STAKEHOLDER IMPACT ANALYSIS

Consultants and other business advisors are frequently brought in by senior management to establish and lead a change program within the business. This brings to mind the old joke: How many consultants does it take to change a light bulb? Just one, but the light bulb has to want to change. An old joke for sure, but it reinforces the inescapable truth that a consultant cannot change a business. Only the business can change the business. If the business does not want to change, then there is nothing the consultant can do.

But who is the business? The business is a collection of people working together to achieve a common objective. For change to be successful, these same people need to band together to build a momentum for change that cannot be stopped. The organisation must push over the tipping point to make change inevitable.

The problem is that, in large organisations, whilst most staff support the overall business objectives, they don’t necessarily agree on the best way to achieve them. A characteristic of large organisations is the proliferation of subcultures throughout the business.  These subcultures are normally aligned to the different stakeholder communities or silos that make up the business. Depending on the specifics of each subculture, change will be met with a variety of mindsets ranging from “I have been here 15 years and seen it all before; it didn’t work then and it won’t work now” and “If it ain’t broke, don’t fix it,” to “We welcome the opportunity to change.”

For change to be successful, these individual communities need to be recognised, understood, and engaged as stakeholders in the change program. The trick is identifying each different stakeholder community and determining how change will individually and collectively impact each community and how each will respond to the proposed changes.

This paper will not discuss in detail how to identify individual stakeholder groups. Rather, it will examine how to evaluate the impact of a change program on stakeholder groups and how these same groups can impact the change program.

It is common practice to start an impact analysis with a stakeholder identification exercise, the rationale being that once you know who the stakeholders are, you can evaluate the impact change will have on them. My experience is that an effective stakeholder impact analysis must start with an analysis of the impact of change on the business. After all, how can you be confident that you have identified the complete and correct set of stakeholders, never mind the impact of change on these stakeholders, until you have fully understood the impact change will have on the business as a whole

I have found that while most change practitioners agree with the above, they also frequently attempt to complete both analyses at the same time. Inevitably, this will deliver a skewed and incomplete result. It is important to complete the studies sequentially.

To understand the business impact, it is easiest to use the traditional variables of people, process, and technology, with the addition of foundation items such as culture, strategy, policy, and rules. Collectively, these variables will provide the necessary width to complete a suitably comprehensive business impact analysis.

The objective of the study is to agree what will be different in the business as a result of the change. The following framework can assist.

Business impact table

The table is a summary of the impact of change on the business.

You will note that the framework breaks the headers of people, process, technology into their component parts. It is the component parts that are analysed, not the header itself.

A key part of any change program is effective communication in order to  ensure senior managers understand the need for change.  To be successful, it is vital that a senior stakeholder is able to quickly assimilate and understand the issues. It is not uncommon for an overly detailed analysis to be put in the “too hard basket,” causing the findings to be partially ignored or even lost entirely.

If the table is detailed, it can be supplemented with Harvey Balls to provide a quick summary of the extent of the change.

Dark (red) indicates a high degree of change.

Business impact table withHB

Using the Harvey Balls as a guide, it can be seen that the proposed changes will have a moderate impact on the business processes and a high impact on people, management practice, structure, and culture. There will be limited impact on strategy, policy, and business rules.

This summary is highly significant, as the common practice in business improvement programs is to map the business processes. In this case, understanding the business processes may be important, but it is not where the real game is. Rather, a strong focus on people and culture is more likely to deliver the desired business benefits. The detail in each cell describes the nature of the change.

Depending on its size, a change program will comprise multiple projects or work streams, each focusing on a different aspect of change such as Quality, HR, IT, or operational improvements.

The framework can be used for each project within the program. As before, Harvey Balls can be used to indicate the magnitude of the change within each project.

consolidated business impact table withHB

This type of analysis will provide a manager with a ready snapshot of the impact of each project’s specific changes on the business. While this view is valuable, it is incomplete.

What is required is a consolidated picture of change across all projects.

Project summary unclassified

The table provides a consolidated and immediate insight into how the projects will individually and collectively impact the business. You will note that the subcategories of “people” have been removed. This is to support the principle of “easy to understand.” Senior stakeholders will want to know how much change will impact their people. The fine detail is unlikely to be important at this time.

In the example, project 3 is anticipated to have the biggest impact across the entire business, and management practice, access to information, and culture will be most heavily impacted across all projects.

Project summary

This table now becomes the basis for determining the real stakeholder groups. Given that process flows are not a top three priority, it is unlikely that the process operators are going to be a primary stakeholder. Conversely, their managers are identified as a primary stakeholder. This is reinforced when you consider management’s impact on culture and access to information.

With this insight, that change program can set its priorities and tailor the messaging appropriately.

