Adopt Change Management Practices and Succeed at IT Organizational Redesign

Adopt Change Management Practices & Succeed at IT Organizational Redesign

The perfect IT organizational structure will fail to be implemented if there is no change management.

Analyst Perspective

Don’t doom your organizational redesign efforts

After helping hundreds of organizations across public and private sector industries redesign their organizational structure, we can say there is one thing that will always doom this effort: A failure to properly identify and implement change management efforts into the process. Employees will not simply move forward with the changes you suggest just because you as the CIO are making them. You need to be prepared to describe the individual benefits each employee can expect to receive from the new structure. Moreover, it has to be clear why this change was needed in the first place. Redesign efforts should be driven by a clear need to align to the organization’s vision and support the various objectives that will need to take place. Most organizations do a great job defining a new organizational structure. They identify a way of operating that tells them how they need to align their IT capabilities to deliver on strategic objectives. What most organizations do poorly is invest in their people to ensure they can adopt this new way of operating. Brittany Lutes Research Director, Organizational Transformation Info-Tech Research Group

Executive Summary

Info-Tech Insight

Implementing your organizational design with good change management practices is more important than defining the new organizational structure.

Your challenge

This research enables organizations to succeed at their organizational redesign:

• By implementing the right change management practices. These methods prevent:
  • The loss of critical IT employees who will voluntarily exit the organization.
  • Employees from creating rumors that will be detrimental to the change.
  • Confusion about why the change was needed and how it will benefit the strategic objectives the organization is seeking to achieve.
  • Spending resources (time, money, and people) on the initiative longer than is necessary.

McKinsey reported less than 25% of organizational redesigns are successful. Which is worse than the average change initiative, which has a 70% failure rate.

Source: AlignOrg, 2020.

The value of the organizational redesign efforts is determined by the percentage of individuals who adopt the changes and operate in the desired way of working.

When organizations properly use organizational design processes, they are:

4× more likely to delight customers

13× more effective at innovation

27× more likely to retain employees

Source: The Josh Bersin Company, 2022

Common obstacles

These barriers make implementing an organizational redesign difficult to address for many organizations:

• You communicated the wrong message to the wrong audience at the wrong time. Repeatedly.
• There is a lack of clarity around the drivers for an organizational redesign.
• A readiness assessment was not completed ahead of the changes.
• There is no flexibility built into the implementation approach.
• The structure is not aligned to the strategic goals of IT and the organization.
• IT leadership is not involved in their staff’s day-to-day activities, making it difficult to suggest realistic changes.

Don’t doom your organizational redesign with poor change management

Only 17% of frontline employees believe the lines of communication are open.

Source: Taylor Reach Group, 2019

43% Percentage of organizations that are ineffective at the organizational design methodology.

Source: The Josh Bersin Company, 2022.

Change management is a must for org design

Forgetting change management is the easiest way to fail at redesigning your IT organizational structure

• Change management is not a business transformation.
• Change management consists of the practices and approaches your organization takes to support your people through a transformation.
• Like governance, change management happens regardless of whether it is planned or ad hoc.
• However, good change management will be intentional and agile, using data to help inform the next action steps you will take.
• Change management is 100% focused on the people and how to best support them as they learn to understand the need for the change, what skills they must have to support and adopt the change, and eventually to advocate for the change.

"Organizational transformation efforts rarely fail because of bad design, but rather from lack of sufficient attention to the transition from the old organization to the new one."

– Michael D. Watkins & Janet Spencer. ”10 Reason Why Organizational Change Fails.”

Info-Tech’s approach

Redesigning the IT structure depends on good change management

Common changes in organizational redesigns

Top reasons organizational redesigns fail

1. The rationale for the redesign is not clear.
2. Managers do not have the skills to lead their teams through a change initiative like organizational redesign.
3. You communicated the wrong messages at the wrong times to the wrong audiences.
4. Frontline employees were not included in the process.
5. The metrics you have to support the initiative are countering one another – if you have metrics at all.
6. Change management and project management are being treated interchangeably.

Case study: restructuring to reduce

Clear Communication & Continuous Support

Situation

On July 26th, 2022, employees at Shopify – an eCommerce platform – were communicated to by their CEO that a round of layoffs was about to take place. Effective that day, 1,000 employees or 10% of the workforce would be laid off.

In his message to staff, CEO Tobi Lutke admitted he had assumed continual growth in the eCommerce market when the COVID-19 pandemic forced many consumers into online shopping. Unfortunately, it was clear that was not the case.

