Organizational Change

www.oracle.com

THE BUILDING
BLOCKS OF
ORGANIZATIONAL
CHANGE: A Guide For The Modern
Finance Leader

O
verhauling your processes, rewiring your product focus,
creating a new culture:
large-scale, transformative organizational development and
change is messy,
difficult—and usually fails.

This digibook contains a step-by-step guide to leading process

management and overcoming the cultural and procedural challenges,
with case studies and examples of how smart CFOs are leading the
transformation of their enterprises.

Every organizational change is different, but we’ve focused

on six areas that are pretty consistent
challenges to CFOs trying to turn a business round:

1. Leading Disruptive
138 reasons why you need to get on with it
2. The Three Skills To Create
a Mandate for Change
 Management Can anyone else in the C-Suite
do cost-benefit analysis?
3. Business Process Management
In Two Words: Simplify,
Standardize “We really ought to get round to doing
something about that”

1. Winning Hearts and Minds Culture trumps strategy—every

time
2. Seizing the M&A Moment Take advantage of the view from
the other side
3. Change with Confidence The three ways to reduce risk
in organizational development
4. Building your action plan Build your comprehensive list of
next steps

Further reading

If we seem to be missing three big ticket items, it’s because they’re

covered elsewhere in this series.
Check out our three digibooks on Thriving in the Digital Age, Annual
Reporting and Forecasting

Who will find this digibook useful?

This has been written with CFOs and finance VPs at international
companies of all sizes in mind, but
our research and case studies also include smaller businesses and
public sector bodies, as well as larger
multinationals, so any senior finance person will find it useful. It also
has insights into the life of the CFO
that other C-suite team members may find useful in understanding
the challenges that face the finance
department during major organizational change initiatives.
LEADING DISRUPTIVE ORGANIZATIONAL
CHANGE
‘Same old, same old’ is a dangerous place to be for a 21st century
business.

There are 138 ‘Unicorn’ startups valued at over $1billion, and those
valuations exist because each startup is expected to disrupt, overhaul
and destroy its traditional competitors.

Cloud computing, outsourced supply chains and social marketing have

driven the costs of launching a new global business down to the
hundreds of thousands of dollars—so if there’s no unicorn coming
after you today, there may well be tomorrow.

And that means you need to excel at organizational change. Your case
needs to be iron-clad, your process management needs to be a shining
light of efficiency and your staff need to be singing the praises of your
end-state. And this all needs to be done at pace: the faster, the better.

The good news is that if you are one of the 18% of CFOs who take the
lead on change management, you are much more likely to find
yourself in line for the CEO’s role.

The bad news is that organizational change is one of the hardest

things a business can do. Whether it’s a product pivot, a merger or a
complete restructuring, studies consistently reveal that the majority
of organizational change initiatives do not succeed in sustaining
long-term gains.

Figure 1: How successful have your organizational change

initiatives been?1

• Meets initial objectives

• Sustains long-term gains

• Unsuccessful
• Successful
Within your own department, you’ll already be at the forefront of
innovation in your process management, implementing
transformation programs to introduce effciencies and increases in
productivity. This experience is now crucial as you become a leader of
wider change in your business—a recent survey reveals CFOs expect
to spend up to 60% of their time on organizational change.2

So, as a CFO, how do you own organizational development? This guide

shows you how to make the case, and create mechanisms to see your
plans implemented effectively. At the end, there’s an opportunity to
build a personal checklist to meet these challenges head-on.

The three skills to create your mandate

for Change Management
Nobody joins the C-suite to be on the C-list. And yet, for every CFO
with a front-line role in building business transformation, there are
four who only play a supporting part.

Which one are you?

If you’re going to lead change, you need a mandate from the top. You
need to win the buy-in of the CEO and the Board.

And as a CFO, you have three unique skills that put you in an ideal
place to get this buy-in:

1. Analytics

You’re the only person on the board who knows how to use
predictive analytics, which means you’re the only one who
can forecast the outcome of change.

2. Independence

You sit outside spending departments and are loyal only to

the bottom line, which means you’re the only member of the
C-suite who can be trusted by all departments to make an
accurate and neutral cost-benefiit analysis.
3. Value-driven approach

With 80% of corporate value now sitting in intangibles,3

you know how to quantify the returns of organizational
change on the share price.

These three skills are your launchpad to building a business

case that goes beyond traditional ROI measurement: using
predictive analytics to model scenarios; comparing Net
Present Value to the probable profitability of investing in a
major organizational change; stretching your brain and the
brains of your team to prove that the capabilities of the
business can be enhanced.