To understand how the change program will impact a specific stakeholder group requires the application of a consistent numerical scale. Such a scale could be:

  1. No impact
  2. Low impact
  3. Moderate impact
  4. High impact
  5. Maximum impact

Each stakeholder group is then evaluated according to this scale and the results are tabulated as follows. The stakeholders are listed down the page. The types of change the stakeholders will go through are listed across the top of the table. Once again the variables of people, process, and Technology are used to guide the analysis. It is unlikely that the detail will be a mirror of the business impact table, but is expected that the business impact table will inform the variables used in this study.

Stakeholder summary table

The table is completed once the totals column is complete. To really make sense of the table, graph it and rank it from highest impact to lowest.  It is clear that the first six stakeholder groups will be most impacted by the program and the last four stakeholder groups will be least impacted.

The primary difference between the stakeholders on the left hand side of the graph and those on the right is that those on the left will typically be operational staff and those on the right will be senior managers and executives. The seniority of these managers means that they are unlikely to be substantially impacted by the technical aspects of the change program.

stakeholder graph with circles

This type of stakeholder analysis is common practice and in the normal course of events, the change program would target the top six with specific interventions and deal with the bottom four with general interventions. The stakeholders in between would gradually move from specific to general.

By general activity, I refer to interventions aimed at groups, rather than individuals. It would be brilliant if a company had the time and resources to work with each person in the company individually. This luxury is seldom, if ever, open to large companies and so change is addressed with general activities.

My critique is that this is a one-way study, in that it only evaluates how the change program impacts the stakeholders.

In my opinion, a far more critical analysis is an evaluation of how the same set of stakeholders could impact the success of the change program through their actions, be they positive or negative, or simply through inaction.

The point of this second study is to determine which individual stakeholder groups could substantially impact the success of the project if they wanted to. Consider: if the executive team chose to, they could terminate a specific project or even the entire program, a particularly substantial impact. If the service desk became disenchanted, they could reduce the quality of the customer service they provide. This would dilute all the good work done on the rest of the project. It would not stop the project, but it would have a detrimental effect on customer satisfaction.

To complete this study, the scoring can again be on a simple low to high scale, as the evaluation is more subjective than objective.

  1. No impact
  2. Low impact
  3. Medium impact
  4. High impact

 

When completing the analysis to determine how stakeholders could impact the change program, it is important to use the same stakeholders that were evaluated in the first study.

Stakeholder impact on project

As before, the scores are graphed. It is important that the stakeholder sequence is kept constant as per the first graph.

reverse stakeholder graph

It can be seen that, unlike the initial study that produced a smooth graph, this study produces a saw-toothed result, indicating that there are stakeholders across the full spectrum that can significantly impact the project.

Of particular interest are the stakeholders on the right. In the first graph these stakeholders were scored very low as they were deemed to be senior or executive managers and therefore largely unaffected by the technical aspects of change. But in this second graph, they have a very high score as they have the positon and power to substantially impact the project.

The full strength of the analysis is evident when the two graphs are compared.

stakeholder graph comparison

As expected, there is a strong two-way impact across the first four stakeholder groups. These are the primary stakeholders impacted by the project and, if the change program does not fully enlist them in the change program, then it will be almost impossible to achieve sustainable business improvements.

Equally, when looking only at the first graph, it is unlikely that stakeholder groups 8 and 9 would have been considered particularly important stakeholder groups. But when combined with the second graph, they become high priority stakeholders.

The first graph is an analysis of the technical aspects of the change program. It evaluates which stakeholders will be impacted by the change and the data behind the graph will tell you why they are impacted. In many respects, change will happen to these stakeholders whether they want it or not. This does not diminish the responsibility of the change manager to minimize their resistance to change as much as possible.

By comparison, the second graph reflects the political aspects of the change. While these stakeholders may or may not be directly impacted by the technical changes, they will be acutely aware of how the change program could impact the business financially and their own reputations within the business and the market place. These two considerations make them a particularly important set of stakeholders. This is particularly true as you move towards the right. The change manager needs to work very closely with these stakeholders as they are not directly impacted by the change program, “whether they want it or not” and can choose their own level of involvement.

This dual analysis is of critical importance when it comes to communicating with each stakeholder group. The primary stakeholders in the first analysis will need to be sold on how important the change program is to the business and how important they are to its success. At the other extreme are the priority stakeholders identified in the second analysis. As per the first group, these stakeholders will also need to be convinced that the change program is strategically important to the business. But they will also need to be convinced that the business improvement program is being well managed and that it is unlikely to have a detrimental impact on the reputation, operations or finances of the business. If any of these tests fail, then the program runs into the very real risk of being cancelled.

