07 - Art.5 - What Comes First in Ict Transformations

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5 WHAT COMES FIRST IN ICT

TRANSFORMATIONS?

Aron Emil TĂTARU1,


Bucharest University of Economic Studies, Faculty of Administration
and Public Management, Bucharest, Romania
Constantin Marius PROFIROIU2
Bucharest University of Economic Studies, Faculty of Administration
and Public Management, Bucharest, Romania

ABSTRACT We live in the age of technology. This technology and information era emerged in
the early 1970s and is growing exponentially ever since.
In this context, we are no strangers to the slogan: Technology that will change
your life. Or even better: Technology that will change the world! But does
technology and information really have the power to trigger this desired, beneficial
change in our lives? Did our lives and the societies that we live in, notably
improved during the last decades, as a result of technological advancements? Or,
even more important: can technological innovation be considered a driver of
behavioral and organizational change?
Many organizations nowadays rely on ITC transformations to create a shift
towards a culture of performance and to repeal the counter-productive, obsolete
behaviors which constantly hamper and undermine progress. The purpose of this
paper is to investigate if ITC innovations really have the potential of changing
people’s behaviors, to support organizational development, or conversely, if
behavioral and cultural change should be prerequisites for successful
implementation of ITC transformations in modern organizations.
We will explore this topic through analysis of change management methodologies
and literature review, identifying examples of recent, large-scale ITC
transformations and their associated success criteria.

KEYWORDS Change management, transformation, ITC, leadership, behavior

INTRODUCTION
Technology is nowadays an important part of every aspect of our lives. For several decades now,
automation is the key word for companies trying to generate additional gains in productivity. It all
started with the production line and swiftly expanded throughout all blue & white-collar activities.
Moreover, new breakthrough advances in Artificial Intelligence (mostly democratization of AI

1
Corresponding author. E-mail address: aronemiltataru@gmail.com
2
Corresponding author. E-mail address: profiroiu@gmail.com

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through machine-learning systems based in the Cloud), 3D printing (including the newest metal
printing technologies), IoT (and the more advanced and integrated Sensing City¹ initiatives), self-
driving vehicles, enhanced use of biometrics to perform the most usual daily functions (voice
recognition and authentication or advanced face-detecting systems used to authorize transactions),
among others, are all improving our productivity, safety and quality of life. We can certainly state that
we live in times of unprecedented dynamics of the technological advances. This triggers severe
pressures for organizations to constantly change.

Although there is no doubt about the way technological advances are slowly redesigning the
environment we live in, and reshaping our social systems and human interactions, there is one
question that still needs to find a clear answer: do new technologies also have the potential to
significantly improve human behavior on the long run?

To answer such question, thorough quantitative research needs to be undertaken to determine if recent
decades are witnessing significant improvements in key indicators that could be used as proxies for
human behavior (such as improved learning, violence reduction, better communication, creativity,
improved problem-solving, empathy, healthier eating & living habits, waste reduction and better
consumption behaviors etc.) and if this alleged evolution could be attributed to technology. The scope
of the present paper is less ambitious than the one presented above, although our research is targeted
in the same direction. We will merely try to identify if adoption of new technologies could be
considered a driver of behavior change of the people in organizations. We aim to provide meaningful
evidence about how organizations should approach ITC transformations in order to achieve the
desired end state: improved performance, better quality of service or enhanced collaboration. We will
do this through literature review and by presenting relevant examples of important ITC
transformations and their underlying success factors. To substantiate our arguments, we will use our
experience related to the transformation of the Romanian tax administration, through the introduction
of new ITC systems and tools, transformation started in 2014 and still ongoing today.

The first part of the paper will present the main theoretical underpinnings of organizational
transformation and associated success criteria, while in the second part we will try to identify how the
initial design of the Romanian Tax administration reform program, heavily relying on an ITC
solution, influenced its implementation and ultimately affected its overall performance.

MANUSCRIPT
Problem Statement and Research Hypothesis
ITC Systems, applications and tools are making significant headway in today’s working environment,
automating even the most basic functions and operations. This trend started in the late 1990s and is

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growing continuously ever-since. Private companies and public-sector organizations alike, are
spending hundreds of billions each year to stay on top of the technological wave. According to the
data presented by the statistics portal Statista, in the first semester of 2017, the cumulated spending on
IT services, software and hardware, reached an overall amount of USD 1,924.00 billions². The
American research and advisory firm Gartner is forecasting an annual increase in the amounts spent
on ITC (Data Center Systems, Software, Devices, IT Services and Communication Services) of 6.2%
in 2018 alone³.