Once you’ve made your case and got that backing, you’re set.
But that’s only the beginning of the journey…

Figure 2: Seven key intangibles affected by organizational

change
1.
Employee
retention
3.
Organizational
reputation
5.
Productivity
7.
Collaboration
2.
Risk
management
capability
4.
Customer
loyalty
6.
Customer
service
Business process management in two
words:simplify, standardize
Complexity kills innovation. So hold your horses—before anyone
starts piling on the radical new change initiatives, it’s essential to
strip down your legacy processes, systems, organizations and
workflow, and find ways to simplify.

This is not merely a step that needs to be taken in a specifc

organizational change: it is also an essential ongoing process that will
make all change faster and less painful in your organization. The
problem you face is the ‘normalization of deviance’, and it’s something
that happens in even the best-run companies. There will be aspects of
the business that everyone knows are insane, but which people have
lived with for so long that they treat them as normal—it could be two
departments that hate each other, a project that will never be ready to
launch, or (most commonly) a layer of unproductive, unaccountable
bureaucracy.

Figure 3: Three common types of normalized deviance

Departments that
hate each other Absurd
bureaucracy Terrible projects
that refuse to die

“We really ought to get round to doing something

about that.”

This phrase is the biggest source of pointless complexity in the

business world. And therefore, the biggest barrier to change.

Don’t fall victim to believing that you can automate these problems
away. If the business process you are automating is not fit for
purpose, your new technology will be compounding a weakness.
One of the main problems organizations face when undertaking
business transformation arises from not having made their
simplification far-reaching enough. The scope gets reduced and
becomes less meaningful.

So if simplification is the first step, the next is to make it the

standard. Implement it everywhere through shared services or
centers of excellence. Your mandate for change gives you the
authority to eliminate the exceptions.

“Standardization means having a leader saying: we

are doing this, this is our end-state, we’re doing it
everywhere.”

Loren Mahon—VP, Global Finance Systems, Oracle.

Communicate and convince

Culture trumps strategy every time

A CFO can come up with a complete, inspirational case for

organizational change, and explain it clearly and persuasively in a
board meeting, but without cultural change it will founder.

“You need to convince people that change is good and

that they need to embrace it,” says Valdemir Bertolo,
CFO of Brazilian financial services business Serasa.
“You can use reason to prove that the change is good,
but you also need people skills to make the change
happen.”4
One of the reasons that only 18% of CFOs currently manage business
transformation processes is their perceived disconnection from
corporate culture. José Manuel Alejo Cantú, CFO of Mexican
automotive components group Metalsa, found that one of the biggest
barriers to leading change was the perception of Finance as the
function that always says ‘no’. This idea is dangerous to making your
organizational change a success.5

This means that once you have top-down support, you need a way to
create bottom-up implementation. For this, you need change agents
all down the line.

Who are they? What makes someone an effective

agent of change?

Don’t go for the people with first-class technical knowledge: outside

of their specific remit, they are likely to be some of your most
conservative employees.

You’re looking for people who share your vision, are excellent
communicators, and can troubleshoot well: they need to have the soft
skills to be able to persuade and influence others to take part and
share in the process.

Your team then needs to follow a simple process to

win hearts and minds:

Figure 4: The process for winning hearts and minds

Diagnose what it is that your employees fear about change. It’s too
easy to spend all your time concerned about redundancies—but these
are HR and Legal’s problem more than the CFO’s. Your issue is to
overcome the concerns of those who stay, and studies show that this
generally falls into three categories:

• More work with fewer payoffs

• New roles with less satisfaction
• More oversight with less power
Explain not just the business reasons behind the change, but the
benefits for front-line staff. Make sure that the information about the
change comes from you as the leader and from change agents in other
departments to build confidence.

Replace current mindsets—this is a long-term process, but key to

success. Model scenarios and share ‘springboard’ success stories to
change mentalities. Draw upon your ‘neutral’ position, outside of
spending areas, to build trust.

Reinforce With patience and the relentless enthusiasm of your

change agents the organization begins to realize ‘resistance is futile’
(you may also need to throw in an occasional threat—you didn’t get
that mandate from the board for nothing). And then the next change
effort becomes a little easier.

“At this point they don't even do it out of fear of being

fired... they do [it] because they've come to
understand that it's the Right Thing.” Former Amazon
employee—Steve Yegge—on how Jeff Bezos changed the

engineering culture at Amazon6—a process that

resulted in the creation of the $25bn AWS business.

