Managing change in financial services for sustainable growth
Flight to the Future
Changing market dynamics in the financial services industry mandate quick responses from organisations
that wish to stay ahead of the competition, reduce risk, and increase profitability.
As the world’s most experienced outsourcing services company, EDS has developed a high-value
services model that delivers superior returns to clients across the globe. We provide a broad portfolio of
business and technology solutions to help clients worldwide improve their business performance. EDS’
core portfolio comprises IT, applications and business process services, as well as IT transformation ser-
EDS’ A.T. Kearney subsidiary is one of the world’s leading high-value management consultancies.
Through our nearly 120,000 employees, we support the world’s leading companies and governments in
60 countries. With $20.7 billion in 2004 revenue, EDS is ranked 95th on the Fortune 500. EDS Global
Financial Services Industry leverages EDS’ global technology leadership to create integrated business
and technology solutions that are tailored to meet the needs of financial services institutions worldwide.
We have more than 15,000 employees serving financial institutions in more than 30 countries across the
banking, insurance and capital markets sectors.
In Europe, we work with leading financial institutions such as ABN AMRO, AON, AXA, Banksys,
Barclays, Banca di Roma, Banque Hervet, Dexia, Fortis, KBC, la Caixa and Société Générale.
These institutions turn to EDS to help them transform their infrastructure and operations in order to
reduce costs, improve efficiency and meet ongoing regulatory requirements. By leveraging EDS’ core
our clients can focus on products and services that distinguish them in the marketplace and with their
We apply our 35 years of experience in the financial services industry to each client. In fact, today, EDS:
• Is the world’s largest third-party mortgage loan sub-servicer
• Processes 1.3 billion credit card transactions annually, supports 45 million credit card
accounts and handles more than 1.8 billion merchant accounts in 18 countries
• Processes 2.2 million credit and auto loans every month
• Processes 24 million credit transactions annually (payments, applications and
• Processes 320 million statements and 2.7 billion cheques annually
• Provides life pensions and health BPO services to more than 10 million policyholders and
has migrated over 12 million policies globally
Table of Contents
Introduction 4
Why Do Financial Organisations Need To Manage Change? 5
Pace Of Change 6
Change Triggers Within Organisations 7
Strategies For Managing Change 9
Creative destruction 9
Balancing stability and change 11
Approaches to effecting change 12
Examples Of Change Strategies 13
Sea change 13
Step change 15
Changeling 17
Cultural change 17
Seven Rules Of Practical Change Management 20
Achieving agility 20
Rule 1: Clearly define the future mode of operation (FMO) and the corresponding benefits 21
Rule 2: Focus delivery on releasing business value 22
Rule 3: The programme management function must be exemplary 22
Rule 4: Strictly control scope creep 22
Rule 5: Establish a strong business change architecture function
Rule 6: Programme teams need HR support, too 23
Rule 7: Partnering – it’s not a sign of weakness 23
Inside Organisations – The Mechanics Of Change 24
Who is responsible for change in the organisation? 24
‘Softer’ Change Issues – Dealing Successfully With Employees 31
Phase one – unfreezing 31
Phase two – transition and acceptance 32
Phase three – moving forward 33
The importance of communication 36
Phase four – institutionalising the changes 38
Changing Lifestyles And Employee Attitudes Toward The Workplace 38
Key Failure Factors 40
Poor change leadership 40
Inability to communicate a clear rationale for change 41
Handling resistance to change 42
Poor middle management skills in managing people/projects 42
Failing to ensure employee buy-in at all levels 42
Key Success Factors 46
Effective change leadership 47
Ability to communicate a clear rationale for change 48
Rigour during the planning stage 49
Setting realistic timescales for change 49
Anticipating and handling resistance to change 49
Effective implementation 50
Choosing the right teams to deliver change 51
Employee buy-in 52
Last word 53
Acknowledgements 54

Change is a constant in today’s world of financial services, and the ability to successfully manage change
is a prerequisite of any sustainable corporate strategy. Whether you are a de-nationalised state insurer in
an emerging market aiming to compete on a pan-European basis with global organisations, a mutual with
a rich history of success seeking to survive by a stock market flotation, or a market leader in a mature mar-
ket concerned about the challenges from new entrant competitors, managing change is an essential skill.
How change is tackled depends on the context: the company may be facing a burning platform and with
no option but to go forward; it could face change as an imperative following a merger or acquisition; or it
may be that a company already enjoys a market leadership position but believes it must change to sustain
its lead. Nevertheless, a high number of change programmes fail – and, even amongst those that appar-
ently succeed, a large number fail to meet the expectations of senior management. Good change manage-
ment is a combination of excellence in process management and in the ‘softer’ aspects of change such as
changing employee behaviours and ensuring they commit to the changes, and providing the right level of
support to enable this at the right time. Getting the multiple dependencies right is tough, akin to conduct-
ing an orchestra in that ‘a good change management capability energises and motivates, creates a sense of
pace and timing, and provides a skilled performance while sustaining the performance of others.’ (Carnall,
Colin, ‘Managing Change in Organisations,’ FT Prentice Hall, 2003.)
In Spring 2005, Limra Europe conducted research into its membership to ascertain what they considered
to be best practices in change management. The specific areas investigated included
• What kinds of events triggered change
• How change was defined in companies
• How change was managed internally in financial organisations
• Key success (and failure) factors in managing change
• What metrics/methodologies were used
• How proactively change was managed
• Age-related attitudes of employees towards change
• The psychology of change within the workplace
This report examines the results of the research, and sets it within the wider context of best practice in
change leadership. The research consisted of an online questionnaire, supplemented by in-depth meetings
with change managers and senior executives in a range of financial organisations. In the research, change
was variously described as endemic to every organisation, or to ‘business as usual’. It can range from
wholesale cultural transformation programmes which aim to alter employee attitudes, values and behav-
iour, to smaller-scale, structural, changes such as de-layering, or the restructuring of a limited number of
functions but where an existing corporate strategy is left untouched.

Why Do Financial Organisations Need To Manage Change?
Change is part of our everyday lives. We handle it so instinctively that often it creeps up
unaware, and the extent of our transformation is only registered with surprise long after the
starting point. It occurred at a slower pace in the lives of the post-world war consumer genera-
tions. Brown or white goods (fridges, TVs, ovens, now no longer brown or white but available
in ice-cream colours) were typically bought for life. The notion of in-built obsolescence would
have been anathema to them and the notion of replacing them for redesign reasons seen as
impossibly frivolous. In the world of work, organisations were characterized by a high degree
of job specialisation, reliance on formal procedures, by hierarchy, clear status differentials,
and an emphasis on control. (Carnall, ibid.)
By comparison, the past two decades have witnessed massive restructuring in the financial services market
– consolidation, competition, product failures and selling scandals. Tidal waves of legislation, combined
with the relentless speed of technology advances, have made financial companies far more aware of struc-
tural inefficiencies and the importance of responding rapidly to such changes. Elsewhere, everything is
converging into fast-moving consumer goods, offering an infinite variety of lifestyle choices. We wonder
how it came about that hamsters, champagne, Botox injections, cosmetic surgery fees and self-storage
spaces have replaced prunes, corned beef or a rubber roller table mangle in UK plc’s shopping basket over
the last half century (UK Office of National Statistics, March 2005). The intervening years have raced
by and the past seems to be a foreign country. We recall the monolithic mobile phones of only 15 years
ago as if they belonged to a bygone era. Or consider how trains have changed over the recent decades:
formerly, there used to be a division between second-and first-class carriages. Then the distinction was
between smoking and non-smoking carriages; now it is between ones allowing mobile phone usage and
quiet carriages.
So change has always been there, but capturing and shaping it is the challenge companies face today.
Instinct, however, is not enough to deal with change: businesses need to exercise formal ways of read-
ing changes in the environment and creating internal capabilities for dealing with them. How do compa-
nies differentiate between routine aspects of the changing business environment and ‘strategic inflection
points.’ There may be an extraordinary change in the business environment on the part of a competitor,
or of a regulator. It might come from a directional shift on the part of a vitally important strategic partner,
or the advent of a new product or even revolutionary types of competitive paradigm such as eBay or
If, according to PriceWaterhouseCoopers, over 40% of change projects fail and only half of those that suc-
ceed meet senior management expectations, it is vital that financial organisations are aware of the pitfalls
to best practice and are able to analyse their own experiences with clarity and insight.

Pace Of Change
When Limra Europe first started talking to the financial services community about change management,
the most common observation we encountered was how fast the pace of change is now compared to 10 or
15 years ago, that it is continuing to accelerate, that there is no respite, and that companies feel they are
racing to stand still let alone gain competitive advantage. This was definitely the case for the UK where
80% of replies revealed that the need to adapt to change was more pressing today than three years ago.
Whereas non-UK respondents felt that the pace of change had only heated up in the past three years, a
substantial proportion of UK respondents felt that the pace of change had been accelerating for at least five
years. At any given time, financial services companies confront the challenges of:
• Increased regulation – an unprecedented level of attention from regulatory bodies and consumer
• Customer awareness and growing sophistication or acumen in the selection of providers
• Increased competition from large retailers diversifying into financial services, new entrants with
out legacy infrastructures and niche players who are intent on cherry-picking the best customers
• Technological developments that make new services possible or offer potential improvements to
existing systems
• Issues such as managing diversity or anti-age discrimination
There were interesting differences of opinion in the replies. One head of change at an institutional asset
manager remarked that:
‘The pace of change is no greater now than in recent years and, in technology terms, it has ac-
tually slowed down. The past 10 to 20 years have witnessed massive business improvements
when processes moved from being manual to automated. Ten years ago, the technology gain,
in our view, would be called evolutionary. Great differences were made. Now they are incre-
mental. There are no more ‘shed-loads’ of efficiency to get out of tasks.’
In another example, the senior programme manager at a global banking group commented:
‘The pace of change has quickened dramatically in recent years and will not let up. Members
of staff, especially in branches, feel bombarded with change.’
The head of change at a UK mutual life insurer observed that he did not see more change now than 10 or
15 years ago, except in the area of regulation. He did, however, consider there was more forced change
from the outside.
‘Change was always there in the ‘old days’, but it simply went under a different banner. Much
of it was concerned with fire-fighting.’

One particular pressure on companies, and a major contributor to the sense of uncertainty so many feel, is
the speed at which rivals can now enter the market and the rapidity with which they can duplicate a rival’s
value or product proposition.
’There is no escaping change as the entry barriers to our business product areas are so much
lower, technology races ahead as a constant, and the door is open for copycats to enter and
steal market share.’
Change Triggers Within Organisations
Change is caused by a complex mix of new technology and social trends, which makes it al-
most impossible to predict. It is easy to forecast most technical changes, but almost impossi-
ble to foresee how human beings will react to them.
(Partridge, Chris, The Times, February 2005.)
Replying to the question, What triggers change?, 100% of UK respondents cited regulation as the over-
riding trigger in financial services, followed by acquisition, product development and technology. Re-
spondents from Continental Europe (including the Republic of Ireland) saw competition and changing
customer demands as the most important triggers. Changes at board level were reported by 50% of UK
organisations participating in the survey as triggering change, compared to only 20% of Continental Euro-
pean participants. This possibly correlates with the far higher number of acquisitions completed in the UK
in recent years. There may well be a greater degree of senior management churn in the UK market than
elsewhere. Indeed, a survey of 115 UK companies by management psychology consultants, RHR Inter-
national, reported that half of the respondents felt they would lose 50% or more of their senior managers
over the following five years. It also noted that within 12 months of being hired, 40% of boardroom man-
agers under-perform or are fired. This could be a recipe for endless cycles of change, leaving organisations
constantly grappling with the fallout from abandoned change programmes. At Abbey National, for
example, the incoming director of programme management in 2000 inherited 294 projects, cancelled 223
of them, realigned the remaining 72 to the new business strategy and redeployed the ‘spare’ project
managers in training, development and best practice. (Project magazine, April 2003).
The role of senior management is vital to successful change, as we shall examine more closely in a later
section. It is often the case that a new CEO, not necessarily from the outside, is seen as a welcome breath
of fresh air, symbolising a break from previous practices and heralding a period of beneficial change and
new practices. At the same time, the longevity or otherwise of the CEO in his/her job can be a disruptive
factor. A sample of responses to the survey question, How long has your CEO been in his/her job? re-
vealed that average tenure of CEOs was only nine months.
The group projects manager at a mobile telephony company, whom we interviewed to add a wider context
to the research, expressed an uncompromising view of the role of the CEO. She considered that ‘senior
management likes to change the structure for the hell of it,’ to justify their existence. They like ‘to throw
all the pieces in the air at once,’ preferring to take a Big Bang approach rather than the incremental steps,
which the implementation teams believe are more realistic and achievable!

• At one global bank participating in the research, the new CEO, 18 months into his new
role, has embarked on a major cost campaign. This focuses primarily on the key areas of debt
management and wastage – the collection and processing of bad debt, money
management services for indebted members of the public, credit policy terms, mortgage
approval and arrears handling teams. This cuts across the whole business infrastructure
and is run by the CEO as a personal campaign in an attempt to maintain pace and
momentum in a massive and complex organisation of 225,000 employees worldwide.
• In the case of a UK mutual society, there have been five changes of CEO in as many years.
One came from the motor industry, stayed 18 months then moved on. Another came
from a competitor, stayed one year and moved on. Each CEO has, according to the head
of change, his own agenda. One was strong on mergers, leading to acquisitions. Another brought
in a more informal culture. This is a company that has confronted its role in the marketplace
and has had to take radical steps to adjust and survive. The incoming CEO is ‘home grown,’ with
notable skills in the areas of affinity groups, strengthening the brand and customer proposition,
in emphasising performance, combined with an empathic approach to the concerns of the
workforce. In this company, change management has historically been seen as synonymous with
staff culls and painful cost cuts that have eroded loyalties. The challenge for the change
management team and new CEO is to get employees to see that change management is ‘not a
conspiracy to ruin their lives,’ and ensure they are brought into these forthcoming programmes.
Figure 1
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Other. Please specify.
Changes at board level
New product development/launch
Changing customer demands
Which of the following events act as triggers for change programmes
in your organisation (UK participants)?

In addition to the change triggers mentioned in Figure 1 {above}, several responses alluded to systems
integration, product launches and rationalisation of the organisational model as giving rise to change pro-
grammes. Other triggers included:
• E-enabling of all our business systems and the introduction of self-service
• A re-definition of how we do business to focus on persistency and the quality of customer
• Introducing the end-customer into everything we do
• Systems infrastructure
• Office relocation
• Depolarisation
• Mortgage and general insurance regulation
• Development of customer propositions
• E-transformation of our business processes
• New sales strategy
• New back office – physical move after a merger
• IT strategic changes
• Launch of new distribution channels
• Implementation of new remuneration models
Strategies For Managing Change
Creative destruction
In March 2005, Danny Kruger, a member of the UK Conservative Party who was standing against the
Prime Minister in the following May General Election, was taped talking about the party’s plans to intro-
duce a period of ‘creative destruction’ in public services. This was interpreted as implying that the Conser-
vatives planned to lay waste to these services in a ruthless attempt to reduce public spending.
