Change management in a company – why it is necessary
Change is an inseparable part of running a business. Customers, technologies, costs, regulations and competitors’ actions all change. Even so, many business owners still treat change as something to be avoided, or as a one-off project, rather than as a permanent management process.
That is why so many initiatives end in failure: they are not looked after properly. A company may have an excellent strategy, a modern ERP system or an ambitious growth plan, but if people do not understand the purpose of the changes and cannot adapt what they do, the results will fall far short of expectations. Incidentally, most SMEs have none of these three things!
Change management means consciously leading an organisation from its present state to its target state while minimising resistance and risk.
Is change needed in companies, and when?
Many companies begin to change only when financial problems appear, in the form of falling profitability, declining sales, sharply rising costs, failing to keep up with technology, inefficient processes, failing to keep up with the competition, or an exhausted owner.
When these symptoms appear, it is the most expensive possible moment to introduce change. It is best to implement changes while the company is still functioning well. In a strong organisation it is easier to find the resources, time and energy for transformation than it is during a crisis.
The owner’s pain of change – a psychological view
Owners often know what needs to be done but put off the decision. The reason is simple: change means losing comfort and having to abandon established patterns.
Psychologists call this “loss aversion”. The pain of giving up the present state is usually stronger than the potential, uncertain satisfaction of gaining a benefit.
An owner may fear losing control, making a mistake, criticism from the team, the cost of the investment, or worse results in the short term.
Paradoxically, many companies stay with an inefficient way of operating not because they do not know the solution, but because they are not emotionally ready to implement it.
Employees’ uncertainty about change – acceptance or “torpedoing”
Every change prompts the same question among staff: “What does this mean for me?”
Employees often do not resist the change itself; what they cannot bear is the uncertainty, which may, after all, mean:
losing their job,
a wider range of duties,
having to learn new skills,
a fall in their subjective or objective sense of security.
If the change is poorly communicated, rumours, passive resistance and informal criticism of the project appear. As a result, part of the team begins, consciously or unconsciously, to “torpedo” the change.
That is why effective change management requires:
a clear explanation of the purpose,
showing the benefits,
regular communication,
involving people in the decision-making process.
Unfortunately, changes bring benefits, but not for everyone. And it is not known at the outset who will miss out.
Cosmetic and critical changes
Not all changes carry the same weight.
Cosmetic changes concern minor improvements such as a new report, a change to the office layout, a modification of document templates or a small piece of automation. They are easier to make, and they may be changes in appearance only.
Critical changes affect the way the company operates and often involve a new strategy, a reorganisation of the structure, the implementation of a key system, a change in the sales model, an acquisition or merger, or digital and AI transformation.
The more a change affects people’s everyday work, the more attention the process of managing it requires.
Real and sham changes
In many companies, change exists only on slides – and even disappears from them if its results turn out to be different from what was expected. Nobody wants to be the father of a failure, or of a half-hearted but costly “success”.
Real change happens when the following change:
decisions,
behaviours,
habits,
business indicators.
Sham change is:
a new strategy that is never implemented,
training with no change in practice,
new procedures that nobody follows.
If, after a few months at most, we see no change in measurable indicators or in behaviour, the change was most probably a sham, whatever was declared before it was introduced.
Last-minute change – a cancer that has already spread
Many companies do not change when the first warning signs appear. They change only when the situation becomes critical.
Falling profitability, the departure of key employees, the loss of customers, outdated processes or a lack of investment in technology are like the first symptoms of an illness. At this stage the problem can usually be brought under control with relatively little effort.
Unfortunately, most owners choose to wait it out: waiting for their luck to turn, finding excuses for not acting, blaming those around them for the failures.
“It’s not that bad yet.”
“The market will bounce back.”
“Next quarter will be better.”
“There’s no time for projects like that right now.”
Meanwhile, the cancer goes on developing. When a company decides to change only under the pressure of a crisis, it is often like a patient who goes to the doctor only when the disease is already advanced.
Why do we wait so long?
The reasons are mainly psychological:
denial of the problem,
the hope that things will improve by themselves,
fear of the cost of change,
defending one’s own ego,
attachment to established ways of doing things.
The owner is often not buying time. In reality, they are losing it. When a person’s hip starts to hurt, the pain later moves to the knee and then to the spine. The stomach is ruined by too many painkillers. It is the same in a company, where departments and projects are a system of communicating vessels. What does this “spread” look like in a company? Here is an example.
No change in sales → falling revenue → cost-cutting → less investment and training → declining competitiveness → loss of the best employees → a further fall in results
Change implemented in a crisis becomes a rescue operation. When a heartbeat is being restored, ribs often get broken. It is the difference between:
modernising a process and desperately repairing it,
developing skills and making redundancies,
implementing AI by choice and implementing AI under pressure from competitors,
reorganising for growth and restructuring for survival.
Bad management habits – why don’t our brains want to change them?
The brain is programmed to save energy. That is why it prefers automatic, habit-based actions to conscious effort.
If, for years, a manager has:
made all the decisions alone,
micromanaged the team,
ignored the data,
reacted instead of planning,
then strong neural habits have formed that are hard to change.
Change requires building new pathways of action, and that means discomfort. For this reason even intelligent leaders often go back to their old behaviour under stress – which is often the most demanding test of leadership they face, and one they fail.