Considering their associated investments, the stakes of ITC transformations are really high. In
exchange of the huge budgets made available, stakeholders expect increased performance, better
quality of service, enhanced communication, increased data security and availability, improved
organizational agility, scalability and the list doesn’t stop here.

However, a rich literature on change management, points out to the fact that roughly 70% of change
transformations fail to achieve their stated goals. These troublesome statistics are revealed by several
studies, such as the ones presented by McKinsey in 2009⁴ or by Harvard Business Review in 2013⁵,
to name just a couple of them.

There are many factors underlying such a poor performance, but one of the main reasons of the low
success rate of transformations could be attributed to the fact that ITC implementations’ main focus is
on the technical solution and on designing the new operational model and overall enterprise
architecture, frequently neglecting the necessary changes in behavior of the most important actors: the
people of the organization. Technological changes are nowadays happening faster than ever, governed
by the ubiquitous provisions of Moore’s Law, thus putting high pressure on organizations to
continuously adapt. The challenge is even greater for public sector organizations. Most of them are
today heavily reliant on old infrastructures and technologies, mostly due to the limited innovation
culture in the public service, historical fragmentation of systems and databases and not least, to the
lengthy and cumbersome procurement processes governing their operational models.Nevertheless,
there is a strong push on most public organizations to integrate new technologies. Taxpayers
expectations for better e-services, budget cutbacks, the ever-increasing need for efficiency, data
availability (the need for real-time analytics), continuity of service, seamless communication between
government databases (whole-of-government approach – eliminating fragmentation and redundancy),
the need for enhanced transparency and to improve the quality of public services provided, are all
driving this need for change.

Simultaneously, public sector organizations worldwide are undertaking sustained efforts to change the
organizational culture, towards a more open, flexible, customer-centric approach. All this require new

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competencies from the public-sector employees, competencies that are not traditionally associated
with the values of bureaucratic organizations.

According to an OECD Report published in 2010⁶, the 8 key competencies of the future, for public-
sector employees are:

 Innovation,
 Creativity,
 Flexibility,
 Work collaboratively across boundaries,
 Change management,
 Relationship building,
 Vision,
 Future orientation.

Many public-sector organizations today are lagging in making available these competencies to their
operations. Nevertheless, there is a close relationship between ITC transformation and cultural
change, both being primordially aimed at improving the public service provided and both requiring
new behaviors and attitudes from the employees.

The approach to change transformation.


There is a vast literature related to the change management domain. Although the first theories of
change management emerged in the 1950s, in the area of psychology (see Kurt Lewin’s Frontiers in
Group Dynamics), the first change management methodologies appeared only a couple of decades
later. Two major approaches to change management emerged, one focusing on the organization (or on
the social system to be changed), and the second focusing on supporting the people which are subject
to change to make the requested transition. Transformations require change leadership to focus on
both directions, simultaneously managing the opposing fields of forces and people’s emotional states,
to successfully achieve the desired change outcomes.

Starting from the McKinsey’s 7S model, developed in the 1980s⁷, an organization which plans to
initiate an ITC transformation, should be able to provide concrete answers to the following questions:

 What is our Digital Strategy and how the proposed ITC systems and tools are contributing to
the achievement of the Business Strategy?
 How are our Systems (processes/procedures) going to change?
 Is the new ITC system impacting our Structure (hierarchy and reporting lines)? If yes, how?
 Do the new technologies require a change in the management Style?

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 Will the Shared Values of the organization change?


 Will Staff need to change (including its capabilities)?
 Will the new ITC system and tools require new Skills and Competencies?