Kruger’s comment was sound, if misunderstood. Taking his cue from Foster and Kaplan’s best-selling
book (‘Creative destruction: why companies that are built to last under-perform the market – and how to
successfully transform them,’ Currency, Doubleday, 2001), he argued that the managers of any organisa-
tion must abandon the idea of continuity and seek radical change in order to survive. As the author of a
Demos report on information exclusion, Kruger was well aware of the dangers of marginalising poorer
members of society by refusing them access to vital resources. But demonised in the press, and to save his
party further embarrassment, Kruger resigned.
The intensely competitive business environment means that change has come to dominate the agenda in
most organisations, with companies seeking to reinvent, renew, reshape or transform themselves in a bid
for a sharper competitive edge. Companies have responded by taking the project management model,
which has existed for decades in IT, and extending this to a more holistic concept that embraces multiple
stakeholders and can be used as a template for embedding change within an organisation.
Organisations pass through cycles of evolution and revolution according to their size and where they
stand in terms of their own evolutionary stage, for example, a green-field set-up or mature market leader.
Different styles of leadership suit these different stages. At a global French financial services group, the
general manager, sales & marketing, recruited a dynamic young manager whose role involved galvanising
a sleepy offshore division servicing expatriates. The general manager described the role as acting as the
‘grit in the oyster.’ The longer-term intention, however, was to replace this younger manager with a safer
pair of hands once the shake-up had occurred.
Bank branches have been revolutionised since the late 1980s by the introduction of self-service technol-
ogy. Routine practices have been stripped out and queries from customers were directed to contact centres
rather than branch staff from the mid 1990s. One bank we talked to removed lending decisions from the
branches although this was reinstated later on. As far as the branches are concerned, this is virtually a
case of permanent revolution, with change programmes in the wings to ensure that the paying in of small
business takings – one of the most time and resource intensive transactions at branch tills – is processed
in a more streamlined fashion.
Other factors affecting the ebb and flow of the corporate life-cycle are ones Carnall defines as the ‘six
dilemmas of business.’ At different stages of the life cycle, organisations will make choices in terms of
centralisation or decentralisation, in how they strike the balance between efficiency and effectiveness,
global and local operations, change and stability, control and commitment style of management, and their
use of in-house or third party professional expertise.
At one financial services research house, the appointment of a new president at the start of 2005 is leading
to a strategy of greater centralisation after a period when standalone centres had been created for the Asian
and European regions. In this case, the new strategy aims to create a structure which will strengthen the
service it offers to the regions by more effectively leveraging resources in the US and elsewhere and will
serve to eliminate duplication in some areas and reinforce capabilities in others.
In terms of the optimum balance between efficiency and effectiveness, improving the performance of
internal processes such as risk management, compliance, accounting, HR, new product development, or
procurement policies has been an industry priority for several years. Real effectiveness, however, lies in
an organisation’s ability to adapt to changing circumstances and ‘scramble’ resources to meet challenging
situations rather than simply applying cost-cutting remedies, which may diminish this adaptability in the
longer run.
We found in our research that companies are wrestling with programmes involving change of a more tech-
nical nature – such as the introduction of automated processes. At the same time they are trying to build
more flexibility into corporate culture and working practices through more emphasis on teamwork, new
job descriptions, new reward systems and by starting to engage employees in more decisions affecting the
business. At one investment house, the head of change commented that headcount was no longer a part of
any cost-cutting programmes but rather the challenge was to achieve change and business benefits in the
‘softer’ area of people management. All employees had been consulted about the need to change ways of
working and ‘had tacitly agreed,’ although there was some resistance, interestingly, mostly at board level.
Most of the companies surveyed were on this journey but few, if any, had arrived at their intended destina-
tion. Although none of the organisations researched demonstrated chaos, one major banking group’s strate-
gy director remarked at a conference that the company focused to an extreme degree on efficiency factors,
combined with huge amounts of governance and control. As a result absentee rates were ‘sky high.’
When it comes to choices in the area of change versus stability, some argue that organisations should adopt
a strategy of continual internal change to keep employees on their toes. Accenture coined the phrase ‘dis-
turbing the system’ (white paper of same name in Outlook, October 2004) to describe a process of ongo-
ing adjustment to change at all levels of an organisation, rather along the grounds of ‘kaizen’ or continuous
improvement. Other commentators argue that the human need for stability is paramount and taking away all
comfort zones leads to defensive, risk-avoiding behaviour on the part of employees, which is the antithesis
of the sort of entrepreneurial behaviour that businesses may wish to encourage. Others consciously pursue a
policy of unsettling their employees by removing comfort zones.
Change can only happen within a fluid state. Yet so many businesses are locked into rigid struc-
tures – management hierarchies, floor plans, etc. A company full of individuals who have sat at
the same desk in the same spot forever is not in the best mindset to encompass change. Some
businesses have a radical solution to the physical mind lock. They simply don’t allocate space
to employees, but use ‘hot desking’. The alternative is to presage a major change by an actual
physical one – i.e. moving desks and departments. This ‘unlocks’ employees from their ‘safe’
(Wilton, Eric, ‘Dealing with change’, PM magazine, January 2005.)
When companies seek to move from a control structure to a more flexible one based on commitment, indi-
vidual responsibility and teamwork, it inevitably involves the creation of more stretching objectives than
the task-oriented systems of the past, a move towards flatter structures, employee participation, the manage-
ment of multiple stakeholders, and performance-related rewards rather than a salary pegged to a particular
None of this is easy – at one insurer, an ambitious change programme was in progress to move from the
‘job description writing factory’ to a rewards system that would facilitate a flatter and more responsive
organisation. The change leader was, however, encountering fierce opposition on the part of a board member
and eventually the entire board had to be deployed as a means of countering the opposition.
Many of the companies we spoke with were transitioning toward a more fluid structure, or believed they had
moved considerably closer to it. This was the case at one investment house where employee groups had been
set up to amend the governance structure. As the head of change there remarked, ‘18 months ago the execu-
tive was the only place where decisions could be made. Now, they are permeating down to the rest of the
Balancing stability and change
Change today is associated with speed and discontinuity, with a sense of increased pace and complexity. We
have referred to discontinuous change, based on the new paradigm of evolution. Evolution in this context
incorporates the sense of ‘revolution.’ Carnall refers to evolution as the ‘engine of success, requiring us to
understand and learn to ride the changes occurring.’
Managing change effectively requires a clear grasp of the ‘drivers of stability’ in an organisation – those
tending towards the preservation of equilibrium or inertia, the maintenance of the status quo, the ‘traditions’
and practices that support these drivers, and the cost of removing them. They can be insidious and hard to
identify, which is why organisations may opt for including an external expert who may be better placed to
identify what is holding them back. Previously, companies could concentrate on small numbers of changes
at any one time and there would usually be a period of stability before the next change. Change was seen
as interrupting the status quo, whereas today change has become the new status quo. As Charles Thal-
heimer writes in LIMRA’s MarketFacts (winter 2005 edition):
`All change creates an inevitable dip in the key measures of productivity and quality during
implementation. We call it a delta state and it occurs as people learn what is required of them
in the change process and adapt to the new, desired state. If part of that delta dip is caused
by people refusing to change, spending excessive amounts of time complaining, stalling and
even sabotaging the change, the cost of change will be too great and the potential for failure is
too high.’
We come full circle to the rogue comment by Kruger on creative destruction. Andrew Grove, chairman
of Intel Corporation lecturer at Stanford University and author of ‘Managing Segment Zero’ (Leader to
Leader, Winter 1999) talks of the importance of having a period of experimentation and quasi-chaos while
a company learns to adapt to, and deal with, change. Established practices and established attitudes must
be torn apart before something new can be put in their place. This painful and psychologically demanding
period of adaptation is often referred to as the ‘Valley of Death’ by change management practitioners, and
we shall touch upon it in a later section. The phoenix, metaphorically speaking, cannot otherwise rise from
the ashes; it is in this sense that Kruger was doubtless using the term, but suffered the misfortune of being
taken literally.
Approaches to effecting change
There is a spectrum of styles and approaches to change management programmes that companies can
adopt, but the most effective choice will depend on factors such as:
• The urgency of the need for change
• The degree of opposition or resentment
• The power of the individual or group initiating the change
• The necessity for information and commitment on the part of employees
Once these issues have been taken into account, companies can opt to follow a number of strategies. Bill
Lockitt, author of ‘Change Management’ by 3T Productions Ltd, defines these as:
Participative strategy. This has the advantage of resulting in greater commitment on the part of employ-
ees, with more opportunities for individual and organisational learning, but it is relatively slow to imple-
ment, more complex and costly. Although driven by senior management, the process will be less manage-
ment dominated and instead driven by groups or individuals. The views of all will be taken into account
before changes are made. The outcomes can be less predictable and more costly if consultants are used as
Educative strategy. Similar to the participative, it involves ‘winning hearts and minds’ and changing val-
ues and beliefs through a mixture of persuasion, training and education, but tends to be more management
dominated than the previous approach. Experts, either internal or external, will be used as facilitators but
will not make any decisions or decide on outcomes.
Directive strategy. This emphasises the use of authority to impose change, with little or no involvement
of other people. It can lead to strong resentment from staff members who are not consulted or expected to
question the changes to any degree.
Expert strategy. This sees change management as a problem-solving process. It may be acceptable when
dealing with technical issues and can result in a faster implementation process, but such an approach may
fail to realise any wider aspects of the changes and how they are viewed by a larger audience.
‘Gung ho/rah rah’ strategy. This is a particular manifestation of a directive strategy predicating an avoid-
ance of key issues and a belief that all that is needed is to ‘fire up the troops’ and the change objectives are
achieved automatically.
Negotiating strategy. This approach tends to be taken when the senior managers in an organisation prefer
to negotiate and bargain in order to effect change. It acknowledges that those affected by change have a
say in what changes are made, how they are implemented, and the expected results. As with the participa-
tive strategy, however, this approach takes more time and it is harder to predict the final outcomes.
Examples Of Change Strategies
Sea change
This might be categorised as ‘deep’ or discontinuous change, one that carries a high degree of risk and
complexity. To succeed, it is vital that an organisation has the capacity and capability to cope with this
degree of change. Often the way forward is to adopt a radical, ‘once and for all,’ Big Bang, approach as
the only response in the circumstances and where a return to previous practices is not tenable. The seeds
of change may well have been sown over a long period of time, but a point arrives at which all options are
closed off and there will be no turning back and a clear break is made from the past.
The evolutionary black box – radical change at The Children’s Mutual
Six years ago, and after 120 years of existence, The Children’s Mutual found itself on the horns of a
commercial dilemma. It was an acknowledged specialist in the area of savings products for children,
and enjoying buoyant sales, an efficient operating ratio and winning multiple service awards. But David
White, CEO of The Children’s Mutual, nevertheless felt the company had reached a glass ceiling in terms
of sustainability and he must convince the board of the need for radical change. Whilst recognising that
there was a continuing public need for products that helped families make provision for their children’s
needs, David knew it would be hard to achieve the sort of revenues necessary to compete through or-
ganic growth. Premium size would inevitably be limited by the unwillingness of families to invest larger
amounts for ‘small people,’ however much they cared for their children. As a tiny market player, it lacked
the deep pockets needed to widen its product portfolio, unlike its competitors. The 1% world of low mar-
gin products was looming – meaning further pressure on margins – as was the introduction of Child Trust
Funds to the market.
David considered the market would polarise into large players, able to offer economies of scale, and
niche specialist ones. Unusually, he took the view that the specialist players would not be able to charge a
premium for their expertise in this particular market and therefore would have to compete on price as well
as achieve economies of scale. The Children’s Mutual had already gone as far as it could in terms of cost
cutting, so David chose to go down the route of totally re-fashioning the business. His solution was to set
up what he calls a ‘black box model’ based on the value proposition of ‘understanding the savings needs
of families for their youngsters.’
The proposed new model consisted of the creation of a virtual company. Back office unit costs could be
reduced by as much as 40% (only possible by outsourcing most of the operation). He also developed a dis-
tribution growth strategy based on the belief that economies of scale could be achieved even by a smaller
player if it was ‘smart about who it tapped into’. In other words, which strategic partners iy chose to help
with its goals. Administration and IT were outsourced in 2004, involving some 60% of staff transferring
to work for the outsourcing company in Kent and Gloucester, leaving a ‘sales and marketing machine’ and
HR function of some 65 at the head office in Tunbridge Wells. Distribution had historically been through
direct sales forces (DSFs) and independent financial advisors (IFAs), but with no further call for generalist
sales agents, the direct sales force of some 40 agents was dismantled and the direct marketing operations
ramped up instead.
Another strategic priority was to find a way of raising brand awareness (changed in 2003) without incur-
ring the promotional spend of larger operators. Accordingly, The Children’s Mutual chose to concentrate
on PR. The strategy worked in spades: 574 mentions in the past year alone and the company clearly po-
sitioned in the minds of the public as a market leader in Child Trust Funds. Everyone in the company has
been put through a ‘complete living the brand’ programme.
The Children’s Mutual currently has 30 more than partners in addition to the IFA channel and its Child
Trust Funds are sold in 5000 high street outlets. It carries out mailings on behalf of Lloyds Bank, Moth-
ercare and Boots, offers extensive IFA support, and is price competitive. It continues to be garlanded with
service awards such as Financial Adviser’s 5-Star Service Award nine times, the latest in 2004. More new
customers have been recruited in each of the past two months than in all of 2004. Fund management is
also outsourced, but The Children’s Mutual retains a duty of care to oversee its quality and prides itself on
its flexibility: if a distributor wants a different fund manager on the rota, they will oblige.
How did this new focus come about? David’s transition from sales and marketing director to CEO came
about in an evolutionary way. Prior to 1995 there had been no marketing function at all. The current chair-
man – then a non-executive director – wanted a heavyweight marketing and sales director. After taking
on the role of chairman, he persuaded the board that a new approach was needed. David was brought on
board, and later promoted to CEO.
He wants his people to ‘live and breathe’ strategy. For David, the most important aspect of any senior
management job is communication. In order to deliver against the current environment he needs to offer
a vision and to build a bridge between the present and the envisioned future. ‘If you don’t change, change
will change you, and you will have no control.’ Once the decisions have been made, you have to ‘add
context’ to make it meaningful. You have to offer proof that the vision will work. His challenge is to keep
spirits high. Members of staff were hostile at first, but over time, their comments became constructive.
David believes what has been done is both evolutionary and revolutionary. The Children’s Mutual didn’t
set out to be a virtual company but it needed economies of scale. It now has a straightforward proposition
for customers that combines singular expertise in children’s savings, processing, and the choice of four of
the best fund managers in the country. Strategic thinking has become part of the ‘corporate DNA’, and is
handled by the most senior team. Success notwithstanding, the company refuses to sit on its laurels and,
having delivered their strategic objectives to the letter, they are planning where to go next – they do not
want to miss the longer-term picture.
Step change
An incremental approach to change can be achieved through an evolutionary process. It carries less risk
and a higher guarantee of success as it is implemented and pilot activities can be measured against the
original objectives before moving on. This may be suitable in an environment where external pressures
constantly shift. Arguably, it is a process that should be ongoing in any company that strives to retain its
competitive advantage. In other words, it is more ‘acceptable’ psychologically, more tolerable to em-
ployees and more capable of control by management. It should not contain radical shocks to a system or
culture, although it may include radical change, albeit over a more extended period of time.
