How poorly executed change is costing you millions | The CEO Magazine

Every CEO knows their organization must keep changing. New systems, operating models, cost programs, AI adoption, merger integration, reorganization, growth plays, compliance adjustments and customer experience improvements.

Most likely your problem is not that you are investing too little in change. The problem is that too much of that investment is being wasted.

The cost of poorly executed change does not appear as a profit and loss line item. It is largely concealed despite us feeling its presence. It appears as delayed benefits, productivity drag, duplicated work, frustrated employees, failed system adoption, customer disruption, leadership distraction, rework, consultant spend and strategic priorities that never transition from the slide deck into day-to-day behavior.

For CEOs and CFOs, this should not be considered a ‘people issue’ sitting with HR or middle management. It is an executive leadership and commercial performance issue.

Capital is committed when a business case is approved. It is expended as you implement. Value is created only when enough people behave differently, consistently enough, for long enough to shift business performance. This distinction matters.

A new customer relationship management (CRM) system does not improve revenue forecasting. Salespeople using it properly does. A new enterprise resource planning system does not create better decisions. Leaders trusting the data, people entering it correctly, changing operating rhythms and managing the business through the system does.

A restructure does not increase productivity. Managers making different decisions, stopping old work, clarifying ownership and holding new boundaries does. Or as I like to quip, it’s about ‘saying no, letting go and rethinking how’ when it comes to work behaviors.

A new strategy does not deliver growth. People reallocating time, attention, resources and effort toward the few priorities that matter does. This is where many organizations leak value.

We fund projects, appoint sponsors, form steering committees, create change plans, run the training, send communications and track milestones. Then assume the benefits will follow. Often, they do not.

The organization has implemented the ‘new thing’, but the business has not changed enough to realize the value.

The hidden curve of change

Every major change has a financial curve. At the beginning, costs rise. People are pulled into workshops, leaders spend time in meetings, consultants are onboarded and systems are built. Productivity temporarily dips with this added effort. Teams are asked to keep running the business while also building the future version of it.

At this transitional point of implementation, the organization is in financial deficit. The investment is real. The value is still theoretical (based only on early business case modeling).

The change project’s breakeven point arrives only when the new ways of working are adopted at sufficient scale. After that, the business may enter what I call the value surplus zone, where the change begins to pay back through higher revenue, lower cost, better margin, faster execution, lower risk, improved customer outcomes or whatever the business case said would happen.

Poor change execution extends the deficit period. Good change execution shortens the time-to-value capture.

This is the commercial case for building stronger organizational change capability. Rather than thinking it’s about making people feel better or forcing them to like change, we at the executive level must recognize it is about ensuring a strong return on change investment.

For CEOs, this should be a familiar discipline. The same scrutiny applied to property, infrastructure and equities investment should also be applied to organizational change. Ask yourself the following:

What is the expected value?

What assumptions does the business case rely on?

Which behaviors must change for the value to be realized?

How much capability and bandwidth does the organization actually have to manage it?

How will we know whether adoption is happening?

Where might value leak?

Which initiatives should be stopped, slowed or sequenced differently to facilitate the new initiative?

These are financial questions as much as leadership and governance questions.

Most change metrics are commercially weak

Many organizations track change activity instead of change progress and value. They report the number of workshops delivered, communications sent, leaders briefed, employees trained, milestones achieved and systems launched.

These indicators may be useful, but they are not enough. They only tell you whether the project has been busy. They are input measures. They do not tell you whether the business is truly changing.

Commercially smart change metrics need to connect three things: behavior change, solution adoption and business value.

For example, a CRM transformation should not only track whether the system went live on time and on budget. It should track whether salespeople are entering accurate pipeline data, using common opportunity stages, updating next actions, collaborating across accounts and managing sales meetings through the platform. Then it should connect those behaviors to forecast accuracy, sales cycle time, conversion rates, customer retention or revenue growth.

A cost transformation should not only track savings targets. It should track whether managers are stopping low-value work, changing approval thresholds, reducing duplication, redesigning roles, renegotiating demand and sustaining new spending disciplines after the initial pressure comes off.

An AI program should not only track licenses issued or pilots completed. It should track use cases adopted, hours saved, cycle times reduced, decision quality improved, risk controls followed and capability uplift across the workforce.

The point is simple: benefits realization is usually behavioral before it is financial. Behavior is the lead indicator of value. Track the behavior and the value is likely to follow. The profit and loss moves after people do.

The CEO and CFO’s role in change performance

CEOs and CFOs are uniquely placed to lift the standard. They oversee day-to-day enterprise performance, investment discipline, risk, reporting, governance and resource allocation. They can see where money is being committed, where value is expected and where execution is weak.

That gives them a powerful role in making change and those working on it more commercially accountable. This starts with insisting that major change investments are measured with the same rigor as any other investment.

It means challenging business cases that equate implementation alone to value creation, without consideration of human adoption and behavior shifts. It means asking for evidence that the organization has the capability and capacity to absorb the change.

It means ensuring benefits are owned by senior business leaders, not buried in a drawer with every other business case. It means demanding behavior-based lead indicators are tracked, which show whether adoption and adaptation are happening so appropriate intervention and support can follow when they are not.

The CEO also has a critical role in particular. CEOs influence and collaborate with the board to set the enterprise agenda. They drive what matters, what stops, what gets funded and which behaviors are rewarded. When every initiative is labeled critical, the organization loses the capacity to execute any of them properly.

Change failure is often blamed on resistance. In reality, many organizations are simply overloaded, under-led or poorly measured.

Five actions for CEOs and CFOs

1. Create an enterprise view of change investment

Many organizations have a capital plan, a budget and a strategy road map. Fewer have a clear view of the total organizational change load. Map the major initiatives underway, the functions affected, the leaders required, the employee groups impacted, the expected benefits and the capacity burden. This will quickly show whether the organization is trying to absorb more change than it can realistically execute. Just as we create annual financial budgets, we should forecast an annual change volume and capacity budget.

2. Make benefits behavioral

For every major initiative, identify the specific behaviors required to realize value. Not vague statements such as ‘leaders are aligned’ or ‘employees are engaged’. Define what people must do differently in observable terms. Which decisions change? Which operating routines and habits should change? Which systems must be utilized? What work must stop? How must customer conversations improve?

3. Track lead behavioral metrics, not only lag value metrics

Revenue, margin, cost reduction and productivity are lag measures. They matter, but by the time they move, it’s too late to take corrective action. Add lead indicators such as system adoption consistency, proficiency, thoroughness, process adherence, decision cycle times, manager reporting, customer responses and process speed.

4. Put change capacity into the investment conversation

Before approving another major initiative, ask what will be deprioritized, paused or stopped. Ask when it will be done to manage scheduling clashes. Every project competes for the same finite pool of leadership attention, employee energy and operational bandwidth. Pretending otherwise distills capacity and raises the risk of failure.

5. Hold executives accountable for value realization after go-live

The end of implementation is the beginning of value creation. Keep benefits on the executive agenda after launch. Track whether the new behaviors are being sustained. Review whether the original assumptions are holding. Revise incentives where possible. Intervene early where adoption is shallow or value is leaking.

In the current turbulent economic times, your organization can’t afford to waste change investments. The organizations that get change right will be the ones that treat change as a serious commercial capability.

That means measuring it properly, funding it wisely, sequencing it realistically and leading it with discipline. Poorly executed change is expensive. Well-executed change is one of the most powerful financial levers a CEO can pull.

Opinions of contributors to The CEO Magazine are their own.