In parts one and two of this three-part blog series, we discussed how critical organizational change managers (OCMs) are to organizational transformation as well as the return-on-investment (ROI) when working with one. Our final installment in this series will look at the cost of OCMs and how much budget should be set aside for them.
Benefits and ROI of change management
Before we begin talking about the cost of OCMs, let us look at a quick benefit breakdown of OCMs.
- ROI Factors: faster speed of adoption, higher ultimate utilization, and higher proficiency
- Cost Avoidance: poorly managed change results in immediate and long-term costs from a lack of productivity, incomplete change, and change that does not continue
- Risk Mitigation: employees, the project, and the organization are all at risk during a change – a poorly managed change can result in financial and physical costs (i.e., loss of employees) that can negatively impact the business
- Meeting Objectives: data shows organizations who invest adequately in OCMs are far more likely to see a successful and lasting change take place
Cost of change management
But how much do cost managers cost? Unfortunately, there isn’t a simple answer to that question because any hard numbers will depend upon the change your organization is undergoing and how senior the change manager you hire is, among other factors.
However, numerous studies have determined what percentage of your budget should be allocated to a change manager to see the most successful change possible. Gartner recommends allocating 15% (minimum) of the overall system implementation budget to change management.1 Additional studies have found that 77% of businesses allocate up to 30% of their budget to an OCM consultant. Considering the importance of a change manager to successful organizational change, it is apparent why many organizations would want to secure a healthy budget for an OCM consultant.
The cost of an OCM consultant does not correlate to the cost of the change
Yet these statistics can become misleading. Of companies managing large projects (over $1.5 million), 77% stated they spend less than 10% on change management. This might lead one to believe that 10% is fine for all businesses. This is not the case. Conversely, for smaller projects, where companies were spending less than $50,000 on the project, 85% of respondents said that up to 50% of the implementation budget was spent on change management.
What does this tell us? There is no correlation between the project cost and the cost of the change manager. For these less expensive changes likely do not include much IT change and deal much more with people. For this type of change, it is understandable that a larger portion of the budget would be allocated – after all, OCM consultants are experts on people.
Whereas a costly project that might include far more IT and technology would cost more and a larger portion of the budget would be allocated for that and not the change manager themselves. But it is also important to remember that 10% of $1.5 million + is still a healthy chunk of money, as is 50% of a $50,000 budget.
Allocate at least 15% of your budget for an OCM consultant
The important thing to remember when allocating a budget is the necessary components for a successful organizational change:
- Systems development
- Evaluation and adjustment of processes
All five of these items will require an OCM consultant to organize and complete successfully. That is what this portion of your budget will go to, and as critical as these elements are, they will require a significant investment. So, is 15% the magical number? Perhaps.
The cost of an OCM consultant rises when you factor in what is needed to alter preexisting behavior patterns and thinking throughout your organization. The more emphasis on people, the more an OCM consultant is critical. A minimum of 15% of your budget allocated for an OCM consultant would put your budget in a good place and statistically, this is the most common expenditure.
Judge, your partner for change management
With over 50 years of experience across a variety of industries, The Judge Group has undergone significant change itself. The key to our success is understanding the value of change management and investing in it when we do undergo an organizational change.
Our OCM consultants are experts in their field and will approach your change as they do ours – like it is their own. Judge prides itself on building intimate and lasting relationships with clients, as well as remaining flexible to deliver the right solution. Our clients know that they can count on us every time to be creative, thorough, and attentive. In addition, we are methodology agnostic, so we uniquely tailor our approach for every client and challenge ourselves to deliver the best solution.
Our clients have been keenly aware of the need for change management professionals and solutions, so The Judge Group is ready to meet any need that your organization may have. To survive and thrive in the business landscape, one must always be ahead of the curve. So why not partner with an organization that is committed to delivering best-in-class change management solutions?
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