At one investment house, there is an ongoing programme of change in the ‘softer’ areas of people and
behaviours. This is a logical extension on an ongoing cost-reduction and efficiency strategy that has been
taking place over the past three years or so. Most of the ‘easy targets’ or ‘low-hanging fruit’ have been
harvested through technology-based re-engineering. Certain areas are earmarked for outsourcing. The
next area of ‘attack’ is to facilitate an environment where employees will take responsibility for acting
in different ways and to achieve ‘mindset’ change. Employees are being empowered to change their
approach but pockets of resistance still remain. One of our interviewees referred to ‘logical incremental-
ism’ as a formal change strategy. As Johnson and Scholes explain in their book ‘Exploring Corporate
Strategy,’ this term describes:
‘A strategy development process where managers have a view of where they want the organi-
sation to be in years to come and try to move towards this position in an evolutionary way.
They do this by attempting to ensure the success and development of a strong, secure, but
flexible core business, building on the experience gained in that business to inform decisions
about the development of the business and perhaps experimenting with ‘side bet’ ventures.
Such experiments cannot be expected to be the sole responsibility of top management – they
should be encouraged to emerge from lower levels, or ‘subsystems’ in the organisation.
Effective managers realise that they cannot do away with the uncertainty of their environment
by trying to ‘know’ about how it will change. Rather, they try to be sensitive to environmental
signals through constant scanning and by testing changes in strategy in small-scale steps.
Commitment to strategic options may therefore be tentative in the early stages of strategy
development. There is also a reluctance to specify precise objectives too early, as this might
stifle ideas and prevent experimentation. Objectives may therefore be fairly general in nature.
Overall, logical incrementalism can be thought of as the deliberate development of strategy by
‘learning through doing’ or the ‘crafting’ of strategy.’
(Johnson. G; Scholes. K; ‘Exploring Corpo-
rate Strategy: Text and Cases’, FT Prentice Hall, 2001.)
Change management at a UK insurer on the cusp of radical change – ‘logical incremental-
ism and lots of conversations’
The existing change management department dates back to the 1980s and has grown into a core compe-
tence over the past 20 years. The catalyst to its development was the launch of a complex pension contract
in the mid-80s with a massive array of features and benefits. Unfortunately, the developers failed to recog-
nize the IT department’s inability to manage this degree of complexity, and there was significant financial
loss. The company learned through bitter experience that it was not good at managing projects. A senior
training manager was drafted to work on developing a change management competency, one that would
involve all staff, rather than simply IT.
At this stage, it was decided that project management skills should be developed across the whole organi-
sation. Cranfield University, a leading international management centre, was brought in to discuss how the
company could be more effective at implementing change. It was felt that the approach currently in use,
adopted from the methodology of a major management consultancy, was based excessively on ‘rational,
analytical models,’ and had ‘thousands of forms to be filled in!’
The group HR director at the time took a keen interest and sponsored an in-house Open Business School
Diploma. Over the late 1980s a change management infrastructure gradually evolved, with training re-
sponsible for creating a supporting culture through education and training. According to our interviewee,
change management has always meant more to him than ‘a bundle of technical skills,’ or ‘project manage-
ment plus’. To truly succeed, change management must be embedded into the hearts and minds of
His starting point is to get people to think around the new concept and issues and to experiment with them.
The role of the change manager is to ‘facilitate lots of conversations’ before passing into the implementa-
tion stage.
IT practitioners have excellent skills of logic and tenacity in completing projects, however this tends to
mean they believe all people operate along mechanistic lines and consequently don’t always allow them
sufficient time to absorb and adapt to change. The HR director’s strategy had the ‘express aim’ of bypass-
ing IT and offering an infrastructure, which the top executive group could clearly see and grasp. Training
in project management was offered initially to the top 200 managers through three-day courses. An ex-
ternal consultant was then used to extend these courses to a further 400 managers and specialists. Project
Management Services was established as a formal unit for the first time. Initially, it conflicted with IT by
rejecting what it saw as their complicated methodology, replacing it with one more accessible to opera-
tional management.
The new change methodology went live as the company was in the process of replacing its ‘With Profits
Plan’ with a unitised version. To the surprise of large numbers of sceptics, especially in the sales branches,
it proved a resounding success. The next ringing endorsement of the methodology was the reversal of the
company’s fortunes regarding service quality. The system was activated for an ambitious change pro-
gramme entitled, ‘Total customer satisfaction.’ The group CEO and several executive directors visited the
US to observe the top-ranking service-oriented companies. An expert from Boston Consulting Group was
brought in; later in the programme, more of the top team returned to the US as part of the ‘learning align-
ment.’ Five hundred managers were put through a three-day course on the importance of customer service.
Sixty of these were subsequently licensed as facilitators. Finally, all staff members had a one-day align-
ment course. One year after completion, the organisation was winning multiple service prizes.
The introduction of a new change agent who is not the CEO is a subset of radical or incremental change.
It can be used as a means of seeding change in some ways by stealth, or even, in some instances, substitu-
tion. We have mentioned the appointment of an abrasive personality into a traditional organisation on a
short-term basis, to bring about Accenture’s disturbance in the system. In this case, the aim is to shake up
the status quo at the same time as retaining other senior managers who are seen as deficient in some skills
areas but of great value in others.
After a major acquisition in the US, one European financial group transferred a senior executive from the
US to the UK, ostensibly working on projects and reporting into the CEO, but with a manifest brief to
report to group headquarters on the progress of a group-wide efficiency and cost-cutting programme in
the UK unit. It had the unsettling effect of making people around him feel they had to work demonstrably
harder and faster, to adopt a style characterised by haste, abruptness, an aggressive impatience towards
perceived time-wasters or people engaged in activities which did not overtly contribute to the bottom line.
In this sense, the corporate culture underwent transformation in a short space of time, but the impact was
only temporary: when the ‘yoke’ was removed, the culture reverted to its previous mode. Senior execu-
tives will often ‘pollinate’ their organisation with their own people. They may be moved in surreptitiously
to watch or report on managers suspected of underperformance or a lack of commitment before moving
them into their position. In some organisations, the sudden appointment of a change manager or project
manager into an environment, which has long been left to its own devices, is viewed with suspicion – of-
ten rightly so and an indication that all is not well. Just how well the change or project manager operates
is crucial for maintaining trust and stability in the day-to-day running of the business.
Cultural change
Cultural change becomes necessary when the industry is highly competitive, there is turbulent change in
the environment, a company is growing rapidly, or performance has been in a state of sustained decline.
In such circumstances, new role models will be needed and new management styles will start to emerge.
As the following case study on Friends Provident describes, it is important that any changes are seen as
opportunities and staff are encouraged to adopt new behaviour patterns and new systems to fit their own
While change management is highly disciplined and rational with careful planning and resource alloca-
tion, the ‘soft side’ – the attitudes and behaviours of the people in the organisation – must equally be taken
into account, the forces of inertia and resistance tackled, and motivation and involvement actively encour-
aged through communication. Research quoted in Outsource (News Digest, Outsource, Spring 2005 edi-
tion) indicates that UK companies are less adept than their European counterparts in managing the ‘softer’
side of communications. Having adopted strategic and financial management practices from the US, the
UK could learn from Europe and become more open and empathic with employees’.
Friends Provident Life & Pensions – from battery hens to free-range chickens
Jane Stevens, director of customer services
Bringing about cultural change is one of the most difficult challenges companies face. At Friends Provi-
dent a transformation took place over the period 2001 to 2003 that surpassed all original expectations. Its
impact continues to be felt today.
Pre-transformation, we had a low ranking for the service we provided to IFAs in our key industry surveys.
The perception of our service was going down at a time when the industry was demanding better service
as a key differentiator in the market. We created a full-time project team, made up of senior managers
across the business, choosing people who had a track record of being influential and making change hap-
pen. As well as gathering facts about our service internally, the team commissioned an external empathy
audit of our service. The audit provided us with feedback on what it was like to experience the service
from the viewpoint of our IFAs and consumers. On the positive side, the results showed, we were pleas-
ant, polite, sincere and honest. It was great to hear that our customers could actually feel these wonderful
attributes. However, our approach was formal and came across as bland and detached from customers.
We didn’t appear interested in them. In fact, they came across as more like an interruption. What the audit
made abundantly clear was that the problem was cultural. It was a giant wake-up call.
Traditionally, the project team would have decided what needed to be done and come up with a plan. But
we realised that a key reason why most change programmes fail is because you don’t capture the hearts
and minds of people and really get them involved. So we held three one-day workshops, each just three
weeks apart in venues around the UK. One hundred volunteers represented their colleagues from all over
the company. We made the workshops a balance of fun, creativity and being serious by having the venue
laid out to resemble a fairground.
The first day started with Ben Gunn, managing director, saying: ‘Here’s the problem. Our future may
depend upon it. We really need to get this sorted out because service is that important to our customers.
You need to tell us what’s wrong. Please help.’ We also shared with them our preliminary research and the
Empathy Audit.
The amount of commitment and passion shown by the workshop delegates was beyond our wildest imag-
inings. It was a surprise to some that our people cared as much about our service as senior management.
We got their input on the problem and the vision of where to go. There were 80 initial solutions and we
literally had them vote on the priorities, plans and projects. A key realisation was the need to discard the
notion that success meant we only had to be good at performing transactions. We now realised that great
service was as much about the ‘how’ as the ‘what.’ We created a simple but powerful way to communicate
this model of service to our people that still remains at the heart of our service strategy.
Part of the model uses a metaphor. We essentially said: ‘In all your interactions, what would you do and
how would you do it if that person were a good friend?’ Note – a metaphor. We are not literally encourag-
ing our people to become friends with their customers. Who would want that from a financial organisa-
tion? Of course, we chose that metaphor because of the link to our company name. Our people settled on
a number of projects that were brought together as one change programme. One key project was to intro-
duce all of our people to our new service strategy. Up to this point, it was all theory. One manager, Dave
Bowen, was on the project team, and immediately volunteered to put the theory into practice. ‘It was scary
for me as manager because I had to admit to myself that I’d got it wrong until then. Having worked in call
centres for so long, I thought I knew how to run them really well. The empathy audit had opened my eyes
to just how bland and lacking in personality the service was. So I chose one team, introduced them to the
Empathy Audit results and then the “friends” metaphor.’ He told the team to consider any customer ring-
ing the call centre as a personal friend.
It was clear from the workshops that the root cause of the problems was measuring staff by ‘calls handled’
data and auditing them against ‘scripts.’ So, I removed all existing measures and told them I wanted their
input into how best to treat our customers. The team, however, loved the idea and embraced it in seconds.
There was an immediate, massive improvement and we kept reinforcing the idea that it was acceptable
to forget the existing rules. Staff felt a surge of motivation – as one agent remarked, ‘I feel free to be me,
instead of a battery hen.’
They received a ringing endorsement from both IFAs and the public. One IFA said: ‘I tell you what, all
jokes aside, I swear our partnership would do more business with Friends Provident if there were more
like you,’ and one customer proffered the following unusual praise: ‘Jacqui, they should have you stuffed
and put in reception as an example of how everyone should be.’
Previously, the company had averaged four compliments a month. Now they flooded in. Even more sur-
• Call length remained the same
• The abandoned rate reduced from 7% to < 1%
• We moved from 20% of calls answered in 20 seconds to 90%+
• There was a massive increase in sales leads and customers retained
In terms of overall results, the company:
• Moved into the top five in a key industry service survey
• Was a winner in its first competition entry, the National Customer Service Awards
• The volume of calls was managed with 5% fewer people. And this has all happened during
a time of great market uncertainty and challenge. This is because of far greater efficiencies
being achieved. For example, there are far fewer callbacks now that everyone (in both the call
centre and the back office) is making the extra effort to get it right first time
• Call centre turnover dropped from 44% pa (on the high side but not that untypical in a call
centre) to just 9% within a year of implementing this change
Another example of major mindset change, which we found at one insurer, is where top management cha-
lenged the ‘factory’ that had grown up around the writing of job description forms. ‘Everyone was chasing
grades and not focusing on the customer.’ A flatter organisation was seen as more desirable, but moving
towards this goal caused much internal conflict, not least on the part of a Board director who tried to block
the planned changes. As the change manager in one company remarked, there were senior executives who
engaged ‘excessively in irrelevant backwaters of debate’ when confronted with a new reality they disliked.
In one instance, the HR director had to take firm confrontational action to keep the momentum going. He
concluded that changing minds was not always about communication but ‘having to deal with the potential
realities of making change happen in an organisation.’ This chimes with the comment made by another
change manager who described how he sometimes had to ‘drive a coach and horses through resistance.’
Seven Rules Of Practical Change Management – by David Sexton,
EDS Global Financial Services Industry
Achieving agility
Insurers are facing numerous business pressures to succeed – increased competition, regulatory change,
increased customer sophistication, to name but a few. These pressures are forcing insurers to focus on their
operational efficiencies and underlying structure or business architecture - and as a result many are invest-
ing in significant business change programmes.
Insurers who nibble away at change without addressing the fundamental business architecture are continu-
ing to struggle with the increased pace of requirements and avoid dealing with the ‘hairball.’ The ‘hairball’
refers to the complex, unstructured, operational and technical environment that has grown organically and
through merger and acquisition over decades of tactical change initiatives. The technical aspects of the
‘hairball’ particularly cause business inefficiencies and inflated operational costs that ultimately stifle busi-
ness innovation and competitiveness.
Change from ‘Hairball’ to ‘Agile’ Environment
The companies that have embraced wholesale business change to address their legacy operations are
reaping the benefits. Increased success drives higher sales volumes, further economies of scale, improved
margins, greater ability to invest in improved service, more competitive terms and higher market share.
S en d s
R es p o n se
Se n d s
Re sp o n s e
Business Process Outsourcing
Agile Applications
Agile Infrastructure
Global Secure Network
Fragmented, hard-wired IT systems and business
processes have no flexibility to deal with customer
and supplier variation.
Rigid, fragmented enterprises will be
punished over the next decade
Well-behaved, event-enabled digital nervous systems
have leverage, speed, and flexibility to map business
processes to customer and supplier variation.
Agile enterprises will be rewarded
More frequently, the most difficult step in transformational change is often this first one –recognizing the
need for real investment in ‘strategic change.’ EDS has developed a framework and process for address-
ing inefficient operational infrastructures and moving our clients to an ‘Agile’ enterprise that is efficient
and quick to respond to changing market needs. This ‘Agile’ framework has been implemented with
success at a number of our clients worldwide and it is from this experience we created the Seven Rules of
Practical Change Management.
Rule 1: Clearly define the future mode of operation (FMO) and the
corresponding benefits
Defining the future ‘agile’ insurance enterprise requires a clear understanding of market issues, market
performance and business drivers. Moreover, companies need to realistically evaluate their existing
business strategy, operational functions and technology strategy.
Defining your intended goal is imperative, even if you cannot get there in one step. Technology continues
to be a key enabler for operational efficiency, customer service and ultimately revenue generation, but
this is only one dimension. The future mode of operation (FMO) needs to be defined in terms of business
processes, applications, technology, organisation and governance (BATOG). Depending on the scale and
appetite for change, these may not all be totally applicable but they need to be explicitly discounted, not
The future state goals may not be achieved in a single change programme but provide a ‘blueprint’ or
‘yardstick,’ a set of guiding principles against which to assess all future business change. If the future
architecture underpins the business strategy, then change that moves an organisation towards the future
architecture should deliver benefits.