In his communications, Tobi let people know what to expect throughout the day, and he informed people what supports would be made available to those laid off. Mainly, employees could expect to see a transparent approach to severance pay; support in finding new jobs through coaching, connections, or resume creation; and ongoing payment for new laptops and internet to support those who depend on this connectivity to find new jobs.

Results

Unlike many of the other organizations (e.g. Wayfair and Peloton) that have had to conduct layoffs in 2022, Shopify had a very positive reaction. Many employees took to LinkedIn to thank their previous employer for all that they had learned with the organization and to ask their network to support them in finding new opportunities. Below is a letter from the CEO:

Shopify, 2022.

Forbes, 2022.

Aligned to a Meaningful Vision

An organizational redesign must be aligned to a clear and meaningful vision of the organization.

Define the drivers for organizational redesign

And align the structure to execute on those drivers.

• Your structure should follow your strategy. However, 83% of people in an organization do not fully understand the strategy (PWC, 2017).
• How can employees be expected to understand why the IT organization needs to be restructured to meet a strategy if the strategy itself is still vague and unclear?
• When organizations pursue a structural redesign, there are often a few major reasons:
  • Digital/organizational transformation
  • New organizational strategy
  • Acquisition or growth of products, services, or capabilities
  • The need to increase effectiveness
  • Cost savings
• Creating a line of sight for your employees and leadership team will increase the likelihood that they want to adopt this structure.

“The goal is to align your operating model with your strategy, so it directly supports your differentiating capabilities.”

– PWC, 2017.

How to align structure to strategy

Recommended action steps:

• Describe the end state of the organizational structure and how long you anticipate it will take to reach that state. It's important that employees be able to visualize the end state of the changes being made.
• Ensure people understand the vision and goals of the IT organization. Are you having discussions about these? Are managers discussing these? Do people understand that their day-to-day job is intended to support those goals?
• Create a visual:
  • The goals of the organization → align to the initiatives IT → which require this exact structure to deliver.
• Do not assume people are willing to move forward with this vision. If people are not willing, assess why and determine if there are benefits specific to the individual that can support them in adopting the future state.
• Define and communicate the risks of not making the organizational structure changes.

Info-Tech Insight

A trending organizational structure or operating model should never be the driver for an organizational redesign.

IT Leaders Are Not Set Up To Succeed

Empower these leaders to have difficult conversations.

Lacking key leadership capabilities in managers

Technical leaders are common in IT, but people leaders are necessary during the implementation of an organizational structure.

• Managers are important during a transformational change for many reasons:
  • Managers play a critical role in being able to identify the skill gaps in employees and to help define the next steps in their career path.
  • After the sponsor (CIO) has communicated to the group the what and the why, the personal elements of the change fall to managers.
  • Managers’ displays of disapproval for the redesign can halt the transformation.
• However, many managers (37%) feel uncomfortable talking to employees and providing feedback if they think it will elicit a negative response (Taylor Reach Group, 2019).
• Unfortunately, organizational redesign is known for eliciting negative responses from employees as it generates fears around the unknown.
• Therefore, managers must be able to have conversations with employees to further the successful implementation and adoption of the structure.

“Successful organizational redesign is dependent on the active involvement of different managerial levels."

– Marianne Livijn, “Managing Organizational Redesign: How Organizations Relate Macro and Micro Design.”

They might be managers, but are they leaders?

Recommended action steps:

• Take time to speak with managers one on one and understand their thoughts, feelings, and understanding of the change.
• Ensure that middle-managers have an opportunity to express the benefits they believe will be realized through the proposed changes to the organizational chart.
• Provide IT leaders with leadership training courses (e.g. Info-Tech’s Leadership Programs).
• Do not allow managers to start sharing and communicating the changes to the organizational structure if they are not demonstrating support for this change. Going forward, the group is all-in or not, but they should never demonstrate not being bought-in when speaking to employees.
• Ensure IT leaders want to manage people, not just progress to a management position because they cannot climb a technical career ladder within the proposed structure. Provide both types of development opportunities to all employees.
• Reduce the managers’ span of control to ensure they can properly engage all direct reports and there is no strain on the managers' time.

Info-Tech Insight

47% of direct reports do not agree that their leader is demonstrating the change behaviors. Often, a big reason is that many middle-managers do not understand their own attitudes and beliefs about the change.

Source: McKinsey & Company “How Do We Manage the Change Journey?”

Check out Info-Tech’s Build a Better Manager series to support leadership development

These blueprints will help you create strong IT leaders who can manage their staff and themselves through a transformation.