Seizing the m&a moment

Sometimes the grass really is greener on the other side—your
competitors often have specific talent and knowledge you need, or a
strong positioning in a specific market. As a catalyst for change,
nothing beats learning from them. And when’s the best moment to do
this? When you acquire them.

Everyone knows horror stories of mergers and acquisitions that have

gone wrong. After the spectacular failure of the $350bn AOL-Time
Warner merger, Time Warner’s President, Richard D. Parsons blamed
not just the business model, but also the lack of preparation that had
gone into the cultural changes.7

But at its best, a merger or acquisition is a fantastically creative

process: the greatest opportunity you have to overcome the
normalization of deviance, and build a stronger culture. It’s also a
particular opportunity for the CFO, because it’s one of the moments
when the finance department has absolute control.

So, how do you make the most of M&A (without taking a

spectacular leap into an AOL-Time Warner-sized abyss)?

To learn from the best talent in the merged or acquired organization,

it’s vital to start considering it early on—in other words, before the
deal has even been closed. Anything else is often too late.

You need to embed change management analysis into acquisition

scoping. It needs to be a key element that sits alongside broader
strategy, cost-benefit and due diligence. You need to consider the
most probable pain points in merging two corporate cultures and
identify from the beginning who will lead change in the
merged/acquired organization. Nearly 75% of organizations who are
successful in retaining talent post-merger target them either in or
before the negotiation stage.8

Use your mandate to demonstrate the importance of this change

management analysis—to the operational, reputational and financial
sides of the enterprise.

And focus all those organizational change efforts on two

end-goals:

1. Integration

Talk to the longest-serving employees about the culture of

both organizations. Identify what goes well in the merged
organization, and what goes well in yours and use change
agents to build these into your organization’s mindset.
 2. Measurement

Set metrics that can measure the adoption of these cultures

across both organizations. This could be internal, like
employee satisfaction, or external, like Net Promoter Score.
You have a very limited window for this kind of cultural
change, so be prepared to measure frequently to benchmark
progress.

Three steps to reducing risk

Radical change doesn’t need a radical approach. The opposite is best—
make it ordinary by making it safe, breaking it down into smaller
steps and setting clear milestones.

As a CFO, you will need the soft skills to bring a team towards a
larger objective. Here are the three rules you must apply to achieve
successful implementation of organizational change:

1. Rule 1

Calibrate the pace: Even if you have a radical end-state,

you can always break it down into achievable areas. This is
especially important if either you are new to the
organization, or the organization is new to change (or
both!) Don’t let single teams bite off more than they can
chew. It’s vital that you build confidence at all levels, and
a great way to do that is to achieve some quick wins.

It’s worth deliberately designing in some of these in your

early planning, so that you can be pretty sure you’re going
to get off to a good start. That will then enable you to carry
colleagues with you as bigger challenges emerge.

Oracle’s Loren Mahon notes that “10,000 foot-

level change is always occurring, but when you
break things down at the project level or
 organizational area level, things do finish. It’s
important to have an end—constant change of
scope and design will not really create a
culture of change management, it just creates
fatigue.”

2. Rule 2

Set time-bound milestones: To be able to deliver wins

of any sort—quick or not—it’s very important to have clear
end-points when you can show success. Even if your process
of corporate transformation is wide-ranging—and especially
if it is, as it may sometimes seem never-ending— it’s critical
that you have moments when you can evaluate progress
and show results.

It’s inevitable that as circumstances change, there will be

changes of scope. Without milestones and a sense of
progress being made, it’s all too possible that organizational
fatigue will set in. As a CFO, you are ideally placed to hold
individuals and the organization to account against pre-
determined targets, and to show measures of success.

That means you can predict which bits of your

organizational change are most likely to fail—moving too
fast or too slow, underestimating scope, underestimating
effort, customer response, and so on.

You can therefore build a bit of latency into the process so

that one part of the system failing doesn’t derail the whole
enterprise. You build confidence by anticipating risk,
knowing how to measure it and showing how you’ll manage
it.

3. Rule 3
 Plan for failure: As CFO, you know better than anyone
the things that go wrong in your organization (after all,
you’re the one who has to explain them to the
shareholders).

That means you can predict which bits of your

organizational change are most likely to fail—moving too
fast or too slow, underestimating scope, underestimating
effort, customer response, and so on.

You can therefore build a bit of latency into the process so

that one part of the system failing doesn’t derail the whole
enterprise. You build confidence by anticipating risk,
knowing how to measure it and showing how you'll manage
it.