There is a further relationship between the two graphs. The senior stakeholders on the right will frequently have the organisational position and authority to instruct the stakeholders on the left. This makes these senior stakeholders even more important when it comes to designing the initial communications and prioritizing which stakeholders need to be engaged with first.

There is one other stakeholder group that needs to be considered as part of the impact analysis, namely the business improvement team. This is the group of people who are working full-time or close to it on delivering the business improvement project. They may or may not be part of the program office and frequently this team will be a blend of full-time employees and contractor staff.

For me, this is one of the most important stakeholder groups on the project. This team is a catalyst for change in the sense that they create change, but are not themselves changed. They are also a temporary group, constituted for the life of the program. For these reasons, they are seldom, if ever, evaluated as part of the impact study.

A key responsibility of this team is executing an effective communications strategy. They will decide on what messaging is communicated to which stakeholder group, on what frequency and format. The importance of getting this strategy right cannot be underestimated as it will directly influence how the business perceives the change program.

It is therefore vital that the health and competence of the team is measured and managed. If this team becomes disillusioned or suffers from poor morale, the consequences for the success of the program would be significant. Equally if this team does not have a common understanding of the objectives of the program or how the various projects fit together, then they will be prone to delivering mixed messages to the business and undermining the very change they are trying to create.

STRATEGY DEVELOPMENT WORKSHOPS

This article covers the basics of developing a business strategy. My favourite maxim on strategy management is “The bus that runs over the pedestrian is never the bus the pedestrian is watching.” This maxim reinforces the point that the value of a business strategy is directly related to the assumptions that underpin it.

When establishing a strategy, the first assumption is that the management team formulating the strategy all frame the conversation the same way.

Invariably this is not the case and the book “Reframing Organisations” by Boleman and Deal describes this phenomenon very well.

In their book, they describe four frames through which a manager can view the organisation and environment they work in.

  • The structural frame: a focus on how groups and teams are structured.
  • The human resource frame: a focus on human resource management and positive interpersonal dynamics.
  • The political frame: a focus on power and conflict, coalitions and dealing with internal and external politics.
  • The symbolic frame: a focus on organisational culture.

Recognising that managers may not be aware that they view the organisation differently as do their colleagues, it is important to agree the frame or frames the team will use through the strategy development process. It is acceptable that different managers explicitly adopt different frames to enrich the conversation and ensure groupthink is mitigated. It is only important that everyone knows which frame each person is using through the course of developing the strategy.

The strategy management process is depicted as follows:

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Simplistically, the purpose of a strategy workshop or process is to answer five questions:

1. What business are we in?

a. What is the corporate culture?

b. What is the risk appetite?

 

2. What is the endgame or, in other words, what does success look like?

a. Asset sale

b. Public listing

c. Family business hand-down

d. Stop investment and take the money in annual dividends.

 

3. Why will we succeed?

a. Analysis of the operating environment

a. How is value created?

b. Who are the competitors?

 

4. How will we succeed?

a. S.W.O.T. analysis

b. What is the business model?

c. What is the style and structure of management?

d. What are the priorities?

 

5. How will we manage success?

a. Organisation structure

b. Compliance management

c. Performance management

The strategy workshop should open with confirmation of the nature of the business, the company culture, and the risk appetite. The nature of the business is to answer the question: “What business are we really in?” Often the answer will revolve around business models such as treasury or risk. These models are then placed in the context of the business they operate in. For example, supermarkets are generally in the treasury business and construction companies are in the risk business. Understanding the company culture will inform the strategy process as to the nature of the risk the company is willing to take on. For instance, a conservative company will not endorse a high risk strategy.

It is difficult to develop a strategy if there is no consensus on the nature of business, culture and risk profile.

The strategy workshop can now move to an analysis of the endgame. The purpose is to establish agreement on the exit strategy. The exit strategy is a statement of how the owners will turn their investment in the asset into cash. Options include: sell it, list it on the stock exchange, or take the cash in billings without actually building the asset. An equally acceptable option is to give it to the kids.

The endgame question informs the investment decision. For example, it is very difficult to sell a professional services business and if the principles wish to exit the business, then investing in the business may not be the best way for them to get value from it. Rather they should maximise their billing and take out the value in dividends over the next few years, then simply close the business and walk away.

The endgame question is equally valid for a public company, but the alternatives are different. There is only one objective for the directors of a public company and that is to maximise shareholder value. This reduces the directors’ endgame to the alternatives of selling the entire company or selling the shares they hold in the company. There are a few additional complex options that are not included in this article.

If the business is saleable, or it is a public company, then the exit strategy will always be to sell the shares for the highest value possible. The business strategy must therefore focus on activities that increase share value in a sustainable manner.