Once the target has been defined and agreed upon, it needs to be broadly communicated – not just to ex-
ecutives and to senior management. All those involved in the programme need to know the big picture and
the rationale behind all their future hard work. This will ensure morale is maintained and all are pulling in
the same direction, remaining focused on delivering business capabilities and benefits. Good communica-
tion and leadership is imperative.
Agile Infrastructure Business
& Funding
Rule 2: Focus delivery on releasing business value
The programme should be planned and structured to deliver value to the business. The individual projects
or releases should be designed and scoped to deliver business capability with directly associated ben-
efits. Multi-disciplined teams considering all dimensions of the BATOG should be combined into defined
releases of business capability. This approach ensures that when a project is delivered it is complete: for
example, simply releasing software rather than introducing a new system complete with people who are
trained to use it, under an improved team structure (with more efficient and effective staff), operating more
effective processes. This not only maintains the focus on delivering benefits, but also eases the transition to
live operation.
As you can see in the business change life cycle diagram, EDS’ approach devotes an entire workstream to
managing value delivery, with most of the hard work performed at the planning stage.
Business Change Life Cycle
Rule 3: The programme management function must be exemplary
Strong programme management is imperative for the overall success of the project and ability to deliver
benefits to the business. It should not be confused with successful delivery, which is purely the preserve
of the project or release managers. The experience and structure of the programme management team is
just one important aspect. It is also crucial to have a proven business change methodology or framework
comprising a rigorous set of processes, disciplines and mechanisms for managing large-scale change. This
change affects business processes, technology transformation and implementation, and people manage-
ment. This framework should include all the core change disciplines such as financial control, risk, scope
change, issue management, resourcing and career management to name but a few.
Rule : Strictly control scope creep
Scope creep is one of the biggest thieves of the benefits case. Managing and accommodating change
throughout the programme lifecycle is a significant task and a programme management function in it-
self. A balance needs to be struck between meeting all business requirements as they expand or change
throughout the programme and the programme’s capacity for change – managing against budget, and
setting milestones and external expectations.
Discover Define &
Initiate Design Develop Implement Operations
& Support
1. Value Management
2. Business Architecture
3. Technology Architecture
4. Management of Change
5. Programme Management & Governance
Fundamentally, the benefits need to be kept in mind. Elaborate processes have been devised, supported by
some useful technical tools to manage this very complex area – but it is not a task to be undertaken by an
inexperienced team.
Rule : Establish a strong business change architecture function
The FMO must be explicit and provide a blueprint for the target organisation providing definitions for all
areas of the BATOG. As discussed in Rule 2, the FMO acts as the rudder for the business, ensuring that
the business strategy, IS/IT strategy and operational design are aligned. This is not just an exercise for
specific programmes – it should be a ‘business as usual’ activity – using this yardstick to measure change
for all business initiatives whatever the size. Regardless, the FMO needs to be owned, managed and
enforced. Hence, it is a function that requires ‘teeth.’ If not, fragmented tactical changes that conflict with
the strategy and FMO can be pushed through by forceful business managers. This can, in turn, store up
future problems and often compound the very ‘hairball’ that the change programme is designed to unravel
and simplify.
Ideally, this function should be permanent and control all business change. It should maintain the integrity
of the business strategy and FMO as well as having the backing of senior executives to allow it to steer the
business and to approve or challenge change initiatives and requirements.
Rule : Programme teams need HR support, too
Operational staff seconded into change programmes all too often lose touch with their line management.
Personnel management gets lost in tight programme timescales and the struggle to achieve milestones and
deliverables. This can be detrimental to morale and to the effectiveness of the change programme.
Conversely, the experience and skills gained by staff on substantial business change initiatives should also
be an asset and opportunity. The chance to be involved in new technology and processes and the exposure
to a successful business strategy can be advantageous for staff development in many ways. The HR solu-
tions are often simple and not particularly time consuming – they just require discipline in what can be a
hectic programme of work. Two areas that often get overlooked are:
A clear commitment and support from line management in terms of the benefits of personal
development, acquisition of new skills and a deeper understanding of the business.
Continuing active career management. This should be a relatively simple task covered by defining the
duration of a temporary secondment to a change programme (and sticking to it) and by establishing the
continuing career management checkpoints and combined evaluations with both line management and
programme management.
Rule : Partnering – it’s not a sign of weakness
We continue to see insurers evaluating their core and non-core business particularly when considering
outsourcing. In much the same way, insurers need to evaluate their core skills, too. Insurers are highly
skilled in delivering insurance products to customers through operational processes, however relatively
few would necessarily count managing large-scale business change amongst their core competencies.
This is quite natural: why would you expect experienced actuaries, claims handlers or contact centre staff
to have these skills? And why would an insurer seek these skills for temporary change programmes?
The marketplace is littered with failed ‘in-house’ change programmes. Not only do the programmes fail
to deliver the benefits but ‘business as usual’ service is often adversely affected in the attempt to staff the
programmes. Help is at hand; there are companies in the market with business change management as a
core competency. These are predominantly consultancies and outsourcers, the latter group undertaking
large-scale transformation when they inherit a new operation.
Getting experts to assist with change has three key benefits. First, they have staff with specific skills
and access to the latest tools and disciplines, coupled with experience and best practice ideas from other
industries and companies. Second, it prevents significant drain on operational staff and prevents the need
for lengthy and costly recruiting exercises and temporary staffing. Finally, through innovative commercial
arrangements, it can considerably reduce the risk of the business change, transferring large elements of the
delivery risk and realisation of benefits to the third party, allowing the insurer to maintain its focus on its
business and serving its customers.
In summary
Unsurprisingly, skills and experience are key success factors to successfully managing change and imple-
menting the seven rules. Before embarking on significant change programmes, organisations need to be
brutally honest about their own capabilities. Like buying old cars, skimping on the initial investment, and
third-party advice, and professional assistance can potentially be counter productive; not only do you risk
failures halting progress from a to b, but the emergency costs incurred to put you ‘back on the road’ can
escalate out of all proportion. More worrying still is the danger that you will put your entire investment
completely off track.
Inside Organisations – The Mechanics Of Change
Who is responsible for change in the organisation?
Figure 2 shows the consolidated replies to the question, ‘Which of the following apply to your organisa-
tion?’ Individually, there were interesting discrepancies between UK and non-UK responses. Of the UK
respondents, 100% stated that change management was an ongoing, integrated part of their operation, 67%
had permanent teams dedicated to change, and 83% reported that change was managed centrally and with-
out any external professional assistance. In the case of non-UK respondents, 60% said that change was an
ongoing feature of their operation, 100% that it was managed centrally, but none of them had dedicated
teams working on change programmes.
Figure 2 Approaches to change management
There was a considerable difference in the response to the statement: ‘We respond to change when it
becomes necessary.’ Only one UK respondent agreed with this, compared to 60% of non-UK respondents.
A further question, however, asking companies to describe their attitude to change revealed the majority,
in all regions, felt that change was a mixture of the reactive and the anticipatory. Interestingly, 17% of UK
respondents stated that employees were responsible for their own change, but none at all reported this was
the case outside the UK
In the UK, 67% of respondents stated that change management was part of project management, and 40%
of non-UK respondents stated this was the case. In only one instance was the IT department responsible
for delivering change.
We delved into all these areas in the course of the individual interviews. In particular, we wanted to iden-
tify distinctions companies made among programme management, project management, IT and change
management, and where the change capability was located within the organisational structure. We also
looked at some of the methodologies used by the teams. In all cases, we found as many differences as
similarities with little consensus in how financial services companies tackle their change management
A central tenet across all organisations is that change is indeed a constant and that it must indeed be man-
aged. Beyond the champion or sponsor, there must be a single individual – or several – with responsibil-
ity for planning all the diverse activities, obtaining approvals, assembling resources and carrying out the
work. They must, furthermore, be appointed with sufficient authority to enact the changes they are man-
dated to control.
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
We always use external consultants
Employees take responsibility for managing their own change
The IT department implements change
Change is managed at local level
We have permanent teams dedicated to CM
We respond to change when it becomes necessary
Change management is part of project management
We manage change ourselves
We use external expertise as appropriate
Change is an ongoing part of our business
Change is managed centrally
Programme management is generally seen as a structured framework for defining and implementing
organisational change. Within the umbrella of a programme, several projects relating to, for example,
products, working practices and service capabilities may be taking place, all of them integral to the final
delivery/outcome. Programmes may be seen as the practical embodiment of the organisation’s overall
strategy, but they must also contain the ability to respond to changes of strategy along the way and accom-
modate new initiatives.
Programme and project management (PPM) is a professional skill derived originally from the heavy con-
struction industry and the military but subsequently adopted by financial services companies. The original
proponents were often professionals from an engineering background.
In the early days of change management, new recruits handling change in the financial sector often came
from an armed forces background or from electrical engineering in the belief that programme and project
management was a genuinely transferable discipline.
Building a successful culture of business change management in a green-field
Swiss Life UK (SLUK) presents an interesting case study of an organisation that successfully developed
a responsive change capability. Despite the success of the programme, however, the group executive
decided to withdraw wholesale from the ‘non-core, capital-intensive, niche risk protection market.’ (Swiss
Life press release, December 2004). As a result, its closed book of business was sold to Resolution Life in
Adam Heslop was initially appointed as corporate project manager in 1999 and later made head of busi-
ness change for SLUK. His background included a degree in computing and cybernetics, followed by
project management experience in the armed forces, chemicals and airline industries. Nevertheless, such
a heavy industrial background was no impediment to promoting a refreshingly informal and relaxed ap-
proach to project management. The historic link with IT (which had previously handled projects up to
that point) was severed. He took the view that ‘it was wrong for a supplier to the business units to take
this role,’ and that it was vital for the business operational managers to learn to understand and manage
change. This move was seen as positive by the IT department, which ‘welcomed the prospect, and subse-
quently the reality, of a business customer educated in change and able to take a lead in its management
rather than relying on IT.’
Adam’s challenge was ‘to succeed with a light touch approach that did not wrap the business units in red
tape’ and to grow a proper project culture at SLUK. Dispensing with the existing project office – with its
laboriously detailed reporting of progress in multiple processes – he worked to replace it with a workforce
expert in PPM and in line with the company’s core belief in the empowerment of employees. His chief
objective was to prove that a project-oriented culture could be created and projects brought in on time and
to budget without burdening people with excessive reporting duties.
Three years after his arrival, project management had become a widely accepted discipline at SLUK and
one of the ‘most requested areas for personal development.’ He felt he had empowered ‘managers and
staff by embedding the discipline into the culture of the company without creating a project empire,’ and
focusing on providing a framework ‘supported by tools and techniques, rather than imposing an overstrin-
gent process.’ During this time, open workshops on project management were provided to all levels of
staff including training on acting as a sponsor to senior staff. The team was located as far as possible from
the IT department. Much of the success could be attributed to the relatively small size of SLUK (just 700
More than 100 staff attended one or more training courses with content on project sponsorship, writing
business cases, and the basics of project management. They followed a training path aligned with the
Association for Project Management’s (APM) continuing professional development scheme and linked to
the exam for practitioner assessment. According to Adam, the key people in the equation are operational
managers, but typically they do not have the time or skills to manage the implementation process, nor
are they generally remunerated for doing so. He tried to foster a culture of change to support this layer of
people, and made sure the organisation recognised and rewarded them. A permanent change team existed,
in parallel, which offered a wide range of consultancy services such as project health checks and launches.
Ultimately, he felt he had created a ‘community of practice using an holistic end to end ‘light touch’ pro-
cess. This influenced our strategy development, project portfolio and programme management and which
in turn ensured business benefits were demonstrably gained.’
He defines programme management as a collection of inter-connected projects. When a number of proj-
ects run in parallel, this is portfolio management. Programme managers are required to map the business
benefits, track these and to conduct regular satisfaction audits. Change management sits at the top of the
pyramid. Ten years ago, a typical project manager would have focused primarily on process and details
but today, the successful project manager requires wide-ranging skills including:
• Networking skills
• Persistency – the ability to constantly pull the project work back to the bottom line,
‘clarifying the success criteria’
• Flexibility – the ability to move outwards from training in project sponsorship to
project management and then portfolio strategy alignment
• The ability to build and maintain momentum
• Ability to identify the cost of change – most companies have little idea how much they spend
on change
A key success factor is allowing enough time for the change capability to bed in. Adam left one major
retail banking group because although a massive change management capability had been developed, he
felt it had become too process-driven. ‘Over-rigorous processes can support inexperienced change manag-
ers and can act as a safety net for everyone, but when applied as a ‘sheep-dip’ the pace of change drops
significantly and opportunities for achieving the benefits change brings can be (expensively) lost. While
flexibility, a degree of speed and pragmatism are the order of the day, the more slowly you change, the
quicker you gain your benefits.’
Everyone interviewed for the research mentioned the importance of a senior executive – preferably the
CEO – as the primary sponsor for major change programmes. At the same time, many of them commented
on the importance of a change programme manager being able to challenge the parameters of any task
he/she has set. Adam Heslop particularly emphasised the right of any programme worker to say ‘no’ and
to challenge the rationale for a project.
This is by no means always the case: the group product manager at the telephony company we interviewed
feels that she does not really have a mandate to challenge imposed deadlines but sees one aspect of her
role as ‘educating top management to be more realistic about deadlines.’ Although she cannot question
deadlines, the area of programme development and project management has been successful in moving
from an implementation unit to getting involved at the earliest stages of the high-level business case when
deadlines are discussed.
Nor does the necessity of having a senior sponsor for change translate into the existence of a board execu-
tive with responsibility for change: in the UK, just 33% of survey responses noted that a board member
had direct responsibility for change. Only one non-UK respondent noted that a board member was respon-
sible for change.
Multi-faceted delivery in a complex matrix structure – international banking group
The structure of change management at a global banking group is a complex affair. Change is managed as
a separate unit change management division (CMD), which forms part of the customer services division
(CSD). The general manager of the CSD division reports directly into the group CEO. Change manage-
ment is a highly professional unit consisting of senior managers responsible for global transformation (in-
cluding outsourcing), business process engineering, business infrastructure, training and communications.
IT comes under the wing of the chief operating officer’s (COO) division, also at general manager level,
reporting into the group CEO, and acts as a support function to group-wide projects. Change management
services, another part of the CSD, is responsible for all staff training associated with major change.
The prevailing practice is for staff in separate operational areas to carry out smaller-scale projects on their
own, but where projects affect multiple parts of the organisation, CMD will manage the necessary infra-
structure to deliver the objectives.
Accordingly, a wide range of training and methodologies are on offer to operational staff. There does not
appear to be a formal strategy of training all operational managers – instead it is at the discretion of the
line manager to recommend an individual for the relevant training. The comment was made that standards
for success vary outside the CMD area. On offer is internal training consisting of a one-day overview
of the project management software, a three-day planning and control course, a five-day, more in-depth,
introductory course and an intensive eight-day course. ‘It is fair to say that the degree of professional-
ism can vary.’ Within the CMD there are a number of methodologies used, including Method 1 originally
developed by Arthur Andersen, systems development lifecycle (SDLC) and Six Sigma. Operational unit
employees with project management skills are moving towards a US ‘black belt’ accreditation. The bank
offers, additionally, a two-year diploma in project management in association with the Institute of Finan-
cial Services.