Build a Better Manager: Basic Management Skills

Build a Better Manager: Personal Leadership

Build a Better Manager: Manage Your People

Build Successful Teams

Transparent & Frequent Communication

Provide employees with several opportunities to hear information and ask questions about the changes.

Communication must be done with intention

Include employees in the conversation to get the most out of your change management.

• Whether it is a part of a large transformation or a redesign to support a specific goal of IT, begin thinking about how you will communicate the anticipated changes and who you will communicate those changes to right away.
• The first group of people who need to understand why this initiative is important are the other IT leaders. If they are not included in the process and able to understand the foundational drivers of the initiative, you should not continue to try and gain the support of other members within IT.
• Communication is critical to the success of the organizational redesign.
• Communicating the right information at the right time will make the difference between losing critical talent and emerging from the transition successfully.
• The sponsor of this redesign initiative must be able to communicate the rationale of the changes to the other members of leadership, management, and employees.
• The sponsor and their change management team must then be prepared to accept the questions, comments, and ideas that members of IT might have around the changes.

"Details about the new organization, along with details of the selection process, should be communicated as they are finalized to all levels of the organization.”

– Courtney Jackson, “7 Reasons Why Organizational Structures Fail.”

Two-way communication is necessary

Recommended action steps:

• Don't allow rumors to disrupt this initiative – be transparent with people as early as possible.
• If the organizational restructure will not result in a reduction of staff – let them know! If someone's livelihood (job) is on the line, it increases the likelihood of panic. Let's avoid panic.
• Provide employees with an opportunity to voice their concerns, questions, and recommendations – so long as you are willing to take that information and address it. Even if the answer to a recommendation is "no" or the answer to a question is "I don't know, but I will find out," you've still let them know their voice was heard in the process.
• As the CIO, ensure that you are the first person to communicate the changes. You are the sponsor of this initiative – no one else.
• Create communications that are clear and understandable. Imagine someone who does not work for your organization is hearing the information for the first time. Would they be able to comprehend the changes being suggested?
• Conduct a pulse survey on the changes to identify whether employees understand the changes and feel heard by the management team.

Info-Tech Insight

The project manager of the organizational redesign should not be the communicator. The CIO and the employees’ direct supervisor should always be the communicators of key change messages.

Communication spectrum

An approach to communication based on the type of redesign taking place

Include Employees in the Redesign Process

Stop talking at employees and ensure they are involved in the changes impacting their day-to-day lives.

Employees will enable the change

Old-school approaches to organizational redesign have argued employee engagement is a hinderance to success – it’s not.

• We often fail to include the employees most impacted by a restructuring in the redesign process. As a result, one of the top reasons employees do not support the change is that they were not included in the change.
• A big benefit of including employees in the process is it mitigates the emergence of a rumor mill.
• Moreover, being open to suggestions from staff will help the transformation succeed.
• Employees can best describe what this transition might entail on a day-to-day basis and the supports they will require to succeed in moving from their current state to their future state.
  • CIOs and other IT leaders are often too far removed from the day-to-day to best describe what will or will not work.
• When employees feel included in the process, they are more likely to feel like they had a choice in what and how things change.

"To enlist employees, leadership has to be willing to let things get somewhat messy, through intensive, authentic engagement and the involvement of employees in making the transformation work."

– Michael D. Watkins & Janet Spencer, “10 Reasons Why Organizational Change Fails.”

Empowering employees as change agents

Recommended action steps:

• Do not tell employees what benefits they will gain from this new change. Instead, ask them what benefits they anticipate.
• Ask employees what challenges they anticipate, and identify actions that can be taken to minimize those challenges.
• Identify who the social influencers are in the organization by completing an influencer map. The informal social networks in your organization can be powerful drivers of change when the right individuals are brought onboard.
• Create a change network using those influencers. The change network includes individuals who represent all levels within the organization and can represent the employee perspective. Use them to help communicate the change and identify opportunities to increase the success of adoption: “Engaging influencers in change programs makes them 3.8 times more likely to succeed," (McKinsey & Company, 2020).
• Ask members of the change network to identify possible resistors of the new IT structure and inform you of why they might be resisting the changes.

Info-Tech Insight

Despite the persistent misconceptions, including employees in the process of a redesign reduces uncertainty and rumors.

Monitor employee engagement & adoption throughout the redesign

Only 22% of organizations include the employee experience as a part of the design process

– The Josh Bersin Company, 2022.

