Introduction - Section 4 - Rates of return on Investment (ROI)

Introduction

"...you are attempting to show the relationship between what it costs to manage the people side of change and the benefits of applying a structured approach to enabling and encouraging employees to adopt a change......you will only then receive the buy-in and investment necessary to apply change management. If you can 'get the scale' by showing the real and tangible benefits of change management outweigh the costs..."
Prosci, 2023g

(source: Prosci, 2023g)

Research (Prosci) has shown that investing in change management increases the likelihood of all projects' success.
The cost side of change management is easier to quantify than the benefits side.

NB As organisations show more maturity in the way they handle change, their success rate increases significantly, ie success rate of around 40% for level 1 maturity (Prosci scale) increases to around 2/3 at level 5.

Maturity levels scales:

(source: Prosci, 2023h)

Can use a cost-benefit analysis with the appropriate sensitivity analysis to identify and test different inputs and outcomes (expected vs actual). When doing this analysis, you need to understand what your key stakeholders want from the change process.

It works on the assumption that the more the change involves people, the higher the degree of uncertainty to predict the expected ROIs. For example, if the change involves renegotiating a lease on an office, the expected ROI is easy to predict. However, if the change is people-dependent, ie involves changing the way people currently work, behave, mindsets, etc, there is a chance of greater variability. On the other hand, the people-dependent (people change) activities have the potential to deliver the most value to the organisation.

In the cost-benefit analysis, the costs are

i. dedicated resource(s), eg people, time, money, facilities, etc

ii. cost of methodology and tools, eg Prosci, etc

iii. purchase of source materials, eg machines, materials, etc

iv. training time and costs, etc

The benefits are

v. human factor, eg speed of adoption, ultimate utilization and proficiency

vi. cost avoidance, eg change management is a cost-avoidance tactic

vii. risk mitigation, eg if the change is handled poorly, the organisation is at risk

viii. benefit realization insurance, eg value of project depends on how successfully the change is handled

ix. probability of meeting objectives, etc, eg how likely is the change project/activity likely to meet objectives

Furthermore, there is the opportunity cost of not doing it.