The areas of customer propositions and marketing have historically been less adept and skilful at project
management, and suffer from a lack of adequate focus on a feedback mechanism for smaller projects.
However, a new marketing chief from an FMCG background has brought in a more ‘joined-up’ approach
with regular and challenging reporting during feedback sessions. This is generally creating a climate more
suitable for dealing with rapid and constant change.
The organisational structure in which the change management teams operate contains a multitude of steer-
ing groups, which programme managers must attend at any one time. Resources are scarce and fought
for bitterly as a result of substantial headcount reductions in the past 15 months. IT is a jealously guarded
There are legions of stakeholders and, according to our interviewees, irreconcilable conflicts; for example,
between the drive to cut costs, while simultaneously ramping up sales. The senior manager for change we
spoke to had started his career in IT, ending up in business process engineering. Thinking back over his
19 years with the bank, he concludes that with the exception of the public sector, and specifically, the UK
National Health Service (NHS), the bank was one of the most complex environments for change manage-
ment he could envisage.
The two managers we interviewed did not see change management as a new discipline but one that had
always been there and is simply the term for a broader programme incorporating a number of ‘pan-organi-
sational touch-points.’
At one medium-sized insurance mutual, the existing change management process dates back 10 years, to
the time of a McKinsey review into the organisation’s feasibility and has only recently been called change
management. There is a small, dedicated team of six, but as with Swiss Life UK, and many other or-
ganisations we spoke to, training in project management is offered to business unit employees on a needs
basis. Ultimately change management skills are filtered out to a broad level of users but competencies will
vary considerably. The specialist change team feels that it would be inappropriate to offer project manage-
ment training to all members of staff. Even with those who are trained, they believe it is hard to identify
the ones with the right combination of skills – which they define as tenacity and facilitation.
Experienced project managers are paired up with the less skilled. All change management activity is car-
ried out internally, in ‘bite-sized chunks’ and outputs are all carefully monitored. Employee advocates are
identified and used to disseminate messages associated with changes. The dedicated team essentially acts
as a gatekeeper to four categories of change management in the organisation consisting of: strategic proj-
ects – such as the introduction of a customer proposition; mandatory projects such as an electronic report-
ing; business critical projects; and operational projects.
A project plan is prepared at the start of each year and there is a strong focus on evaluation. Dealing
with regulatory changes and the introduction of flexible benefits are the immediate challenges. The team
believes that much of the literature of methodologies is still too skewed towards heavy-construction
industries and it is currently evaluating how other life companies decide on the key issues including: the
optimum number of projects and programmes at any one time; best practice in the formation of steering
committees; and how change management links into the corporate strategy.
At one European insurer, all change is managed internally and centrally. The project office of five to seven
members reports into the COO. All members have a project management background and their role is
cross-functional. They work with all departments on a project and collaborate closely with marketing and
HR, which are responsible for communicating the change. Change at the company is generally triggered
by new technology and market changes. Another major factor is cost rationalization and changes at man-
agement level. The company adapts different models or methodologies according the nature of the change
although it has certain core procedures for implementation.
At a mobile telephony company with 6,000 staff in the UK, change consists of a team of five, reporting
into the HR director. Project management is a separate entity, reporting into the director of Programmes,
development and project management, who is not on the board . The group project manager interviewed
is in a permanent team engaging in ‘micro-management’ and consisting of a process development team
of eight to 10 members, a corporate performance office with seven to 10 members which mainly acts in a
reporting function, and 35 people responsible for project management. All projects are agreed at a gov-
ernance level so project managers have a mandate without line authority. In practice, this mandate ‘ebbs
and flows in terms of its strength.’ The project management team is totally cross-functional, often handling
work with marketers on launching new products or re-branding.
At Lloyds TSB, the function originated in 1992 with the creation of a project investment and manage-
ment function consisting of just four people. It subsequently grew to 40 in 1994, rising to 300 professional
change managers by 2003. Group Project Services, as it is now called, offers shared change management
services across most of the Lloyds TSB group, along three dimensions: ‘delivery’ teams providing experi-
enced project and programme managers; management of the investment of change on behalf of the group’s
executive; the definition and development of the policy and standards for change. Operational employees
are actively encouraged to acquire APMP professional accreditation. (Source of data: Atkinson, Alan,
‘Culture Shock,’ Project magazine, April 2003.)
According to the responses to the survey, methodologies which are typically used within companies for
managing change included PRINCE (Projects in Controlled Environments), risk-based project manage-
ment, RUP (Rational Unified Process), SDLC (System Development Life Cycle), and an EFQM (Euro-
pean Foundation for Quality Management) Business Excellence Model which was described as a ‘useful
catalyst for driving change.’
Success is measured against the original objectives through the use of internal surveys, by assessing the
impact on revenue cost, service levels, employee and client satisfaction, efficiency increases, sales, com-
pliance with regulations, press coverage, and profitability.
Respondents stated 55% of companies measured the success of change programmes over a one-to-two
year period, and 30% over a period of months (less than one year). Some 15% stated, however, that the
timescales would be related to specific projects and there was no actual rule of thumb for all projects. No
respondents recorded specifically that they measured programme periods greater than two years.
Answers to the question ‘How many change programmes are currently in progress in your company?’
ranged from none to six. One clearly tongue-in-cheek reply stated that there were thousands, but when we
considered the 400 business transformation professionals at Prudential UK, this seemed quite feasible!
Half of the replies stated that change programmes were categorised according to their size and potential
impact and some then prioritised against agreed criteria.
‘Softer’ Change Issues – Dealing Successfully With Employees
Phase one – unfreezing
To change minds as well as behaviour successfully, employees need to see the purpose of any change and
agree with it, be supported by rewards and recognition, have the skills to perform the new activities, and
see key people modelling the new behaviour. Crucially, at outset, they must ‘unfreeze’ by starting to ques-
tion the status quo and should be encouraged to consider the following questions:
• Why do we need change?
• What is the present state of the organisation?
• What will the future be like?
• What is/is not going to change?
• How is the organisation vulnerable in making this work?
• What are the key success factors?
Managers responsible for leading change must effectively ‘abandon yesterday’ (Drucker, Peter, ‘Change
Leaders’, Inc magazine, June 1999) and free up resources that ‘are committed to maintaining things that
no longer contribute to performance … Maintaining yesterday is always difficult and extremely time-con-
suming (and often) commits the ablest people to non-results.’
Abandoning the past, however, and trying to innovate, is fraught with difficulties. An organisation may
have a risk-averse culture that has traditionally ‘punished’ failure. Employees in key positions may be in-
capable of tolerating ambiguity and may well not have been required to in many of the functional roles in
financial services. Judging ideas rather than generating them may be the dominant culture, peer reviewing
rather than producing. Organisations can be prevented from ‘unfreezing’ because people become ‘highly
skilled at maintaining patterns of ineffectiveness, or ‘skilled incompetence.’ (Argyris, C.; ‘Overcoming
Organisational Defences,’ Needham Hts, MA: Allen & Bacon, 1990.) A real marker of ineffectiveness is
making the change itself un-discussable amongst employees, denying them the choice of commitment by
distancing the change process and emphasising winning and losing behaviours. A ‘gung-ho,’ or action-
based, culture in many organisations makes executives unwilling to incubate problems rather than let them
emerge gradually is another factor militating against effective ‘unfreezing.’
Every organisation, furthermore, has its points of pride, traditions and taboos. A company of supposed
‘knowledge workers,’ the majority with doctorates, was warned by a Canadian life CEO that the ‘collec-
tive IQ of an organisation reduces in inverse proportion to the level of individual IQ of its workforce.’
Conversely, an organisation may take pride in a culture, which elevates the idea that of ‘pulling yourself
up by your bootstraps’ and there may be a distrust of qualifications such as MBAs. One Limra colleague,
who, as training manager at an insurer, mentored two senior staff studying for an MBA, was told that the
company actively discouraged this qualification because it led to higher turnover of staff as well as unreal-
istic expectations of promotion that the company could not fulfil.
Embedding ‘organised abandonment’ into the company infrastructure and culture cannot be achieved
unless employees are offered the tools to develop and maintain a permanently open cast of mind. But
whereas this may be possible in a creative or freelance environment, it is harder in companies with large
numbers of staff engaged on process-related tasks, which often do not require empowerment.
One company change manager remarked that ‘empowering everyone was impractical and any company
seeking to do so needs a dose of reality. It’s impossible to meet everyone’s unleashed aspirations.’
Another commented that in the insurance business, offering everyone training in being empathic, problem-
solving and pro-activity could actively make some people very uncomfortable. In another company, the
attitude was more laissez-faire towards unfreezing and guiding staff through change with the CEO taking
the view that ‘if you work with bright people, as I do, they will find their own way and make all the imagi-
native and mental leaps forward.’
In practical terms, the desire to galvanise employees to adopt a more responsive, more commercial cast
of mind is often realised through draconian job in the hope that making a mean and lean company will
change the mindsets of existing staff. This can be an extremely blunt tool – putting every aspect of an or-
ganisation on trial for its life and constantly challenging performance and results. This is all very well, but
falling into the trap of considering staff as either ‘bean counters’ or ‘bean producers’ can be too simplistic
and result in an ‘anorexic’ firm rather than one that is lean.
Activities during the unfreezing stage are likely to include:
• A programme of communication to ensure all those concerned are kept fully informed
• Involvement of staff in planning and preparation
• Training and support for staff who will be affected by the change
• Publicity campaigns to reinforce key messages about the change
• Identifying and addressing resistance to the change
Every company we talked to was engaged in some, if not all, of these activities at a time of change, but the
fact remains that staff are managed inappropriately. Two principal reasons are time pressures and the lack
of managers with sufficient skills in change leadership. Even successful organisations can carry the seeds
of their own decline if they do not take steps to codify management capabilities, live off their reputations,
or are prone to restructuring as an alternative to change.
Phase two – transition and acceptance
In phase one old habits are recognised and there is growing awareness, if not acceptance of the need to
jettison these habits. As a result, the process of abandonment begins. Phase two, defined by Bridges and
Mitchell (Bridges, William, and Mitchell, Susan, ‘Leading Transition: A New Model for Change,’ Leader
to Leader, Spring 2000) as ‘shifting into neutral,’ is a time of limbo when people adjust mentally and new
structures and practices are put into place and bedded down. During this time people may feel at a loss,
making this a hard phase to manage. Although business as usual is advocated at these times, in reality,
employees can be devastated, in limbo, unsure who any winners or losers will be in the process. For all the
talk of empowerment and the importance of staff, there is the feeling of abandonment, there is an over-
whelming feeling of abandonment. As one employee at a mortgage/life provider which changed its focus
to being purely a pension specialist, with large numbers of job losses, writes in one of our case studies:
‘We were made to feel an important part of the process. However, I believe that senior man-
agement were treated as more important. Rightly or wrongly, they held all the cards as such
and we relied on management to be kept informed of the ongoing changes and information.
At times, members of ‘the staff’ were made to feel like an inconvenience, which got in the way
of the real business of changing and redirecting the company strategy and focus.’
It may not always be possible to arrange a definitive structure for the change management programme
from day one. Especially as in a period of profound change and restructuring, core employees may decide
to leave.
Phase two is a time when power and decision-making issues are thrashed out and which, despite the best
endeavours of senior management, may well take longer than anticipated. It coincides with the ‘trough of
despair’ and despondency experienced by the majority of employees affected and who remain outside the
key decision-making team(s). It is so deeply uncomfortable that people will do all they can to get out of it
– some by back-pedalling, some by going forward – possibly too rashly and in a misjudged way. Never-
theless, best practice in change concludes that organisations and their staff must spend time in the neutral
zone to achieve successful change.
Behaviour that may in some senses be construed as disloyal should be tolerated and accepted as necessary
for some employees in order to come to terms with an unpleasant situation. It is important to accept that
while it is human nature to resist change, that does not mean that individuals cannot be won round. People
will generally see the disadvantages of any change before the advantages, so some strategies for dealing
with these blockages involve expressing any benefits associated with the changes on a personal level. It’s
equally important to recognise that people have a fear of the unknown and of failure – new tasks and tech-
nology may leave them exposed. Other sources of potential resistance will come from:
• Concern over changes to established practices and traditions, which people see as an intrinsic
part of the corporate culture. The key here will be to reaffirm the past while leaving the
door open to how the future will unfold
• Lack of confidence in the change management team – often fostered by a lack of
involvement in planning and preparation. Lack of involvement will also make them view any
changes as impositions.
• Changes in power relationships – it is too easy to create a situation which polarises
winning and losing mentalities and roles. The perceived losers are more likely to resent
any changes
At one life insurer, the attempt to bring in more flexible benefits, rewards, and grading systems caused
huge conflicts, with the greatest opposition coming from the finance director. The company tackled this by
bringing in external facilitators who gathered together the top 15 managers below board level and 15 staff
representatives. The whole team took over a hotel room for two days to work through the issues. Every-
one was on the same level. In the final two hours, the whole executive board joined, listened to various
presentations, and decided then and there on a solution.
Phase three – moving forward
The third phase is ‘moving forward.’ Some employees cannot move forward. Some fail through lack of
nerve. Some ‘freeze’ at the start of the new beginning. A common source of failure on the part of change
leaders is to underestimate how long a transition takes. We have heard many comments about how the
time it took to implement changes frustrated new CEOs. At a global bank, change programmes were seen
to be most at risk in the ‘middle regions.’ Down in the far reaches of the organisation, the clear mandates
from above became distorted and struggled for dominance against other priorities.
The coping cycle involves denial. People will be reluctant to question their existing practices and will in-
sist on finding value in the status quo, even when they may complain about it at other times. Or it may lead
to organisational paralysis. For the individual, a suddenly announced redundancy can have such an impact,
but if there has been a long lead-up and change is seen as part of the plan, with obvious opportunities for
some, people can behave differently. As the following description of communications and morale during a
major change programme explains, ‘gallows humour’ must be permitted.
The change treadmill – a survivor’s (later made redundant) perspective
‘During my time at ABC life insurance, there were two main changes that occurred. First, there was a
change of focus from being a mortgage/life provider to purely pension specialist. Second, there was a
streamlining and consolidation of departments to provide more efficient working practices. In both in-
stances change was communicated on a company-wide basis – initially directly from the CEO, with
further information made available from heads of departments. Employee meetings were set up as open
forums, arranged by managers and department heads to answer their employees’ concerns on a regular
This worked well from my viewpoint but the success of this process was entirely dependent on the skills
and communication capabilities of each individual manager. In some instances, I knew people who were
not happy at all with how this process worked. Morale was certainly affected. It was made clear from
the start that there would be as much open and honest communication as possible and people were made
aware of the risk of redundancies. The process was well thought out beforehand and was quick from start
to finish in both cases. This way both company efficiency and staff morale were affected as little as pos-
sible. There were no gimmicks or staff rewards, just open communication with the knowledge that HR
would be on hand to support the affected individuals as much or as little as was needed.