The manager’s ego that ignores the data
One of the greatest enemies of change is the overconfidence of people who have been successful in running a business and have come to believe in their own infallibility and in an unchanging business environment. They say:
“We’ve always done it this way.”
“I know this market better than anyone.”
“I don’t need indicators, I can feel them.”
A mature manager is able to test their beliefs against the facts. They look for data, and for the opinions of competent people, that may challenge their assumptions rather than merely confirm that they are right.
Treating change as a cost rather than an investment
Many companies reject projects they need because of the cost, being unsure of the benefits.
Owners ask:
How much will the system cost?
How much does the training cost?
How much does a consultant cost?
Far less often do they ask:
What will we gain, net, from the change?
How much does not changing cost?
How much are we losing through mistakes?
How many lost customers are the result of our current problems?
Not investing in development often turns out to be the most expensive decision over a period of several years.
Rare qualities in a manager – openness, determination and critical thinking
The most effective leaders of change have three qualities.
Openness – A readiness to question their own beliefs, and an understanding of the principles of experimentation.
Determination – Acting consistently despite difficulties and resistance, but using emotional intelligence, which makes it possible to manage human rationality and the lack of it.
Critical thinking – Making decisions on the basis of facts, not emotions or opinions.
This combination is rare, but it is precisely what distinguishes leaders of transformation from managers who maintain the status quo.
Change as a result of self-reflection
Self-reflection means deliberately pausing, analysing your own actions, beliefs, emotions and results, and drawing conclusions that lead to change.
Advantages
High motivation to act – Changes that we discover for ourselves are usually accepted more readily and carried through more consistently.
Lower cost – They do not require a consultant, mentor or adviser.
A deeper understanding of the problem – The leader arrives at the causes of the problems themselves, rather than being handed a ready-made prescription.
Building self-reliance – The company develops the ability to diagnose itself and to improve continuously.
Disadvantages
Cognitive blindness – The biggest problem is that it is hard to see your own mistakes. The owner is often part of the problem.
The influence of ego – Managers naturally look for evidence that confirms their beliefs and ignore information that contradicts them.
A slow pace – Reaching conclusions on your own takes longer.
The risk of going round in circles – Without new stimuli, a company may analyse the same problems again and again without a breakthrough.
Change with outside help
Outside help may come from a mentor, a consultant, an adviser, a member of the supervisory board, a coach or even the family circle.
Advantages
An objective view – An outsider is not emotionally attached to the organisation.
A faster diagnosis – An experienced adviser may spot a problem in a few days, whereas the owner will analyse it for months, having sometimes already looked at it for years to no effect.
Experience from other companies – A consultant sees patterns that recur in many industries.
Breaking the status quo – An external expert is more likely to question assumptions that the company regards as “sacred truths”, especially when their authority rests on real achievements.
Greater accountability for implementation – People usually take more care to see changes through when they know that someone will be monitoring progress.
Disadvantages
Cost – Good outside help is an investment, but the money still has to be spent.
The risk of choosing the wrong adviser – The market is full of people with a large number of certificates and little business experience, who are business celebrities, but ones created by themselves or by the media.
A less self-reliant organisation – If a company becomes dependent on advisers, it may struggle to solve future challenges on its own.
Rejection of the recommendations – Even the best diagnosis will change nothing if the owner is not ready to accept uncomfortable conclusions.
In my view, the most effective approach is a hybrid model that combines the company’s own homework with outside support.
Stage 1 – self-reflection
The owner answers these questions for themselves:
What is working well?
What is working badly?
What data confirm this?
Which of my beliefs might be wrong?
Which habits are getting in the way of the company’s development?
Stage 2 – testing against an outside perspective
A mentor or a consultant helps to verify the conclusions, or to show completely different options.
They ask:
What have you overlooked?
What alternative interpretations of the data are there?
What are those who are better than you doing?
Which risks are you ignoring?
Stage 3 – implementing together
Self-reflection builds awareness, and outside help increases the likelihood of effective action. It is a mirror that shows you what you look like, provided you are willing to take a brave look at your own image.
Outside help is a mirror set at a different angle, including from behind. It can also show you what surrounds the bathroom, as if from above: the flat, the building, the district, the city, the country, the continent and the world. It shows what you are unable to see for yourself.
A short recipe for carrying out effective, measurable change
Diagnose the problem on the basis of data, not intuition. Examine how the problem is interlinked with other areas. Take a holistic approach.
Define a specific business goal for the change.
Set measures of success (KPIs).
Involve key employees from the start of the process.
Communicate the reasons for the change and its benefits.
Break the transformation down into small stages.
Measure progress regularly.
Adjust what you do on the basis of the results.
Reinforce new habits and behaviours until they are fully embedded.
Celebrate what has been achieved, because this is part of non-financial motivation. Coming through a change gives a great deal of satisfaction if it is recognised.
Change, then, is not an IT project, a new procedure or a presentation for employees. It begins in the minds of owners and managers. It is a process of moving from old beliefs, habits and ways of working to new, more effective solutions. Companies that learn to manage the changes they need build a lasting competitive advantage. Those that keep putting change off will sooner or later be forced to change by the market – unless they want to be permanently marginalised.
I am keeping my fingers crossed that you will implement the changes yourself, but if you cannot manage it, I am here to help. Check whether I am credible and take the first step. After that, it gets easier.