Employee Pulse Survey

Conduct mindful and frequent check-ins with employees

Process to conduct survey:

1. Using your desired survey solution (e.g. MS Forms, SurveyMonkey, Qualtrics) input the questions into the survey and send to staff. A template of the survey in MS Forms is available here: IT Organizational Redesign Pulse Survey Template.
2. When sending to staff, ensure that the survey is anonymous and reinforce this message.
3. Leverage the responses from the survey to learn where there might be opportunities to improve the transformation experience (aligning the structure to the vision, employee inclusion, communication, or managerial support for the change). Review the recommended action steps in this research set for help.
4. This assessment is intended for frequent but purposeful use. Only send out the survey when you have taken actions in order to improve adoption of the change or have provided communications. The Employee Pulse Survey should be reevaluated on a regular basis until adoption across all four categories reaches the desired state (80-100% adoption is recommended).

Define Key Metrics of Adoption & Success

Metrics have a dual benefit of measuring successful implementation and meeting the original drivers.

Measuring the implementation is a two-pronged approach

Both employee adoption and the transformation of the IT structure need to be measured during implementation

• Organizations that are going through any sort of transformation – such as organizational redesign – should be measuring whether they are successfully on track to meet their target or have already met that goal.
• Throughout the organizational structure transition, a major factor that will impact the success of that goal is employee willingness to move forward with the changes.
• However, rather than measuring these two components using hard data, we rely on gut checks that let us know if we think we are on track to gaining adoption and operating in the desired future state.
• Given how fluid employees and their responses to change can be, conducting a pulse survey at a regular (but strategically identified) interval will provide insight into where the changes will be adopted or resisted.

“Think about intentionally measuring at the moments in the change storyline where feedback will allow leaders to make strategic decisions and interventions.”

– Bradley Wilson, “Employee Survey Questions: The Ultimate Guide.”

Report that the organizational redesign for IT was a success

Recommended action steps:

• Create clear metrics related to how you will measure the success of the organizational redesign, and communicate those metrics to people. Ensure the metrics are not contrary to the goals of other initiatives or team outcomes.
• Create one set of metrics related to adoption and another set of metrics tied to the successful completion of the project objective.
  • Are people changing their attitudes and behaviors to reflect the required outcome?
  • Are you meeting the desired outcome of the organizational redesign?
• Use the metrics to inform how you move forward. Do not attempt the next phase of the organizational transformation before employees have clearly indicated a solid understanding of the changes.
• Ensure that any metrics used to measure success will not negatively interfere with another team’s progress. The metrics of the group need to work together, not against each other.

Info-Tech Insight

Getting 100% adoption from employees is unlikely. However, if employee adoption is not sitting in the 80-90% range, it is not recommended that you move forward with the next phase of the transformation.

Example sustainment metrics

Change Management ≠ Project Management

Stop treating the two interchangeably.

IT organizations struggle to mature their OCM capabilities

Because frankly they didn’t need it

• Change management is all about people.
• If the success of your organization is dependent on this IT restructuring, it is important to invest the time to do it right.
• This means it should not be something done off the side of someone's desk.
• Hire a change manager or look to roles that have a responsibility to deliver on organizational change management.
• While project success is often measured by if it was delivered on time, on budget, and in scope, change management is adaptable. It can move backward in the process to secure people's willingness to adopt the required behaviors.
• Strategic organizations recognize it’s not just about pushing an initiative or project forward. It’s about making sure that your employees are willing to move that initiative forward too.
• A major organizational transformation initiative like restructuring requires you lean into employee adoption and buy-in.

“Only if you have your employees in mind can you implement change effectively and sustainably.”

– Creaholic Pulse Feedback, “Change Management – And Why It Has to Change.”

Take the time to educate & communicate

Recommended action steps:

• Do not treat change management and project management as synonymous.
• Hire a change manager to support the organizational redesign transformation.
• Invest the resources (time, money, people) that can support the change and enable its success. This can look like:
  • Training and development.
  • Hiring the right people.
  • Requesting funds during the redesign process to support the transition.
• Create a change management plan – and be willing to adjust the timelines or actions of this plan based on the feedback you receive from employees.
• Implement the new organizational structure in a phased approach. This allows time to receive feedback and address any fears expressed by staff.

Info-Tech Insight

OCM is often not included or used due to a lack of understanding of how it differs from project management.

And an additional five experts across a variety of organizations who wish to remain anonymous.

Research Contributors and Experts

Info-Tech Research Group

Related Info-Tech Research

Bibliography

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