There was a definite beginning to the process, but no ‘finish deadline’ was given, as this was bound to
be missed and risked demoralizing staff further. Instead, regular updates were offered. Was the change
handled sensitively? In a way. The company was very careful to thank the efforts of the people in the areas
affected, and to reassure them that the shift in focus was not down to them, but to market conditions, and
that future growth potential lay elsewhere.
Black or gallows humour certainly abounded. Strangely, colleagues got closer over this period on a
personal level, socialising more during and after work to discuss the situation. There was a real feeling of
teamwork and helping one another out, which probably increased the work rate. The downside was that
after people left or moved, this camaraderie was broken down, and needed rebuilding.
Was the change positive? It was certainly a unique experience that I witnessed from both sides, being first
a survivor and then being made redundant! Neither situation was easy, but each had positive and negative
aspects at different stages in the process, but with different consequences. At the end of the process, I defi-
nitely accepted the situation, although to say I embraced it is too strong a word. I did feel, however, that it
was an opportunity to move on to bigger and better things. ’
Some people will start to talk openly and to use the language of the new order. A phase of ‘neutral’ adapta-
tion follows as people try to make the new system work. Finally, the changes are internalised, and new
processes, systems and relationships are bedded down. The ‘shock’ or system disturbance becomes the
new reality – at least until the next time. Even the ‘victims’ may accept their new situation with equanim-
ity and optimism if this stage is handled well, as described in the next case study.
Redundancy the right way – an employee’s perspective
‘As an employee of the XYZ Insurance Group since 1979, I had seen and experienced many changes up to
1999. During my 20 years, I had relocated a couple of times, and had seen many people made redundant
and retire early. This in itself had partially prepared me for the experience of redundancy when it became
my turn. Talking to those affected had enabled me to imagine myself in their situation, the feelings of
rejection, the anger, the process of looking for another job. Constant rumours of take-overs and disastrous
business ventures had also helped to create a feeling of when, rather than if. It would be fair to say that
when it was confirmed that another company was going to purchase the group, it was not a bolt out of the
So in terms of mental preparation for redundancy, I was as prepared as anyone could be. However, this
informal mind-setting was backed up by the knowledge that a very clear and well-known set of rules,
regulations and rights were ready to kick in once the process had begun. First, we were well aware of our
redundancy terms regarding the formula that redundancy payments would be based on. Second, we knew
how long our notice period would be and were informed that if we found a job within our notice period,
the company would do everything it could to let us go as early as possible with no financial loss to our-
selves. Third, we knew our rights regarding finding other jobs within the newly-created group. And finally,
we knew what assistance we would receive in finding other jobs outside of the newly-created company.
My family and I spent a weekend at the company’s expense in Edinburgh, to look at the area to decide if
we might possibly want to relocate. Informal chats with our counterparts in Edinburgh helped us gauge
the atmosphere and form a view on the working conditions we might experience. We were counselled and
assisted by an outplacement company who came to our workplace to help us, source job opportunities,
write CVs, prepare for interviews and generally promote a positive attitude amongst the affected group.
The various types of interviews and tests that might be set during the interview process were discussed
and practised. We were also encouraged to talk to as many people as possible, something which in itself
helped people come to terms with what had happened.
The attitude of my immediate boss was extremely helpful in assisting her staff in adapting to their new
status as a redundancy-in-waiting. She ensured that the company was fully supportive of our next move,
whether that was taking time out from paid work, exploring the opportunities within the new organisa-
tion or finding employment elsewhere. We were encouraged to make full use of the facilities within our
workplace; supporting the outplacement advice we had been given. We were reassured that time off for
interviews was not a problem and everybody worked together to make sure that the duties of the depart-
ment were covered.
I completely understood the reasons why I was being made redundant and being part of a large group gave
me a feeling that we were all in it together. Being treated with sympathy was an important part of the mix,
but I think the key strength of the way that redundancy was approached by those charged with helping me
was the positive attitude engendered. I never once felt that I was coping on my own or that the odds were
not heavily stacked in my favour. I was clear as to my entitlements and where clarity or confirmation was
required, assistance was always at hand.’
The importance of communication
There is a danger that when a company engages too enthusiastically in a communications programme that
a gap between words and deeds may be highlighted. This leads to disappointment, especially if the project
encounters grave difficulties along the way. ‘I rue the day we decided to invest in so much hype. How do
we get them to understand that it’s just not working without totally disillusioning them?’ commented one
chairman in Colin Coulson-Thomas’s book, ‘Transforming the Company.’ (Kogan Page, 2004.)
Effective communications are critical with the objectives of:
• Identifying the internal and external people who need to be kept informed of progress
• Identifying the key messages for the change effort and the impact these will have on
different parts of the organisation
• Ensuring everyone fully understands the objectives and expected benefits of the change
• Planning the mechanisms for receiving, recording and handling feedback
• Disseminating information on any quick wins
• Generating an atmosphere of progress and momentum to help reduce resistance to the change
One interviewee in the Limra study expressed a similar concern with an over-abundance of communi-
cation. There had been a concerted effort by corporate communications to show employees clear links
between their roles and the overall strategy. His personal view, however, was that it was unrealistic to give
everyone in the company full details of the wider picture, but that the inevitably watered down version
could lead to serious misunderstandings, and he reluctantly concluded that ‘a little knowledge was a dan-
gerous thing.’
Communications during an acquisition
This case study is based on a presentation given by the head of corporate communications at a UK life
insurer at a LIMRA Europe discussion forum. The presentation focuses on the period during which the
company was an acquisition target.
While messages must be consistent, they need to be tailored to the different audiences. Plans and inten-
tions need to be explained, but it is important to ensure that intentions are deliverable. Honesty is also
critically important at this time. For instance, if there are going to be redundancies, people need to know.
One of the major challenges in formulating a communications strategy during an acquisition is that there is
often a long period of real uncertainty where confidentiality about who the acquirer would be is a prerequi-
site. The importance of ‘filling the void’ was emphasized and the point made that it is better to say some-
thing about nothing, rather than nothing at all. At the time of the potential acquisition, staff meetings were
held during negotiations to listen to staff concerns and questions. Some of the steps involved in a bidding
process were outlined whilst not divulging any details (as confidentiality agreements preclude these from
being made public). Bulletins were issued to repeat messages given at staff meetings or pass on any new
messages. One employee commented to the communications department, ‘You’re very good at saying a
lot about very little!’
Company policy did not allow confirmation or denial of speculation. Even saying something ‘might’
happen during an acquisition process could be misleading – people could assume that it will. And a lot of
uncertainty can be created if timeframes are indicated, as expectations can be raised and then dashed when
negotiations falter – and in acquisition nothing is final until an agreement is signed.
Much planning and no small amount of stress is centred round ‘announcement day.’ Not least of the
difficulties is that no one knows until negotiations are concluded when the agreement will be signed.
Announcements have to be made to all audiences which can be many and varied; strategy and decisions
have to be formulated on how and who is going to deliver the messages. And it all has to be synchronised
within a tight deadline to happen virtually simultaneously. In addition, at this stage, all audiences require
information so a great deal of material has to be prepared, such as press releases, letters, company histo-
ries, fact sheets and Question and Answer documents. Essentially all individuals in all audiences want to
know how the acquisition will impact them personally.
Due to uncertainty over the timing of announcements concerning the company’s future, large London
venues were provisionally block-booked by the company for a number of months during the summer. This
was to ensure that preparations were in place for proper briefings of the sales-force, as well as staff, at the
appropriate time. In the event the company was not sold; the book of business was retained but the sales-
force was transferred to a leading IFA.
Following the official announcement of changes, it was seen as essential to have mechanisms in place for
dealing with the barrage of questions from all audiences, including employees and customers. After the
decision was made to transfer the sales force, calls from customers to the insurer’s customer service divi-
sion rose from 1,500 to 5,000 a day. Customers needed to be reassured that their investments were safe.
In this situation, companies need to decide if they wish to be pro-active, for instance, by immediately
mailing all customers regarding corporate changes, or whether to be reactive by simply responding to
individual enquiries in a timely fashion, as they occur. If this course is chosen, a follow-up mailing to all
customers later should be timed appropriately.
The very human aspects of acquisition were emphasised. Being an acquisition target is a time of sig-
nificant change as it can involve redundancy and loss of jobs for many people within the organisation.
Individuals go through a range of reactions and emotions when faced with major change (be it divorce,
bereavement, redundancy or any other major life change) which can be categorised into periods of:
• Denial – initial shock, anger, betrayal
• Crisis – entering into uncertainty, indecision, depression
• Searching for solutions – ultimate acceptance of the change, looking to the future
And for each major step, a different approach to communication is needed. At the first stage, the individual
needs information to clarify the situation. At the second stage, the person needs support while making
appropriate decisions, and in the final stage, inspiration is needed to establish a new direction. An under-
standing of these human needs, as well as the communications processes, can help to make the communi-
cations strategy, and ultimately the acquisition, a success.
It is also important to recognise the importance of informal communications. Many studies show that
managers spend up to 45% of their time communicating outside the formal authority structure, especially
as regular channels tend to be slow and unreliable. Informal communication is particularly valued when
employees work in a hostile or unsafe environment. It relies on instinct, impressions, and immediate re-
sponses to these, whereas formal communications are often based on inadequate and conflicting informa-
tion. Change managers must grasp the interplay between the two forms of communication.
Phase four – institutionalising the changes
This important stage can too frequently be overlooked. To achieve the ‘institutionalising’ of the changes in
the organisation, activities around the following processes take place: commitment, socialisation, reward-
ing, diffusion, sustained sponsorship and reinforcement. In particular:
• Leaders must continue to lead and to demonstrate that they fully support the change
• The changes should be monitored over time to ensure they are being maintained
• Staff must continue to be supported with relevant training
• The ‘right’ behaviours should be reinforced through rewards and public recognition;
encourage staff to assume ownership of the change and to internalise it as their preferred way of
• Resistant staff should be redeployed or removed and those sympathetic to the new organisation
recruited instead
Changing Lifestyles And Employee Attitudes Toward The
According to the research, employees in the financial sector outside the UK were keener to establish a
better life/work balance than in the UK (80% versus 50%). But none of the regions reported that employ-
ees were more loyal today than five years ago, and almost all reported that employees were more open to
change than in the recent past. A high percentage stated that they were more sceptical about the notion of a
job for life.
During interviews we heard several references to companies recruiting new people to act as role models to
existing employees and to bring in different mindsets. One company remarked that it had ‘brought in new,
bright, people,’ but was ‘at a loss on how to manage and motivate them.’ While the survey responses indi-
cated a broad consensus that older employees were less flexible about change (20-to-40 year-old employ-
ees were seen by 90% of respondents as highly adaptable to change, falling off sharply between the ages
of 40 and 50. While 50+ year olds were seen by all but 20% as the least adaptable cohort), the overall
conclusion was that the approach to change was an attitudinal trait rather than age-related.
In UK replies, 67% stated that changing attitudes in younger people would have an impact on their com-
pany’s structure over the next five years, compared to 40% of non-UK replies. UK companies were evenly
divided on the issue of the impact of a greater number of older workers in the workplace on the structure
of their organisation over the next five years, whereas 80% of non-UK companies felt there would be no
Some of the philosophies underpinning employee motivation include the concept of the ‘rational man’
– that people are primarily motivated by economic incentives, are passive and capable of manipulation
and control by management. Any ‘enlightened’ company would probably seek to treat its employees as
if they were either ‘social’ creatures – where the importance of work lies in the social relationships made
during the working day, but where the intrinsic nature of the work is inherently meaningless. Or they may
subscribe to the view that employees are ‘self-actualisers’ – they find intrinsic value and a sense of mean-
ing and identity in their work. The revisionist view these days concludes that people are far more complex
than these categories would imply, and will have different hierarchies of needs and motivation – well
beyond Maslow’s five-stage hierarchy of human needs motivational model which range over time and the
situation. An individual’s performance may be good in spite of motivation and vice versa. An easier op-
tion, and probably the more pragmatic one, is to divide employees into those who are valuable and those
who are dispensable.
No single managerial strategy therefore will suffice: it’s not the case that earlier models are wrong, but
that each may work with some people some of the time. Herminia Ibarra, Professor of Organisational Be-
haviour at INSEAD, has spent years looking at how people renew and reinvent themselves during a work-
ing life. Her book ‘Working Identity’ (‘Working Identity: Unconventional Strategies for Reinventing your
Career’, Harvard Business Press, 2003) encourages people to experiment with alternatives and that iden-
tity changes through time so that you may want to downsize in one decade but come back into the corpo-
rate fold in another. Dependency and attachment needs change all the time, as does the ability to cope with
change and the rate of change in our personal lives. Organisations, therefore, must take into account how
people renew and reinvent themselves constantly in today’s world, and re-evaluate the traditional balance
between stability and change. They must also meet people’s needs for affiliation and attachment, paradoxi-
cally, at a time when traditional bonds of attachment to the workplace have been progressively broken
down by the recessions of the 1970s, 1980s and 1990s.
We have talked above of the explosion of individualism in lives and life-styles and how this may affect the
way companies must respond to the changing needs and expectations of their employees. This trend may
imply that people are freer and take more risks in their lives, but curiously, this may not be the case. Eric
Miller, the eminent social scientist and expert on organisational change and design, saw ‘independence’
as a life-style choice born out of the desire to avoid risk. If you do not engage in relationships, there are
no ‘unpleasant surprises.’ Paradoxically, individualism also increases the need for connectedness – hence
social relations at work may become more important.
Key Failure Factors
In business, we often create change in response to a different environment or to conceptual
analysis. I find it curious that businesses sometimes respond to these depersonalised prompts
in isolation from the customer. Research suggests that 70% of change programmes fail to
meet their objectives. Either nothing really changes or the change brings unintended conse-
quences – often because staff and customers behave differently than expected.
(Susan Rice,
CEO of Lloyds TSB Scotland, Management Today, March 2005.)
Poor change leadership
Limra Europe’s survey revealed that poor change leadership was far and away the most important con-
tributor to failure in non-UK companies. This was mentioned by 100% of non-UK respondents. UK
companies pointed to the inability to communicate a clear rationale (80%), along with the failure to ensure
employee buy-in at all levels (80%). Accenture estimates that 21% of major change programmes fail, but
other studies suggest that the real figure may be three times this amount.
Some of the reasons given for failure in Accenture’s 2003 study (Cheese, Peter, ‘Change Management
– Disturbing the System’, Outlook, 2004) included misreading the need for change, paying too little atten-
tion to implementation, underestimating the need for leadership, or being by distracted by other concerns.
The study refers to knee-jerk reactions to events or short-term cost-cutting initiatives on the part of man-
agement without due care and attention for programme management skills and obvious accountability.
The study observes that most change programmes, even today, proceed on a ‘command and control’ basis,
offering few opportunities to employees for empowerment or engagement beyond a core team. Yet the
empowerment of employees is seen as the sine qua non of achieving ‘transformational change’ – defined
as the entire realignment of ‘strategy and capabilities with new realities’ and can only be achieved if there
is effective leadership at all levels – or the variety of change champions/agents mentioned elsewhere in the
We have seen the example of a mobile telephony organisation where there is a highly professional change
and project management infrastructure but where there has been a historical disconnect between the senior
decision-makers and the implementation teams, as well as an absence of real trust. The latter have sought
to address this by striving to ‘educate’ management to set more realistic and circumspect targets. But there
is a strong feeling that carelessness and impracticality on the part of top management – and a preference
to take a Big Bang approach in all cases – means that ‘major issues will certainly be involved, but rarely
resolved by the process,’ with much of the work of the change teams described as ‘sticking plaster.’