The longest practical time horizon for a strategic plan is three years and many would argue that this is too long, but this depends on the market the company operates in. Developing a three-year strategic plan does not imply that the owners will exit in three years. The time frame is only to provide context for the strategy workshop and if the strategy development process is conducted annually, then the three years becomes a rolling three years. For some markets such as infrastructure development, the investment period is well over ten years.

At the beginning of this article I mentioned the need to manage assumptions. Through the course of agreeing the endgame, a number of explicit or implicit assumptions will have been made and the next stage of the workshop is to expose and critically examine these assumptions and answer the question: “Why will we successfully achieve the endgame?”

The intent of the question is to force an examination of the assumptions made about the market the business operates in (external environment) and the business’s ability to operate in that market (internal capabilities).

There is no right or wrong order in which to approach these two mini workshops. My experience is that workshop participants need to discuss their internal environment before they can properly consider the external environment. The problem with this approach is that it can become very myopic and the thinking becomes constrained to considering what is known, rather than including what is unknown. If the workshop sequence does start with an analysis of the internal environment then it should include a reconfirmation of the results after the external analysis concludes. This will ensure the capabilities considered in the internal analysis adequately address the opportunities and threats identified through the analysis of the external environment.

For the internal analysis workshop to be successful it is important that there is agreement on the core business. That is agreement on the question: “What business are we in?”

Understanding what business you are in, tells you what you must be competent in and, by inference, what the business must be capable of.

Many capabilities create a competency.

 

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Source MGSM

The internal analysis is therefore a review of the existing capabilities against the nature of the business. It is a review of what exists now and what capabilities need to be introduced or enhanced. To guide the identification and classification of capabilities I recommend the B.T.O.P.P. model. It is a simple but practical model for structuring the analysis.

005 copy

It is important to keep the analysis at a high level to avoid getting mired in conversation on the nitty-gritty. The following table provides a good structure for collating the results.

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Source MGSM

Column A can be renamed “business objective” or “core competencies” or similar. The last column is important. It captures the group’s opinion on what needs to be resolved to close the gap. I recommend using the B.T.O.P.P. model here again to check for completeness. This is in addition to using it for the capabilities analysis. For example, if the desired capability is to be able to establish a “multi-local” distribution chain or to be capable of transacting in multiple currencies, then the issues will be multi-faceted. Using the B.T.O.P.P. model creates a common vocabulary for recording the issues.

There are many models that assist with the analysis of the external environment such as Porters Five Forces (shown below), the P.E.S.T. (Political, Economic, Social and Technological), and P.E.S.T.E.L. (PEST + Environmental + Legal) frameworks.

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Source: Porters 5 Forces

The results of the analysis can be captured in a table as shown.

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Column A describes the nature of change anticipated in the market.

While the table is simplistic, care should be taken to include as much detail as possible when describing the anticipated change. This may require adding additional columns. Depending on the depth of the analysis, a different table may be used for each analysis topic, or one table for all. The table is intended only to collate the issues, not to solve them so there is no column for mitigation actions.

The internal and external analysis addressed questions 3 and 4 (referred to at the start of the chapter) and provided the raw data required to answer question 5. The workshop is now ready to consolidate the issues and prioritise the actions for the next 12 months, 3 years, 5 years etc. The critical issues framework can assist with this process.

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Source MGSM

The methodology is to use the grid to “sift” the issues gathered through the two analyses to determine the critical issues. It is important to treat the grid as a “relative” analysis in the sense that all the issues are important, but some are more important than others. This means that you should be able to place an issue in all nine cells. Placing an issue in the low priority cell does not mean it is not important. It only means that, of the raised issues, it is of a lower priority. The critical issues are then further analysed as shown.

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Source MGSM

The final step in order to conclude this stage of the workshop is to perform due diligence. The approach is to cross-reference the priority actions captured in the previous table to the business objectives discussed at the start of the workshop, or the required competencies highlighted through the capabilities workshop. Using a simple light/dark analysis provides an easily understood summary. Dark shading represents a closer match between the objective and priority.

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Cross-references that are overly dark should be examined for completeness. Is the underlying issue fully described and understood? Is the priority correctly applied?

The priorities are then associated with a high-level timeline and the workshop is now ready to answer question 5: “How will we manage success?”

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On the basis of “a journey of a thousand steps starts with the first step,” the purpose of question 5 is to ensure there is agreement on the tactical changes or projects required to execute the strategy. The timeline provides the priority.

I close with the observation that managers frequently do not allow enough time for everyone to fully consider the points being discussed.

The commonly heard statement is, “Let’s just get something down on paper and we can refine it over email.” This approach may improve efficiency but it destroys the debate. It is recommended that each activity in the workshop is addressed twice, if not three times. If it is a two-day strategy session, then repeat Day 1 on Day 2 to give people overnight to really think about the issues. Then hold a further review a week or two later.