Who Moved My Ledger?

By Nancy A. Bagranoff, Jan Ellen Eighme, and Harvey Kahl, Jr.

In Brief

Overcoming Obstacles and Doubts

Everyone lives with or motivates change. Although recent events have propelled change in the accounting profession at a rate seldom seen in the past, federal legislation and potential state regulatory changes will increase the momentum even more. What was once merely bothersome could well overwhelm those inadequately prepared to manage and lead change. The authors draw lessons from a popular management book that can help accountants attempting to manage transition, legitimate fears of change, the change management movement, and the change management process. An understanding of the fears of change and the change process facilitates change leadership and personal coping strategies.

he last five years have seen tremendous change in accountants’ professional and business environment. AICPA members rejected a new credential, accounting education has been judged to be in a “perilous” state, and the Internet has challenged old business models. Some changes affect accountants directly, others require accountants to act as change agents.

Consulting firms are rapidly developing and growing their change management practices, the services they sell to help companies cope with change. There is an increasing awareness that managing change well is the key to success on many projects [e.g., implementing an enterprise resource planning (ERP) system]. Spencer Johnson’s 1998 book about change, Who Moved My Cheese?, has stayed at the top of best-seller lists for months.

The Case for Managed Change

The only constant in today’s business environment is that change is inevitable. Many of the changes that impact accountants and their businesses seem doomed to failure. For example, more than 80% of 365 technology initiatives studied by the Standish Group experienced either significant problems or complete failure. In a study of 300 large mergers between 1986 and 1996, Mercer Management Consulting found that 60% of the resulting companies lagged behind their industries in total return to shareholders in the three years following the merger. Finally, a study by Arthur D. Little found that 39% of companies undergoing reengineering initiatives are dissatisfied with the results, and 45% are only partially satisfied.

Skeptics would say that it was the change itself that led to the failures described above. The problem might have more to do with how the change was managed. Many ERP engagements are said to fail not because of technical problems, but because management paid insufficient attention to change management issues.

Accountants seeing their jobs displaced by outsourcing, reengineered processes, or a management that believes they do not provide added value may also harbor a negative view of change. Yet accountants are often called on to act as change agents. There are often legitimate reasons to fear change, but there are also lessons to learn from change management or change enablement best practices.

Why Do People Fear Change?

Some accountants worry a lot about the changes in the profession. Others seem to thrive on change, developing new services and skills. Why are people so different in their reactions to change? Understanding fears about transition is the first step in dealing with the fears themselves. There are legitimate reasons why people fear change.

Leaving the “comfort zone.” This is the premise behind the best-selling book about moving cheese. Many people face a routine each day that they know well and have become good at over time. Change means that one has to leave that routine, that “cheese,” and do something else. People fear that they will not be as good at the new thing. On the other hand, comfort zones often turn into ruts, and after a time, experienced individuals are not as good as they think because the rut is no longer fun or challenging.

Loss of position. Probably the worst-case scenario following a change is a job loss. Fear of job loss has been a factor behind some of the negative behaviors surrounding efforts in reengineering, outsourcing, new accounting and enterprise software systems, and e-commerce. These behaviors run the gamut from nonacceptance of a change to outright sabotage. When a manager or consultant walks in the door and announces major change, many people resist, either overtly or covertly. Accounting staff may have good reason for doing so. As businesses increasingly focus on core competencies, they often choose to outsource some functions, including accounting and finance.

New responsibilities. Sometimes change means more work. Information systems can complicate matters because they provide so much information to review and analyze. Routines are built into personal lives over time and can be affected by workplace changes. The need to work overtime, a shift in hours, variability in levels of responsibility impacting stress levels, and relocation are changes that are likely to hit us at home.

Higher expectations. The threat of change often fosters self-doubt. The boss may be extolling the wonderful opportunities when proposed changes are enacted, but employees may be thinking about whether they are up to the challenge. For example, many accountants remember when accounting work meant manually completing budget spreadsheets. Computer technology allowed accountants to do higher-level thinking and analysis. An important part of change management involves retraining people for their new jobs and demonstrating to them that the reward structures are tied to a performance measure they have some control over.

Loss of power and influence. Change may create a sense of insecurity because individuals fear losing power and influence either as a direct outcome or an inevitable consequence of change. Control of information or processes is often a source of power in an organization. Change can create anxiety because it can affect who controls information or processes. In addition, transition often causes a reallocation of scarce resources.

Past experiences. Most of us have faced change at one time or another. Imagine an organization that has seen its management announce every new thing from TQM to BPR with great fanfare, only to see each project take a lot of time and yet fail. If prior change efforts have failed, new change efforts become less appealing.

What Is Change Management?

The escalating pace of transition in recent years has led to a new body of knowledge, called change management or change enablement, which has its roots in organizational development. Traditionally, organizational development methods attempted to increase the effectiveness of organizations through intervention strategies based on concepts from the behavioral sciences. These intervention strategies helped an organization achieve its goals and solve problems by focusing on human relations variables such as organizational culture, organizational structure, management style, and communication.

The scope of change management is broader than its organizational development roots and covers more than training, communication, and documentation. Change management focuses on human behavior, along with the economic, financial, and technical aspects of change. Change management is a structured process supporting people and organizations during the transition to the future vision of the organization. Change management specialists come from many backgrounds and must be skilled in strategy development, process redesign, human resource development, communications, and information technologies.

Change management is an evolving discipline. Many specialists believe that changes in behavior should precede changes in attitude. This is a new way of thinking about change. Behavioralists used to work on changing attitudes first; now it is more common practice to try to make some small, incremental, high-payoff changes quickly. When individuals see the benefits of these changes, they become excited, become believers, and their resistance to change diminishes.