As we can see from the 7S model presented above, ITC transformations require a lot more than
finding the best or the most appropriate technical solution(s). It first needs a mandate, which streams
from the Strategy of the organization. This mandate is translated into a Business Case, which, if
adopted will trigger implementation of the new systems/technologies. But the Business Case has a
broader scope: it allows leadership to assess the impact of the change on both the operational and on
the organizational models. Moreover, implementers must assess how values, management style, staff
capabilities, skills and competencies are going to change and if the change triggered is aligned to the
desired organizational culture, that will underpin the future organization. This is a fairly difficult
process and it is not a once in the lifetime event. Continuous re-assessment of the correct alignment
between the 7Ss presented above is required throughout the implementation. Moving forward, once
the change project has gained acceptance from the leadership, change management should focus on
transitioning each stakeholder group, or better-yet, every individual throughout the change process.
This is achieved mainly through consultation, communication, training and development. Each
individual employee (or stakeholder group) must go through all the phases of the change journey (as
described by Prosci’s ADKAR model⁸):

Figure 1. People vs. business side of change

Source: based on Prosci’s ADKAR model

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In her book Beyond Change Management, Linda Ackerman Anderson presents a holistic approach to
change management⁹. Anderson presents the role of change leadership in transformational projects as:
to create a change strategy that will cover the entire organization (both process-wide and people-
wide). Anderson also highlights one important aspect: change leadership also has the role to transform
the mindsets of both managers and employees, to support the shift towards the new culture. She
states: “Focusing only on content, or fantasizing that organization transformation is only about
people [...] are all equally effective paths to failure”.

To substantiate this perspective, Linda Ackerman Anderson presents the case of a technological
implementation in a large Californian bank, back in the 1980s. The bank was implementing a
computer system for all its geographically distributed branches, aimed at supporting bank tellers’
operations through the provision of customer information. Based on the information provided by the
new system, bank tellers were expected to sell insurance and investment products to customers in
front of their counter, while performing classical retail banking operations. Although all this looked
like a straight-forward plan, the success of the endeavor was contingent on the bank tellers’ ability to
adopt a new, totally different approach of client interaction: a sales approach. Traditionally, bank
tellers are characterized as dependable people and their most important skills were related to precision
of operations and integrity. The new sales orientation required a change in culture, employees’ skills
and behaviors. Moreover, in the classical operational model of the bank, tellers were expected to seek
branch managers approval for any commercial decision. The new way of working requested bank
tellers to make their own, on the spot decisions.

Bank’s leadership approached the project as a mere installation of a new ITC system, although it was
much more than this. To make things worse, new performance management and pay systems were
introduced for bank tellers, their performance being now appraised on a set of indicators related to
their sales targets. The change strategy adopted provided only technical training for tellers on the use
and functionalities of the new ITC system. The bank’s top management considered this enough.
Moreover, they proposed a “big bang” release into production of the new system, over a single week-
end, without piloting the implementation first. This approach to change resulted, over the following
18 months, in massive turnover of bank’s employees (both tellers and branch managers) and in a
substantial loss of market share.

Focusing only on the technical aspects of the change and assuming that people will adopt new
behaviors in reactive manner, might lead to situations similar to the one presented above.

In a recent article published on March 2018, in Harvard Business Review 10, Thomas Davenport and
George Westerman, are assessing the main reasons why so many digital transformation initiatives fail.
Davenport and Westerman are reviewing high-profile examples provided by large multinational

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brands, such as General Electric, Lego, Nike, Procter&Gamble, Burberry or Ford. The main
conclusion of the article asserts that digitalization (or any other important technical innovation) should
be viewed by companies essentially as a tool and not as an end in itself. Companies must not lose
focus on their products and services (their main value creation artifacts) in their effort to become
digital or embrace technology.

Second, Davenport and Westerman point to the highly complex process of introducing technological
innovation into any organization’s operational model: “[...] digital is not just a thing that you can buy
and plug into the organization. It is multi-faceted and diffuse, and doesn’t just involve technology.
Digital transformation is an ongoing process of changing the way you do business. It requires
foundational investments in skills, projects, infrastructure, and, often, in cleaning up IT systems. It
requires mixing people, machines, and business processes, with all of the messiness that entails.”

The conclusions presented by Davenport and Westerman also highlight the importance of considering
the people’s side of change first. New technology often requires new skills and behaviors to support
them and these changes don’t just happen overnight.

In an article presented by McKinsey, headed The psychology of change management 11, the authors
state that success of transformational programs “depends on persuading hundreds or thousands of
groups and individuals to change the way they work, a transformation people will accept only if they
can be persuaded to think differently about their jobs”. Of course, this is not an imperative if the
changes in sight are only minor – first degree changes (e.g. incremental improvement/upgrade of a
product or a range of products) but becomes a prerequisite in cases of transformations or radical
repositioning. In this case, the change leadership must first assess what changes in skills, behaviors
and organizational culture are necessary to achieve the expected business outcomes. And this
assessment should be performed at the onset of the initiative and be included in the Business Case of
the change program/project.