The head of change at one company we visited made reference to the difficulties encountered by a new
CEO who was used to a more directive approach but was being compelled – one gathered unwillingly – to
go through the more time-consuming, participative approach. It seemed, paradoxically, as if the company
wanted staff to be more involved and empowered, but resented the time needed for this to occur.
Figure 3
Inability to communicate a clear rationale for change
In one company, the key issue was the gap in understanding the strategy between the executive and the
rest of the workforce. ‘The biggest issue,’ we were told by the head of change, ‘is how the senior manag-
ers communicate to the rest of the business. Traditionally, senior managers tend to be specialists, not man-
agers. It’s a struggle to recruit people with board level skills – there are not many good ones around.’ The
company has set up courses in company training for managers on ‘making strategy come alive’ and started
‘lunch and learn’ sessions for staff where change management is one of the key skills to be acquired.
A mandate from the top is essential because change and project managers rarely have line management
authority and the complexity of so many programmes makes it impossible for a single person to have sole
responsibility for final success. One individual regularly attended 12 other change steering groups in addi-
tion to his full portfolio of work, including responsibility for an operational area.
According to one senior programme manager at a bank, conflicting priorities are not prevented even
where a top-level sponsor exists. He sees a ‘really key area of shortfall and underperformance is after the
sponsorship stage.’
Given that HR is usually the department tasked with communications for change, we looked at the re-
lationship between the formal change management team and HR, as it seemed that there was no single
approach. In some companies they reported into separate board directors, in others both competencies sat
within HR itself. It was clear that the preferred structure was to keep the change implementation teams
distinct from HR. Replies to the question ‘What role does your HR department play in change manage-
ment,’ included a degree of scorn such as ‘Just issuing memos..’. Other replies pointed to a warmer part-
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Inability to anticipate and
handle resistance to change
Setting inappropriate
timescales for change
Poor change leadership
Poor middle management skill in
managing people/projects
Not making a clear connection
between change and business success
Inability to communicate a clear
rationale for change
Failing to ensure employee buy-in
at all levels
Which of the following factors have contributed to the
failure of change programmes in your company? (UK responses)
‘Active involvement in business projects. HR provides a business partner to projects.’
‘Guidance, advice and consultation.’
‘We consult with them if there is any impact on personnel.’
One change manager told us that HR understood the people issues, but had no idea how to handle the
change implementation,’ IT went too far in the opposite direction, grasping ‘the head but not the heart,’
whereas only the change professional grasped the whole picture. While not acting as a key failure factor, it
would be wise to ensure that there is a good working relationship between all the key actors in the change
equation before embarking on a major programme.
Handling resistance to change
The inability to handle resistance to change was not seen as a particular weakness. One change manager
commented that he and his team are seen as ‘interferers’ and that his role must combine diplomacy with
an iron fist. ‘Sometimes I have to drive a coach and horses through opposition, or embarrass resisters into
Poor middle management skills in managing people/projects
This factor featured quite prominently, even though most companies had a policy of offering training in
change management skills to middle management, so it clearly is not seen as sufficient. This may be con-
nected with the resistance factor in that it may be perceived that middle management is hijacking projects
– becoming ‘black holes,’ that do not communicate the right messages about the rationale for change to
their people.
Failing to ensure employee buy-in at all levels
Organisations still tend to take shortcuts by bringing in new hires, supposedly with the fresher attitudes
and ideas the company seeks. Such a policy should, however, work in tandem with an explicit policy of
offering opportunities for growth to all employees including existing staff. Otherwise it may be seen as
a de-motivating and cynical move to create a dominant culture that is not necessarily appropriate to the
ethos and values of the company. Often too little attention is paid to the fact that the ‘fresh blood’ individ-
ual may be just as hidebound in the execution of their ‘new’ ideas and simply perpetuating the formula of
their previous company. This, too, can give rise to resentment if existing staff believe they are overlooked
or seen as second-class citizens.
Another respondent referred to his company as ‘quite patriarchal,’ adding that ‘talk of empowering em-
ployees needs a dose of realism: it would be impractical to do this and try to meet all their unleashed ex-
pectations,’ and would give rise to constant staff churn. He believed there should be a segmented approach
and that it might be suitable to build more discretion and personal responsibility into some roles but not
In the following case study, leading into a discussion of the key success factors for good change manage-
ment, Ian Veitch, marketing and product development director, Hibernian Life and Pensions, concludes
that the six fundamentals of best practice in change consist of customer excellence, participation and
encouragement, teamwork, innovation and learning, empowerment and responsibility, and a clear focus on
Getting change right: finding a benchmark
Ian Veitch, Marketing & Product Development Director, Hibernian Life & Pensions Limited
‘Most business experts point to people and cultural issues as one of the hardest tasks to get right in a
merger. Compared to these challenges, merging systems and product ranges are much more straightfor-
ward. Our experience backs that up.
Background – the merger
In 2000 Hibernian Life & Pensions was formed from the three-way merger of Norwich Union, CGU and
Hibernian. At that time, the newly formed company became Ireland’s largest life and pension broker com-
pany and fourth largest life and pensions company overall. It is also a subsidiary of the international Aviva
Group, the seventh largest insurer in the world.
This pedigree meant the company inherited high standards from its constituent parts and its parent, but it
also created confusion in terms of its new corporate ethos. As well as this internal confusion, a booming
Irish economy was causing staff turnover to soar.
A need for change
New people had no central point of reference. Each company had its own internal standards but these of-
ten clashed in terms of process and policy. We also had no common internal benchmarking system specifi-
cally developed for the newly merged entity and as a result it was like comparing apples with oranges. It
became very obvious we needed to change, and quickly.
Two things were needed initially:
1. Define the new company’s core ethos
2. Identify a model, which could serve as a foundation for the company’s strategy
1. Defining the core ethos
In March 2002, Hibernian Life & Pensions held a conference for representatives of the management team
to prioritise what we wanted to deliver and in what order. Very quickly the issue of our new culture domi-
nated discussions. We knew we wanted a ‘can do’ approach and we wanted it to permeate throughout
the organisation. Above all, we knew a cohesive and coherent single culture was critical to our success.
Across-functional project team was formed to take the output from the conference and, in conjunction
with management and staff focus groups, they devised “the Six Fundamentals” which continue to be core
to our business. The Fundamentals were communicated to staff at a fun event in a local venue. Based on a
number of popular TV quiz shows, members of staff were told that people were “The Answer” and that
everybody had an important role to play in driving the changes necessary to make Hibernian Life & Pen-
sions an excellent organisation. The Fundamentals were then introduced. These Six Fundamentals would
be taken, adapted and adopted by every team.

2. Identifying a model
Looking beyond the boundaries of the company and our narrow industry, we soon discovered the Euro-
pean Foundation for Quality Management (EFQM) model, which is acclaimed as the most robust quality
and excellence model in existence today. We were very quickly convinced of the appropriateness of the
EFQM model, which highlighted strengths and strategies for improvements. Part of the appeal was also
the independent assessment, which provided a framework from which to progress our planned develop-
ments, along with the capacity to introduce and measure continuous improvement. The EFQM model
provided a process, which became a key part of the foundation for our company strategy. However we
found our people and culture were the true change enablers. We looked at best practices within the three
companies and learned from them and the expertise of our staff. We assessed our best attributes (and some
of our worst), while looking for new and innovative ways to structure our processes and our business.
EFQM in practice
The EFQM model is divided into nine different sections. The first five are termed enablers and are the core
strategic targets set for the organisation. The latter four are the expected key performance results which
are derived from and linked to the strategic objectives. A key factor in this model is that the results are
ploughed back into the business in order to effect yet more change from the key enablers. In this way the
EFQM model forces strategy and results around a virtuous loop to facilitate continuous improvement.
Key sections of EFQM:
Leadership – This placed great emphasis on training all leaders as well as directors. It wasn’t just a ques-
tion of top management benefiting from training. This consistency was applied right across the board and
included team leaders. But we didn’t stop there. Once we put the training in place, we also measured its
effectiveness through our staff climate survey.
The 360-degree feedback approach introduced by Hibernian Life & Pensions incorporated surveys for all
staff and reviews of management by staff. However, the object of the exercise was not to take ‘potshots’
at leaders but communicate in both directions. We continue to run a number of initiatives to facilitate
training, communication and allowing issues to surface. These include breakfast briefings, lunch with the
managing director, staff focus groups and monthly management communications meetings.
Policy and strategy – This area has seen some of the more dramatic changes in the organisation. In the
early days only the directors developed the strategy for the organisation and there was little explanation of
Policy &
& Resources

overall policy across the company. Now, the strategy process demands input from all levels in the com-
pany. We hold a number of briefings EACH year to explain what we are doing as a company and why.
Our theme last year was ‘Making it Happen’ and we explained the strategy so that all our employees knew
their part in what we are striving to achieve.
People management – This is all about listening. We surveyed our staff and found that in many cases
people did not relate their own personal performance to their annual increases and bonuses. It became a
question of laying out clear guidelines and exact expectations. Since working with EFQM, we have intro-
duced an enhanced performance review system taking input from our annual climate survey. Employees
receive a rating reflecting their contribution to the company and this determines their annual increment
and bonus.
In addition, we promote a healthy work/life balance. If our staff would like to learn the guitar or do a belly
dancing class (and some do), then our facilities are available after working hours. These and other benefits
are highlighted in our “Premium Policy” brochure.
Resources and partnerships – This section has helped Hibernian Life & Pensions to look beyond mere
customer/supplier relationships. The appointment of a new regulator in Ireland placed onerous respon-
sibilities on intermediaries and their businesses. In 2002 we formally established a Compliance Matters
subbrand in recognition of the increased challenges our intermediaries face. Compliance Matters is an
added — value service for intermediaries that aims to explain in real terms what actions are required to
help them run their businesses in a compliant manner.
Process improvement – This area has yielded some of the more dramatic external results for Hibernian
Life & Pensions. By our continuous striving for new and better processes, we match our broker needs
more exactly, delivering more efficient services. This has allowed us to forge closer links with our trad-
ing partners. Despite increased volumes of business, we have not increased our staff but have relied on
incremental process improvements. The results have been impressive for Hibernian Life & Pensions
– moving to third overall in the life and pensions market and the number one retail broker company. Each
year Hibernian Life & Pensions receives an external assessment, creating a series of scores that reflect the
trajectory of a jet plane taking off. In 2002 we scored 265, by 2003 it reached 350 and in 2004 it topped
450. The results validated our efforts and provided enormous satisfaction – not just for the project team
leading the push but also for the whole company. Everybody had a part to play and the scores reflected
that. However, Hibernian Life & Pensions did not enter the EFQM model purely for the scores. It encour-
aged us to constantly upgrade our processes and put in place strong disciplines that would allow us to
move up to the next level.
The other advantage of EFQM was that we could benchmark our standards against best practice in organi-
sations on an international level. It was particularly gratifying to see how we advanced when comparing
best practice against some of the leading companies in Europe. This was a great incentiviser.

Of course, this is a journey that never really ends. We have made significant progress in terms of Business
Excellence and our quality agenda. However, we want to improve still further. The flexibility of the model,
its capacity to highlight issues and allow them to surface and the in-built capability to facilitate and mea-
sure continuous improvement, indicates to us that the model will serve us well in the coming years. Suc-
cessful companies don’t stand still. We will continue to apply innovative ideas to ‘the way we do things
around here.’ The programme has been great for our business and our service. However, it is always nice
to get external recognition. In September 2004, Hibernian Life & Pensions was delighted to be presented
with the overall Business Excellence award from the Irish Deputy Prime Minister, Mary Harney.
Key Success Factors
In this concluding section, we examine the factors, which we consider will lead to best practice in change
management. The overall impression from the research is that ours is an industry still in transition, aware
that the external environment is leading to fundamental changes in attitudes and ultimately to the role of
the organisation in society and individual lives. At the moment, pressures to respond to changing market
conditions, through greater adaptability and flexibility, are leading companies to push responsibility down
the organisation under the banners of empowerment. Some are disaggregating the value chain and moving
to more of a networked ethos – or towards fully virtual status. Managers now manage across boundar-
ies, even across frontiers, and are more reliant on ‘outsiders’ than has been customary in the past as roles
become more fluid and less hierarchical.
The most important success factor, based on all responses (see Figure 4), is the ability to communicate a
clear rationale for change, followed closely by effective change leadership. Planning and monitoring was
not offered as a prompted response but was given in the ‘Other’ category by some respondents; as such, it
does not represent its very real importance in the success of a change programme.
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Other – planning and monitoring
Anticipating and handling
resistance to change
Setting appropriate timescales
for change
Making clear connection between
change and business success
Middle management skill in
managing people and projects
Employee buy-in at all levels
Effective change leadership
Ability to communicate
a clear rationale for change
Key success factors – all responses

Effective change leadership
From outset, the top sponsor should offer clear leadership, which is consistent with the aim of finding the
best strategy for getting the workforce safely through the transitional phase of change to arrive at ac-
ceptance and internalisation. The CEO creates the context - the ‘theatre of the mind’ where all the action
happens. Whether they choose to adopt a ‘Big Bang’ or incremental approach, or any permutation in-be-
tween, one of the most important tasks they must fulfill is to create a sense of urgency – providing energy
to the project, challenging negative ideas and encouraging risk-taking. Ultimately, they must generate a
sense of opportunity and tackle complacency head on. In the words of David White from The Children’s
Mutual, they must ‘build a bridge between the present and the envisioned future’ and act as role model
for the shared values. It’s important to ask the right questions to ascertain what the critical risks are to be
taken. According to Susan Rice, CEO, Lloyds TSB, Scotland, ‘My view of leadership is no different in
times of change than in times of stability. It’s essential not just to take risks but to determine what the right
risks are to take. When we make decisions, we don’t have to have all the answers all of the time, but we
do need to have all the questions.’
A further note on the role of the CEO
As a late entrant to the financial services sector, I arrived with no specialist market knowl-
edge, no remarkable insight into our customers’ needs. But I had learned from my previous
roles that leading is about guiding others – staff and customer – to figure out for themselves
what to do next. It’s not about pushing or pulling them along. I try to ask the right questions,
encourage debate, draw a story out of our numbers, not be afraid to take a risk on something
new or different.’
Susan Rice, CEO, Lloyds TSB, Scotland, Management Today, March 2005
Comments on the vital role of the CEO/change leader were made time and again in interviews. Effective
change leadership, along with the ability to articulate a clear rationale for change, were both seen as the
most important contributors to success. It has been noted (Kotter 2001/Carnall p.147) that ‘leadership
is about coping with change.’ Effective leaders recognise that they must provide a unifying focus, they
must create momentum, creative tension, and they must manage meaning to achieve understanding of the
context for change and an awareness of its inevitability and ultimate purpose.
