcomes of the change initiative are identified and linked to one or more business goals. A clear line-of-sight linkage is drawn from the initiative to the goals so that it is clear what value the initiative is adding to the business.
• Develop evaluation objectives that guide change management activities. Evaluation objectives are developed for each initiative objective. This makes it clear how the success of the initiative will be measured. Expectations of business leaders for the initiative can be based on the evaluation objectives. Change practitioners can be held accountable to deliver the benefits as defined by these evaluation objectives. The change management process becomes more focused and effective because change activities are geared to achieving specific measurable objectives.
• Maximize the success of initiative deployment. Evaluation is a dynamic process. There are many points along the road of deployment—signposts, if you will—that indicate how well the deployment is proceeding. If one signpost indicates that people are not effectively following the new work process, then actions must be taken immediately to correct the situation. In this way, evaluation increases the value from the initiative. Corrective action steps nip the issue in the bud before it blossoms into a full-blown problem.
• Isolate the effects of the initiative to produce business results. The strategic change initiative is one of possibly many influences on business goal performance. Understanding the impact of the initiative on the business requires the effects of the initiative to be isolated from all other potential factors. Proven evaluation methodology is employed to isolate the effects of the initiative, and in so doing, learn how the initiative added value to the business. The learning process yields many insights into how to better leverage the value of the initiative.
• Convert the business results into monetary value. Once the effects of the initiative to generate benefits have been isolated, the benefits are converted to monetary value. The evaluation objectives serve as the guide: Were these objectives achieved and how much monetary value was produced? The answers to these questions have a direct bearing on the business goals. The greater the monetary benefits of the initiative, the closer the business becomes to achieving its top goals.
• Calculate the return on investment. The total monetary benefits are known; however, what investment was required to produce these benefits? If the investment outweighs the return, then it’s likely that the initiative was not a good bet for the business. The total initiative costs are tallied and entered into the ROI equation. The ROI is calculated and the results interpreted. In general, the higher the ROI, the better the initiative was for the business. Keep in mind, however, that the ROI is just one aspect of understanding the value of an initiative. Combining the ROI with the intangible benefits produced by the initiative completes the picture of how the initiative added value.
• Leverage evaluation to sustain strategic change. Having a complete picture of how the initiative added value opens up new levels of understanding and new avenues for sustaining the gains. When deployment of the initiative has concluded, it is important to reflect on what happened well and what can be improved. Recommendations are made that sustain the gains made during deployments and offer new ideas for increasing the future value of the initiative. New strategic change initiatives may be suggested. The business builds on its successes to get ever closer to achieving its strategy and goals.

HOW THIS BOOK IS ORGANIZED

This book is organized into three sections and concludes with a chapter that integrates and deepens the learning from bottom-line OD. The first section explains the process of strategic change valuation. This process is at the heart of bottom-line OD because it explains how evaluation and change management are integrated to produce a powerful approach to strategic change. Next, in the second section, special issues are addressed that will enhance utilization of the strategic change valuation process. The third section presents case studies that show how this process has been applied to the latest, state-of-the-art change initiatives.

Section One: Strategic Change Valuation

Bottom-line OD fully integrates evaluation methodology into a strategic change management process. This new approach to change—strategic change valuation—is presented in five phases. These phases-diagnosis, design, development, deployment, and reflection—are central to change management, and each prominently features evaluation methodology. Key process steps are illustrated with case study examples to show in practical terms how bottom-line OD is done. Readers will learn how the combination of evaluation and change management represents a powerful force for creating successful and sustainable strategic change. Chapter 2 explains the strategic change valuation process, and then a chapter is devoted to each of the five phases of the process.

CHAPTER 2: THE FIVE PHASES OF STRATEGIC CHANGE VALUATION

This chapter provides an overview of the entire strategic change valuation process. The linkage and interdependencies of these five phases become clear.

CHAPTER 3: DIAGNOSE PERFORMANCE GAPS TO ACHIEVE BUSINESS GOALS

The process begins with understanding the needs of the business. A diagnosis is undertaken to flesh out the gap between the current performance of the organization and the performance that is required in the future to achieve business goals. An initiative is proposed to close the performance gap. The business case spells out how the initiative will improve the business, estimate the costs for doing so, and make recommendations for moving forward.

CHAPTER 4: DESIGN THE SOLUTION TO ACHIEVE STRATEGIC CHANGE OBJECTIVES

Once the business case is approved, the next step is to organize a change coalition. This coalition consists of the initiative sponsor, the change practitioner, and many key stakeholders and constituents. Rapid prototyping is used to accelerate the design of the initiative. A statement of work is produced that provides a description of the initiative, as well as its objectives, timing, and deliverables.

CHAPTER 5: DEVELOP A CHANGE PLAN WITH EVALUATION OBJECTIVES

A comprehensive change management plan is developed to carry out the statement of work. Evaluation objectives are developed based on the initiative objectives. Change activities are planned that will ultimately lead to achieving the evaluation objectives. Because evaluation objectives are linked via the initiative objectives to the business goals, completing the change activities are directly seen as important steps to a...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright
• Contents
• Foreword
• Preface
• Acknowledgments
• Chapter 1. Introduction to Bottom-Line OD
• Section One: Strategic Change Valuation
• Section Two: Special Issues
• Section Three: Case Studies
• Further Reading
• List of Figures and Tables
• Index
• About the Author