According to the McKinsey’s study, presented by Emily Lawson and Colin Price, there are 4 main
conditions necessary for changing people’s mind-sets, which underpin their behavior during the
change initiative:

1. Making people understand (and resonate with) the point of the change. This is necessary
to avoid any cognitive dissonance that might arise. Moreover, people must understand the role
of their actions during the change process and what will be expected from them in the future.
Lawson and Price mention that “Anyone leading a major change program must take the time
to think through its "story"—what makes it worth undertaking—and to explain that story to
all of the people involved in making change happen, so that their contributions make sense to

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them as individuals.” A strong and compelling change vision must be developed by


leadership and properly communicated throughout the entire organization.

2. Aligning the organizational and operational models (internal processes, communication,


governance, hierarchies, pay and reward systems etc.) with the new behaviors asked from the
employees. This alignment will ensure that old practices do not obstruct the adoption of the
new behaviors.

3. Making sure that all employees have the necessary skills to operate effectively in the new
working environment. Developing skills takes time and should involve more than simple
training. People need to be thought how the new general instructions could be best applied to
their personal role and specific situation. They need coaching and time to experiment and
adjust. This process could unfold in waves: subject matter experts which have already
internalized the new modus operandi could become trainers and coaches for other groups of
employees.

4. Leading by example: making sure that all formal and informal leaders (change champions
and agents) “walk the talk” and exercise the new behaviors. Lawson and Price affirm that
these consistent role models, are “as important in changing the behavior of adults as the
three other conditions combined. In any organization, people model their behavior on
"significant others": those they see in positions of influence”.

The role models are not to be found only at the top of the organization. It is the task of the change
leadership to identify role models at every level and any geography of the organization as early in the
process as possible.

By focusing on the 4 factors presented above, leaders can radically increase the odds for success of
their transformation agenda. Additional enhancements could be achieved by combining the principles
of behavioral economics into the organizational change strategies:

 Disclosure of relevant, comprehensible and accessible information about the costs (economic,
environmental, image etc.) associated with certain actions or ways of doing things, and
informing people of their past behavior and the related consequences of that behavior, could
help people understand (and resonate with) the point of change;
 When aligning organizational and operational models with the new behaviors, change
architects should focus on simplification and increasing use and convenience, for easier
adoption;
 Making use of social norms to change behaviors by informing the members of the
organization what most other people do, or think could further reinforce the leading by
example strategy;
 Eliciting people’s intentions and pre-commitment to engage in certain actions, could also
facilitate the adoption of new, more effective behaviors.

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Success of transformational programs is a sum of many factors. Technical aspects clearly are
important but, as presented above, the human factor might also be a critical one.

ITC transformations are taking the lead of organizational transformations: both private companies and
public-sector organizations are now confronted with changes of systems (ERP, CRM, integrated
workflow management systems, analytics and business intelligence, automation of business processes
etc.), database infrastructure and data warehouse updates (due to security, availability or
interoperability reasons) and the increasing demand for digitalization, new applications and e-
services. All these require substantial investments, but also a more comprehensive approach to
managing the implementation.

Competencies like: innovation, initiative, problem solving, cooperation throughout and beyond the
organization, vision, risk-taking, critical thinking, flexibility and openness are all becoming
prerequisites, not only for change leadership and the guiding coalition, but for every single employee
in the organization. Having in place the behaviors associated with these competencies will foster
implementation and significantly increase its success. Hoping that the new tools and ITC systems will
drive the adoption of new productive behaviors might lead to roadblocks and failure of adoption. The
following chapter briefly presents the experience of the authors with the transformation of the
Romanian public administration, more precisely with the modernization of the Romanian tax
administration.