The Change Management Process

Change management is a process, a series of steps designed to move a person from point A to point B: from a legacy system to an ERP, or from an in-house accounting job to an accounting consultant. A prescribed process is useful in managing change (see Exhibit).

Nothing is more important for successful and lasting change than open, two-way communication between management and stakeholders throughout the change process. If some jobs will be lost through outsourcing, management should admit it. If employees fear that their status will deteriorate with a proposed change, they should inform management of their concern.

During implementation, problems often develop that reduce the project’s initial excitement. If things are not going right, management should solicit input from employees, who often have a better feel for exactly what is wrong and may be able to make constructive suggestions for fixing the problems.
In addition to constant communication, the change process includes the following steps.

Establish the need for change. Change for change’s sake may on rare occasions make sense, but most of the time it does not. In their exuberance for their new approach, change-oriented individuals sometimes forget to establish the need for change. They should be confident the change is really needed before trying to convince others.

Develop vision and a business case. Because change should be part of a strategy to accomplish some goal, a clear mental picture of the desired outcomes and what the organization should look like to achieve these outcomes is critical in communicating a vision that is realistic, realizable, and effective in addressing the needs of the stakeholders.

The business case should convince members of the organization that the proposed change is the best way for the organization to achieve its vision. For example, if it currently takes five days to close the books at the end of each month and the new system can reduce that to two days, the accounting staff may be motivated to commit the time and energy to ensure the new system succeeds. The business case should pinpoint the most important issues and include cost justifications where possible. Sometimes the business case comes down to changing or losing to the competition. There could be external threats that make the business case for change easy. Certainly, potential Y2K problems propelled more companies to invest in new accounting and ERP software than would have done so otherwise.

Get a quick win. Management experts previously argued that changes in behavior follow changes in attitude. Now the conventional wisdom is that changing behavior can sometimes change attitudes. If it can be shown that something works and has value for individuals, they tend to have a positive attitude.

The implication for change management is that a quick win is important in building buy-in to the change. For example, if an organization is redesigning its business processes, start with one that will have an early and highly visible positive result, such as in reducing days inventory or days receivable. A quick win for one organization was changing the name on an invoice. In many cases the company had had two to three different names in the marketplace. Using a single logo and name made the invoice look consistent across the board. This built pride in the change, and reduced customer confusion. A simple change, but an effective first win.

Develop management and stakeholder commitment. Generating a quick win and making a convincing business case should obtain commitment from managers and stakeholders, whose dedicated support can be the key to a successful change effort.

Building commitment first requires getting top management to support and adopt the changes. Line workers, often the first to feel a need for change, are sometimes easy to convince that change is necessary. Middle managers, however, often fear change because they believe they have the most to lose. An important caveat of change management is to let each stakeholder know, to the extent possible, what the change will mean personally. Communicate the impact of change in terms of financial incentives, job satisfaction, organizational stature, career opportunities, and other specific areas of concern. In keeping with the rule about honest communication, make sure that each employee knows both the risks and the downside.

Align the organizational structure and performance measurement systems. Major changes in an organization are likely to change the organizational structure, triggering a fear that some employees will lose their jobs. What is far more likely, however, is for their jobs to remain secure but their activities to change. Proponents of change often take for granted an employee’s enthusiasm for more interesting and challenging work. It frequently takes effort to convince employees that different tasks could mean a better job. One way to promote positive employee response is to involve them in designing the performance measurement system that accompanies the changes in organizational structure. Change initiatives are likely to fail if old performance measurement metrics are used with a new system.

New performance measures signal changed priorities. They also allow individuals at all levels to understand their own performance during the transformation. Rather than be tied to bottom-line financial results, the new measures should be linked to metrics that capture improvements in an organization’s core business processes and ensure the right individuals are in the right jobs. In certain businesses, measuring is a way of life; but employees often regard measurement as management checking up on them. In one case, an organization instituted a zero-tolerance policy on errors in order entry. The measure was unrealistic, and individuals felt excessive pressure. To circumvent the measure, many employees simply took too long to enter the order. This caused customer complaints and increased delivery times—not outcomes the business planned or desired. Measuring various aspects of business processes (such as the time it takes to respond to a customer inquiry or process a sales order) provides more information about what is driving bottom-line results and indicates areas for improvements.

Roll out changes. When the time comes to roll out the changes, everyone in the organization should be prepared for anything. Things rarely go perfectly, but following the steps above should make for a relatively smooth transition. Morale-boosting giveaways, meals, and other tokens can go a long way to making bumps easier for employees to handle.

The roll-out’s success also depends upon training. Insufficient training is a certain way to sabotage a change effort. Organizations with limited budgets often overlook training, thinking that the most important part of the change is more technical. Training should come at the right time; train employees too early, and they might not retain everything when real-time practice arrives. Supervision and reinforcement of a new skill can improve chances for success, which leads to a positive attitude toward change. Every small win can improve attitudes toward change.

Measure the results and reinforce the changes. The roll-out of a new process, system, or outsourcing project does not complete the change management process. Measurement of the results and adjustments to the process will ensure that the changes become permanent. Reinforcing new behaviors will prevent backsliding into old habits. Good practice sometimes demands that individuals be precluded from reverting to the old way of doing things. Modifying a new system to mimic the old can create more problems than forcing employees to adapt to the changes.

Nancy A. Bagranoff, DBA, CPA, is a professor of accountancy at Miami University, Ohio.
Jan Ellen Eighme, PhD, CPA, is an assistant professor of accountancy at Miami University, Ohio.
Harvey Kahl, Jr., was a manager at Andersen LLP.

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