In relation to any major change programme the CEO/change leader must:
• Be clearly accountable and ensure the project management structure reinforces this
• Feel a sense of ownership and demonstrate this by giving delegated authority full support;
as in the case of one insurer, meeting with the change manager for 20 minutes every day
• Provide a unifying focus at the same time as creating momentum and maintaining a sense of
‘creative tension’
• Provide an overall context within which the company’s management set values, support
problem-solving and risk, focus on the manageable, develop skills in people, bring out the
un-discussable, build trust, respect, engagement, alignment, handle breakdowns and critical
• Allow their people to feel pressure and resist the pressure to define new roles too quickly without
losing momentum
• Challenge unproductive norms and not be afraid to fail or to question
• Have ‘kaleidoscope’ thinking – the ability to construct patterns from fragments of data and

manipulate these to form new patterns
• Tune in by creating ‘listening posts’ both in the organisation and externally
• In the words of one change manager, and based on a Price Waterhouse model, build ‘guided
coalitions for change’ before transferring ownership of the implementation process
• Lead the ‘change equation’ which states that the ‘energy for change must be greater than the
costs of making the change’ and bring ‘human scale to risk, challenge, success and crisis’
(Carnall pp112 and 157)
At The Children’s Mutual, a company with an exclusive focus on savings for children, the promotion of-
David White from Marketing Director to CEO proved the catalyst for a fundamental transformation of the
organisation’s structure and commercial proposition. He describes this change as organic and revolution-
ary at the same time, initiated by a prescient chairman five years ago who wanted a marketing and sales
heavyweight. David’s approach combined evolution and revolution. In steering a radically different model
through the choppy waters of change, he ‘starts at the end,’ by giving a clear vision of what it would look
like after the transformation process, then offers the ‘context’ – or the rationale for the change – and takes
on the responsibility for being the guardian of the framework for the necessary transition.
The CEO can also be a positive barrier to destructive tendencies, which militate against the delivery of
change by establishing and exemplifying corporate values. He must then exercise these with sensitivity
and tough love. At a European insurer, a formal approach to change management has existed for a long
time, but faces a considerable task of working on cultural change as a result of the company’s acquisition.
The challenge of the new CEO, appointed early in 2005, will be to sustain the company’s reputation in the
marketplace for innovation, whilst cauterising internal elements which are resistant to the acquisition.
His task will be to give purpose and direction to the changes sought and, as we were told by the group
projects manager there, to exemplify the old Greek proverb, ‘the fish stinks from the head.’ In other words,
the top management sets the tone for the entire company, and if their leadership is poor, this can corrupt
the entire organisation.
Ability to communicate a clear rationale for change
It is easier to use ‘executive speak’ when discussing changes. Communications from above may tend to
overly focus on the organisational perspective, but effective leaders will be able to show their people how
their working lives will be affected on a daily basis by the change, and help them to overcome the fear of
the loss of the familiar. Trevor Matthews, CEO, UK Life & Pensions at Standard Life, sees the following
as the key tasks facing the change leader:
• Establish a clear vision of the future, including a clear statement of the financial objectives
– seek to ‘capture the noble purpose of the business’
• Paint a picture of a promising future
• Identify the key levers for change
• Align the interests of all stakeholders
• Mobilise the efforts of all stakeholders
The story does not end there, but the need to communicate until you are tired of the sound of your own
voice,’ as Trevor says, goes on throughout the duration of the change programme. Willie Watt, CEO of
Martin Currie Investment Management, talks of the requirement to communicate with employees as if they
were shareholders. At Martin Currie, they are “one and the same.”

Rigour during the planning stage
During the diagnostic or planning stage, the process needs to be iterative, continuous, and transparent.
Data should be as authoritative as possible whilst recognising that selective perceptions, group thinking,
company politics and time pressures can lead to outcomes that may not be optimal. Decision-making is
frequently neither rational nor orderly and outcomes can be both intentional and unintentional. Therefore
the process should be fluid with full acceptance that during the implementation process the decision may
well be modified, scaled down, or delayed.
Setting realistic timescales for change
Top sponsors must establish realistic timescales and metrics with their partners in the enterprise and offer
constant support and encouragement. Carnall makes the point that managers in the West often put more
pressure on the timing of the decision process, which may result in less commitment to the decision and
less effective implementation. The Japanese, on the other hand, engage more in problem-solving at the
planning stage. They operate on the basis of parallel activities and launch implementation programmes
before decisions are finalised. Norton (Norton, David, ‘Managing Strategy is Managing Change,’ Harvard
Business School Publishing, Jan/Feb 2002) refers to a three- to six-month ‘mobilisation’ period which
is devoted to building momentum at executive level by: communicating the need for change; building
the leadership team (new faces may be added either through internal promotions or external recruitment,
reflecting the new expertise required by the strategy); and in clarifying the vision or the strategy. Our re-
search suggests that typical timescales for change programmes are around one to two years, but in practice
they depend on the complexity of the challenge.
Anticipating and handling resistance to change
Change involves tackling anything that is blocking change, such as comfort zones, inefficient processes
and habits of mind. Bill Gammell from Cairn refers to the challenge of change as ‘how to take the brave
pill.’ The choices involved in the changes may be tough and it will be necessary to find a balance between
proven disciplines and pragmatism. They need to beware of the ‘black hole’ (MarketFacts, ibid) where
‘reinforcing sponsors’ – generally middle managers – display compliance with the vision during meetings
with the sponsor, but undermine the change effort with staff below them when they return to their jobs.
In handling resistance, the astute change sponsor needs to wait it out and wear it down while displaying
support for those engaged in the implementation. In maintaining the overall momentum, it is important to
energise, but not to be too prescriptive. From inception, the sponsor/CEO must do more than simply issue
the mandate. He or she needs to gain supporters ahead of ‘going public,’ establish networks of allies and
resources from key managers and groups, and create a ‘guided coalition’ supporting the change effort. The
sponsor must encourage integrated, cross-functional behaviour, which is the opposite to the traditional
power structures built around functional or departmental silos.
Change leaders should not be alarmed by, nor seek to break up, existing networks or groups of employees.
As we have mentioned elsewhere in the report, a degree of ‘disloyal’ behaviour can be therapeutic and can
be a coping mechanism for employees. The un-discussable must be allowed to be brought out, trust and
respect must be maintained, and the sense of pace kept up.
Peer groups can act as crucibles for eventual acceptance of the change process; equally, peer group consen-
sus pressures can be leveraged to build support within these networks and contribute towards the mainte-
nance of trust. Communications from the top tend to present the organisational perspective, yet it is often
the hygiene factors – sufficient car parking spaces, drinks making facilities, a subsidised canteen — that
determine employee morale and how much change they will accept.
The organisation must be honest towards employees about the implications of change. Accepting that there
is fluidity in the process – as commented on in case study on communications during an acquisition – is
not the same as giving mixed messages.
Effective implementation
Managing change is a key organisational capability, ‘a systematic approach to applying the knowledge,
tools and resources needed to effect change in the people who will be impacted by it’ (MarketFacts, ibid).
Familiarity with the tools of change and project management, and diffusing these throughout the organisa-
tion is one reason why so many companies involved in the research reported that they encouraged training
in project management skills.
During the implementation and transitional phases, the role of the leader continues undiminished. They
must: challenge the workforce; grant permission to feel pressure and express anxiety; resist pressure to
resolve critical issues and define new structures too quickly; and expose conflict. Other change champions
can also handle resistance and conflict.
Education and awareness-building are critical in this phase. Staff should be actively involved and if pos-
sible, a culture created whereby members of staff are offered training in project management methodolo-
gies and in the psychology of change, resulting in more insight into their own reactions to change. AXA
Equity & Law took this approach in the early 1990s – employees were inducted into a clear understanding
of how change occurs and how it is resisted in organisations and types of behaviour that were antithetical
to cross-functional team activities (one maxim consisted of ‘Find the indispensable man or woman and
sack him’ on the basis that such individuals were the equivalent of black holes.) Martin Currie Investment
Management uses business schools in Strathclyde and Glasgow to help it understand how symbols and
rituals work within the financial services workplace.
Although most change management observers advocate speed of execution, it is important not to assume
that functions, managers, and departments will all change at the same pace. Overall momentum can be
kept up by a policy of ‘quick wins.’ Norton divides the implementation process into two: an initial rollout
period of six months in which the programme is cascaded through the top layers of the organisation and
the process of alignment takes place. Secondly, there is a much longer phase – typically one to three years
during which the change is embedded into the organisation as a whole, and hardwired or institutionalised
via personal objectives, new incentive schemes and compensation packages, new financial targets and
budgets and new information systems.
Ownership of the changes by employees and key stakeholders must be developed and consolidated – so
it is vital for senior managers to constantly check the effectiveness and real alignment of the reinforcing
sponsors. It is not sufficient to simply let the change process unfold: it must be managed from start to
Choosing the right teams to deliver change
As a subset of effective implementation, choosing the right people and teams to deliver change is critical.
Too often the wrong people are chosen to act as change agents and implementers in an organisation. They
may lack the requisite skills, or the necessary authority – direct or delegated. Sometimes task forces are
created several layers down in the organisation, which, in spite of enthusiasm, or their best efforts, lack
the credibility to achieve the change. A skilled programme manager must exhibit political and diplomatic
skills, astuteness, a grasp of the drivers of organisational behaviour, the ability to see the whole picture
across the organisation, empathy, flexible time horizons, whilst adhering to the critical path. Project
magazine talks of programme managers having the ‘tenacity to carry the heavy responsibility of delivering
a project which may be a moveable feast.’ A balance of left and right brain skills – intuition and analysis
– as well as dogged persistence are needed in this frequently ‘entirely unglamorous job’ as one change
manager described her role.
Over and above teams and the top sponsor or CEO, there are other ‘agents’ of change, which are impor-
tant. Lockitt identifies eight roles which are critical in the process:
1. The CEO or equivalent who acts as the ultimate source of authority behind the
change and who must demonstrate commitment.
2. The Change Sponsor who has the vested authority and time to oversee the changes
and who accepts ultimate responsibility for the implementation process.
3. The Change Manager who has day-to-day responsibility for managing the change
process, designs the change and communication processes, monitors progress and liaises
‘up and down’ the organisational structure.
4. The Change Agents who are responsible for facilitating change by gaining
commitment, identifying areas of resistance, disseminating the lessons learned from
consultations with employees.
5. The Change Champions – who are early adopters of the change and who
actively support and promote it within an informal, ‘unofficial’ context. They should be
identified and rewarded by the change manager.
6. The Change Team is drawn from all parts of the organisation, enjoys the confidence of both
staff and management and is empowered to support the change manager.
7. And the Change Participants – who are affected by the changes,
some of whom may be in some of the roles described above, but who will still need to make
changes to their own working practices at the same time as leading some of them.
PricewaterhouseCoopers goes further (article on PWC website by Rimmer, Kraft Wheeler, Gramolini,
Transaction Services group) in referring to the need to build an elite integration team based on ‘star per-
formers’ who have been pulled out of their jobs rather than simply being available.
HR also has a central role to play in change initiatives, taking on a crucial role in planning and carrying
out the employee interventions needed to support change in the areas of training, reward strategies, new
working practices and greater employee participation, so the more that the department is seen as strategic,
the better equipped it will be to fulfil this remit. Most responses to our survey indicated a close working
relationship with HR and, in some cases, the change management capability actually reporting into it, but
there were responses which revealed a contrary trend (ref section on Key Failure Factors).
Employee buy-in
Trevor Matthews from Standard Life talks about the importance of respecting the past, whilst being real-
istic about the present and optimistic about the future as key ingredients for ensuring employees commit
to the change effort. Most radical change programmes will involve changes of staff, and many will be
brought in from outside, but it is crucial to demonstrate that existing staff are held in high esteem. The
means of achieving this were well expressed by the Chief Executive, Willie Watt, at LIMRA Europe’s
2005 Annual Conference.
‘Delivering on your core competitive proposition will entail getting your people to do things differently.
Delivering superior products and services needs a commitment to excellence from your people. So how do
you galvanise and develop a team capable of delivering?
In every business there are good people. Sometimes they are hidden or in the wrong job. The first task is to
find them and get them in the right jobs. The second task is to fill vacancies with the right people. Always
hire the best you can. But don’t overlook the hidden talents of your own people. Building a successful
business is more than just about hiring people. Culture is the shared experience and values of the people in
the firm.
The culture of the organisation is vitally important. Where does it support your strategy, where does it un-
dermine it? How do you analyse culture? You ask deep down within the organisation. Talk to people, piece
together the war stories, both heroic and horrible. Use the positives, work out how to eliminate the nega-
tives. Communicate, communicate, communicate – talk about the business culture you want. Be explicit
about the strategy. Explain it and how the actions of the individual will contribute to its achievement. Be
explicit about the culture you want and what you want to change. Most businesses do not fully use their
talent. Delegate and empower, but ensure people realise that with this comes responsibility and account-
ability. To do this requires a proper appraisal system, a proper business plan and open feedback, all inte-
grated together to meet the company’s strategy. In Martin Currie we have sought to do all these things.
Most of my senior team have been long-serving employees, but not in senior jobs. But we have hired key
men and women and we have convinced them of the culture, strategy and positioning of the business. Not
just the job. This is the key to building a long-term sustainable franchise. We have also invested in articu-
lating values and culture through workshops that bring this to life. All this is integrated into recruitment,
promotion and performance appraisal processes.’
Last word
Organisations increasingly recognise that effective systems can exist in a variety of structures and that ad-
herence to a single form such as ‘command and control’ structures is anachronistic. Potentially, the struc-
ture can include conflicting elements of both order and chaos, or areas of high risk-taking and ones that are
more risk-averse. At one global re-insurer in the late 1990s, institutional analysts warned the group that
its share price would be marked down if it failed to participate more actively in the opportunities offered
by the dotcom revolution. Working groups were set up internally (segregated from the rest of the busi-
ness) that employees competed to join. They were tasked with ideas for destroying the core business. In
other words, license was given to come up with creatively destructive ideas for longer-term sustainability.
Forward thinking companies will strive to find a new equation that balances opposing forces, to reflect
the natural world. In the words of the Nobel physicist, Richard Feynman, ‘All things, even ourselves, are
made of fine-grained, enormously strongly interacting plus and minus parts, all neatly balanced out.’

Thanks and gratitude to all the Limra Europe members who took the time to complete the questionnaire,
to all those who agreed to share their experiences and knowledge during an interview, and to colleagues
who wrote abut personal experiences of change in their own working lives. Special thanks to David White
from The Children’s Mutual, to Friends Provident for allowing us to use the case study ‘From battery hens
to free-range chickens,’ to Ian Veitch from Hibernian Life & Pensions for his account of ‘Getting change
right: finding a benchmark,’ to Martin Currie for allowing us to draw from Willie Watt’s presentation at the
2005 Annual meeting in Edinburgh, to Adam Heslop (, freelance change manage-
ment consultant, for giving us a unique insight into a practitioner’s experience of leading change in the
financial sector, to 3T Productions ( for allowing us to draw from Bill Lockitt’s white paper
on change management, and to David Sexton from EDS for contributing the section on the seven rules of
practical change management.
Wanda Warhaftig
Project Director
LIMRA Europe
+44 (0) 1923 810 352
Copyright 2005 LIMRA Europe Ltd
No part of this publication may be shared with other organisations or reproduced in any form without LIMRA’s express permission
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