Findings: how good intentions often fail to achieve the best results.
The Romanian tax administration modernization program started in 2013 and has gone a long way
until late 2017, when major roadblocks were encountered, at the time when the organization was
faced with the implementation of a new, integrated, ITC system. The entire modernization program
was backed by Romania’s international development partners and generated a lot of enthusiasm
among all external stakeholders when launched, in early 2013. The current section will briefly
describe how the modernization program was designed and the role of the ITC component in the
overall transformation. Capitalizing on the Romanian tax administration’s experience, we will try to
draw a few general conclusions and recommendations for similar future initiatives. The opinions
presented herein are those of the authors and do not represent the official points of view of any of the
institutions concerned.

As per the provisions of the modernization program’s official Project Appraisal Document (PAD) 12,
the development objectives of the reform initiative were to increase effectiveness and efficiency of
revenue collection (taxes and social contributions), to improve tax compliance and to reduce the
compliance burden for taxpayers. The program had a strong Business Case, legitimated by the heavy

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administrative burden on Romanian taxpayers (high number of payments and cumbersome


compliance procedures), the low registration, filing and payment compliance levels, the modest
revenue/GDP ratio and, probably most important, the persistent discontent of taxpayers with the
services provided by the fiscal administration. The modernization program was also going to generate
obvious benefits for the ITC function of the organization, which is operating in thorny circumstances:
outdated technologies, infrastructure and equipment and strong dependence on external service
providers for maintenance and updates. Moreover, fragmentation was the key-word for both
operations and IT (the current IT architecture landscape comprised several hundreds of different
applications).

Meanwhile, various opportunities, most of them in the area of ITC, were gaining more appeal for tax
administrations worldwide. Many fiscal authorities were starting on the road of digitalization and
integration of systems and services (e.g. Poland, Finland, Bulgaria, South Africa, Mongolia, New
Zeeland etc.) and several international companies were now producing mature, integrated software
systems, designed specifically for revenue administration and compliance purposes (Commercial Of
The Shelf - COTS solutions): Oracle’s Tax & Revenue Management Solution, Fast Enterprises’
GenTax, Data Torque’s RMS, RSI’s Revenue Premier, CRC Sogems’s SIGTAS, SAP’s Tax and
Revenue Management, Tata Consultancy Services’ eTax, Crown Agents’ TRIPS, and Giz’s iTax, to
name just the main players.

In this context, the whole modernization program was designed around the improvement of current
business processes and the implementation of the integrated revenue management system (RMS), as
the vision of the transformation in the PAD prescribed: “In the future, revenue administration in
Romania should rely more heavily upon self-assessment and less on achieving compliance through
control mechanisms. Self-assessment would be supported by the implementation of the revenue
management information system and the risk-based compliance management, strong reliance on
electronic communication with taxpayers, and skilled and professional staff, all contributing to an
efficient but taxpayer-centric, client-oriented environment characterized by fairness, honesty, and
transparency.” (PAD, page 17)

Although the program provided substantive support for enhancing the agency’s business processes
and promoting international best practice, longside most of the functions of the organization
(thorough consultancy was provided to improve strategic management, HR management, internal
control, legal and appeals, tax audit, antifraud, business intelligence, registration, payment processing,
returns processing, revenue enforcement, communication, taxpayers services, and so on), the main
message of the transformation was invariably linked to the ITC system and its future functions,
system which was destined to generate a major shift in culture and behaviors.

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The program cycle management benefited from a very coherent approach, positioning all the
consultancy projects at the beginning of the process, to highlight the desired operational model(s),
identify development gaps, optimize future business processes and produce the necessary functional
requirements for the procurement of the ITC system. Everything went well, except for one apparently
small detail: although the PAD advocated that “the project will attempt to promote attitudinal
changes in the tax administration, assisting in improving the relationship between the taxpayers and
the tax administration, and thus creating a more transparent, accountable, fair, and service-oriented
institution, which would maximize the taxpayers’ confidence in the system”, this expected behavior
change was never fully enforced, nor endorsed by the leadership of the organization. In order to
mitigate implementation risks, top-management focused most of the implementation resources on the
technical aspects of the implementation.

Although the modernization program was comprising 4 components and 12 sub-components, senior
management’s attention was mostly captured by the one sub-component that was directly related with
the RMS. This was largely supported by the narrative presentation in the PAD of the sub-components
of component no. 2 of the project (Increasing Operational Effectiveness and Efficiency).

