Copyright © 2011 Accenture All Rights Reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture. October 28, 2010 Change Management ROI Forum

2 Introductions Objectives Brief Overview of Change Management Peter Richardson: Measuring Change Outcomes Topic 1 - Change and Your Organization Topic 2 – The Business Case for Change Management Outcomes and Next Steps Networking Agenda 4:00 – 4:05 4:05 – 4:10 4:10 – 4:15 4:15 – 4:40 4:40 – 5:00 5:00 – 5:40 5:40 – 5:50 5:50 – 7:00 Copyright © 2011 Accenture All Rights Reserved.

3 Please introduce yourself and provide the following details: Name Company Title What are you looking to get out of this forum? Introductions Copyright © 2011 Accenture All Rights Reserved.

4 Introductions Objectives Brief Overview of Change Management Peter Richardson: Measuring Change Outcomes Topic 1 - Change and Your Organization Topic 2 – The Business Case for Change Management Outcomes and Next Steps Networking Agenda 4:00 – 4:05 4:05 – 4:10 4:10 – 4:15 4:15 – 4:40 4:40 – 5:00 5:00 – 5:40 5:40 – 5:50 5:50 – 7:00 Copyright © 2011 Accenture All Rights Reserved.

5 Our goal is to use experienced opinion from across industries, levels, and domains, to discuss, understand, and attempt to place a value on an investment in Change Management Through a discussion with key stakeholders involved in driving change in leading organizations, we hope to understand a variety of Change Management initiatives and how they were successfully (or unsuccessfully) quantified We would like to develop a perspective on creating the business case for Change Management We would like to support increased integration and networking among change leaders in the Toronto area Objectives Copyright © 2011 Accenture All Rights Reserved.

6 Introductions Objectives Brief Overview of Change Management Peter Richardson: Measuring Change Outcomes Topic 1 - Change and Your Organization Topic 2 – The Business Case for Change Management Outcomes and Next Steps Networking Agenda 4:00 – 4:05 4:05 – 4:10 4:10 – 4:15 4:15 – 4:40 4:40 – 5:00 5:00 – 5:40 5:40 – 5:50 5:50 – 7:00 Copyright © 2011 Accenture All Rights Reserved.

7 What is “Change Management”? A way to ensure that individuals receive the support and development they need throughout a business change Focuses on equipping the workforce to respond positively to the change project as well as fulfil their roles and responsibilities in tomorrow’s world The purpose of addressing knowledge and skill gaps resulting from a transformation is to minimize a drop in productivity and reach the desired performance in the shortest possible time to maximize the predicted business benefits from the initiative Examples of change management initiatives include: Sponsorship Stakeholder management Communications Training Knowledge Management Organizational Design Process Design A business change could be small or large, low impacting or high impacting Could be changing an entire organization (business transformation), or a part of an organization (e.g. supply chain function) Change Management OrganizationProcessSystem End Goal To manage the change of a transformation into the workforce, the environment, and the processes of an organization, to maximize expected benefits of the initiative Business Transformation Copyright © 2011 Accenture All Rights Reserved.

8 Introductions Objectives Brief Overview of Change Management Peter Richardson: Measuring Change Outcomes Topic 1 - Change and Your Organization Topic 2 – The Business Case for Change Outcomes and Next Steps Networking Agenda 4:00 – 4:05 4:05 – 4:10 4:10 – 4:15 4:15 – 4:40 4:40 – 5:00 5:00 – 5:40 5:40 – 5:50 5:50 – 7:00 Copyright © 2011 Accenture All Rights Reserved.

Measuring Change Outcomes Copyright c Elspeth J Murray and Peter R Richardson,

10 The Challenge Change activities pervasive in all organizations today Many different kinds of change, at several different levels of difficulty Need to be able to justify the investment of capital, time and effort in change initiatives Outcomes of change are often hard to measure, or at least to link to economic returns Can link change programs to objectives, but even if these are attained, have we created value for the organization? Copyright c Elspeth J Murray and Peter R Richardson, 2010

11 Diagnosis of the Change Challenge Shallow Deep Deepest Operational Cultural Strategic Paradigm "The fundamentals are right - but we need to refocus" - change objectives, strategies, possibly mission " We have to change the way that we think and act" - change vision, values, and leadership "We have to recreate the business - or disappear" - change, redefine and recreate the total enterprise Degree of Difficulty " What we are doing is right - we just need to do it better" - no change to mission, values, strategy PR-056 Copyright c Elspeth J Murray and Peter R Richardson, 2010

12 Propositions Change is always introduced with the intention of increasing value otherwise, why do it? Change always has (should always have) objectives – desired outcomes Objectives can be measured, although sometimes with difficulty Costs of change can generally be measured more readily than outcomes / value created Maybe need to think in terms of value capture and value creation – the former is expected, the latter may be unexpected, unintended Also need to measure the value destruction caused by change Different levels of difficulty in measurement: Level 1 – easily measurable Level 2 – moderately easy to measure Level 3 – some difficulties Level 4 – hard to measure Need to think in terms of tangibles (easily measured) and intangibles (more difficult to measure) Copyright c Elspeth J Murray and Peter R Richardson, 2010

13 Measurement Criteria Cost of Change Value capture and creation Value Destruction Copyright c Elspeth J Murray and Peter R Richardson, 2010

14 Measuring the Cost of Change - a Comprehensive Perspective StrategicOperational Tangible Intangible Debt Charges New Plants ProductDevelopmentMarketDevelopment LabourMaterialsEnergySuppliesContractServices Poor Product PositioningTechnologicalObsolescence Poor Facility Location Poor Quality AbsenteeismTurnover Poor Morale Lost Output Late Delivery Copyright c Elspeth J Murray and Peter R Richardson, 2010