Sub-component 1, targeted at developing the operational functions (tax audit, documentary control,
anti-fraud, business intelligence, enforcement, registration, declaration and processing) is presented as
follows: “The objective of this subcomponent is to use the established international best practices and
business process reengineering embedded in the COTS 3 revenue management system to drive best
practices and business process reengineering”

Project sub-component no. 2, headed Application Software, is presented in the PAD as follows: “The
objective of this subcomponent is to support the modernization and enhancement of businesses
processes and workflows through the purchase, development and implementation of appropriate
revenue management systems. [...] it is evident in the Romanian environment that the most
appropriate project design methodology is to employ a COTS based solution as the principle driver
and enabler of best practice and enhanced business process reengineering. The project will procure the
COTS, in order to absorb the extant best practice BPR 4 already embodied in mature tax software.”

As stated above, the modernization program went fairly well in its early stages. Consultancy projects
achieved their objectives, training programs in several key areas were implemented (e.g. strategic
management, HR management and taxpayers services), and the implementation produced high quality
bidding documents for the ITC RMS System. The major roadblock in the implementation was

3
In the context of the Romanian tax administration modernization project, the COTS acronym designated a
Customized-Off-The-Shelf solution
4
BPR - Business Processes Reengineering

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encountered when the organization was faces with the imminent procurement of the integrated RMS
system.

In order for such procurement to be successful and for a smooth implementation of the system, a
different organizational paradigm was necessary. Such a high complexity project was nearly
impossible to implement in an organization whose main focus was on compliance with bureaucratic
procedures, highly risk-adverse, driven by inputs and not by results and impact, purely legalistic and
mostly reluctant to innovation. Different skills and behaviors were necessary to drive the success:
openness, agility, creativity, flexibility, risk-taking are just a few of them.

And these behaviors were needed not only from the leadership or from the members of the
implementation team(s). They were needed from the bulk of the people, located at every level and
geography. The organization failed to make them available on time and this resulted in major
bottlenecks, later during implementation. Of course, in the case of the Romanian revenue
modernization project, several other key factors might have been causes for delays and roadblocks,
but the conservative and retrogressive culture of the organization certainly played a key role.

This is a clear case in which behaviors should have been changed first to make the technical
implementation and adoption of change possible. We assert that even if the ITC system had been
implemented and rolled-out successfully, results would have been poor, in the absence of thorough
changes in behaviors. However, changing behaviors in such large and complex organizations takes
time and consistent support, and the modernization program’s chances of success may improve in the
near future.

CONCLUSIONS
In their article headed „Stepping Out: Rhetorical Devices and Culture Change Management in the
UK Civil Service”, Amanda Driscoll and Jonathan Morris praise the relevance of the culture in
organizational performance: “[...] culture is the key to organizational performance; simply stated, a
strong organizational culture can be a source of competitive advantage.” Similarly, organizational
culture can be a strong supporter or a blocker of every change transformation. This paper asserts that
for increasing the chances of success of ITC transformations, change managers should first focus on
identifying the behaviors fostering change and cultivate those behaviors throughout the organization.
All the technical aspects should come next!

Paula Alsher vice-president of the international consulting and change management firm,
Implementation Management Associates (IMA), presents a very clear-cut opinion on this subject: “No
behavior change, no implementation.  It’s a simple, but profound statement about the criticality of the
human side of business projects, including transformational change initiatives”13. She also points to

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the fact that “In order to achieve value realization, you must first identify the human objectives for
your change.”

Behavioral change is requested form the overall organization, underpinning the afore mentioned
cultural shift, but the specific gaps should be identified at the level of each group of people and each
workstream. The leading coalition must make sure that everyone understands the new vision and its
benefits. Once positive behavior is adopted and blocking habits are set aside, reinforcement is the key
word. Positive rewards, but also negative consequences will strengthen people’s attitudes towards the
new operational model. Sponsorship of change from the highest levels is mandatory. Role models are
vital for people to adopt the new behaviors. Training, mentoring, coaching and sharing experiences
help people understand how to best incorporate the new models and concepts into their daily work.
Operational model, communication and governance frameworks must all be aligned with the desired
behaviors, to avoid cognitive dissonance.

Maybe one day technology will have the power to correct and change people’s behavior. In today’s
organizations though, changing behaviors is still a prerequisite for all major transformations,
including the case of sophisticated ITC implementations.

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TAD 14 - THE DISCIPLINES AND THE STUDY OF PUBLIC ADMINISTRATION

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