15 Value Creation / Destruction Directly measurable (financial) – improved profitability, increased revenues, decreased cost / expenses Directly measurable (non-financial, and can often estimate dollar benefits accurately, if not precisely) - greater custom loyalty / satisfaction; increased productivity, behavior change, faster service / response times; ease of doing business; improved employee engagement. Improved health and safety; reduced absenteeism and turnover Very hard to measure – enhanced reputation, improved morale, value shift, greater employee loyalty, improved data capabilities, better reporting, enhanced employee benefits Copyright c Elspeth J Murray and Peter R Richardson, 2010

16 Level 1 (Easily Measurable): Introducing a New Product Costs and benefits of introducing a new product can be easily measured Costs include: Product development (R&D, pilots, market research / trials) Product Launch Investment costs Value creation can be measured through: Additional revenues, additional margin, additional profit, ROI Increased market share Value destruction can also be measured: Cannibalization of sales of other products Loss of reputation, brand value if product fails Copyright c Elspeth J Murray and Peter R Richardson, 2010

17 Level 2 (Moderately Easy to Measure): Process Improvement Cost and benefits of process improvement can be moderately easily measured Costs include: Investments in new plant and equipment Training, materials, supplies etc. Lost time, reduced productivity during transition etc. Value creation can be measured through: Additional revenues / output Reduced waste / scrap, reduce labor cost etc. Faster cycle times, improved productivity Value destruction can be measured through Lost output, decreased efficiency Copyright c Elspeth J Murray and Peter R Richardson, 2010

18 A Contemporary Cost Report - Alcoa Australia Period Expenses Equipment rental $ Overtime $ Supplies $ Contract labor $ Energy $ $’000s Period Cost Drivers Waste energy $ Off-spec $ Re-work $ Absenteeism $ Time waste $ Customer failures $ $’000,000s Copyright c Elspeth J Murray and Peter R Richardson, 2010

19 Level 2 (Some Difficulties): An Acquisition Costs of the acquisition can be measured fairly readily: Cost of doing the deal Cost of acquisition Cost of integration Value of the deal may only be apparent after several years Nevertheless, value creation targets can be set and tracked: Increased revenues, profitability, return on investment Cost reductions, economies of scale, economies of scope Value destruction can also be measured: Short term – loss of revenues, decline in profitability, decline in ROI Long term – loss on disposal of the acquisition Copyright c Elspeth J Murray and Peter R Richardson, 2010

20 Level 3 (Hard to Measure): Culture Change Culture change should always have desired outcomes – e.g. improved safety, better customer safety, higher productivity These outcomes can and should be stated as objectives which can be measured (but usually are not) Costs of culture change can be measured accurately, if not precisely: Cost of consultants, time invested by participants, expenditures on workshops, trinkets etc. Value creation can be measured over time Dollars saved through improved safety Improved sales revenues, margins, profits (e.g. from a sales culture change) Reduced cost from improved workforce productivity Hard to measure: Intangible value from improvement in morale, changes in attitude (but don’t these flow through to better safety, improved customer service etc.) Copyright c Elspeth J Murray and Peter R Richardson, 2010

21 Level 4: Culture Change Value destruction: Hard to measure the value destruction created by ineffective culture change – largely opportunity costs – e.g. foregone revenues, cost reductions Copyright c Elspeth J Murray and Peter R Richardson, 2010

22 Level 4? (Hard to Track?): Introducing SAP Some costs of introducing SAP are reasonably easy to track: Cost of the system, cost of consultants, project team Some costs are harder to track: Business interruption, poor reporting Value creation is hard to track: Difficult to attribute revenue creation, additional profits to improved information capabilities, associated improvements without SAP may have created additional benefits Value destruction: Challenging to measure the opportunity cost of devoting 2-3 years to implementing SAP versus alternative investment of time and money in growing the business Copyright c Elspeth J Murray and Peter R Richardson, 2010

23 Introductions Objectives Brief Overview of Change Management Peter Richardson: Measuring Change Outcomes Topic 1 - Change and Your Organization Topic 2 – The Business Case for Change Management Outcomes and Next Steps Networking Agenda 4:00 – 4:05 4:05 – 4:10 4:10 – 4:15 4:15 – 4:40 4:40 – 5:00 5:00 – 5:40 5:40 – 5:50 5:50 – 7:00 Copyright © 2011 Accenture All Rights Reserved.

24 1.What type of change has your organization experienced? 2.How does your organization currently value change management? 3.Have you witnessed a correlation between an investment in change management and the success or failure of a particular initiative? Topic 1: Change and Your Organization Copyright © 2011 Accenture All Rights Reserved.

25 Introductions Objectives Brief Overview of Change Management Peter Richardson: Measuring Change Outcomes Topic 1 - Change and Your Organization Topic 2 – The Business Case for Change Management Outcomes and Next Steps Networking Agenda 4:00 – 4:05 4:05 – 4:10 4:10 – 4:15 4:15 – 4:40 4:40 – 5:00 5:00 – 5:40 5:40 – 5:50 5:50 – 7:00 Copyright © 2011 Accenture All Rights Reserved.

26 1.What are the financial and non-financial benefits of a particular project? 2.How are benefits expected to be achieved? 3.What does a business case for investment in Change Management look like? Topic 2: The Business Case for Change Management Copyright © 2011 Accenture All Rights Reserved.

27 Introductions Objectives Brief Overview of Change Management Peter Richardson: Measuring Change Outcomes Topic 1 - Change and Your Organization Topic 2 – The Business Case for Change Management Outcomes and Next Steps Networking Agenda 4:00 – 4:05 4:05 – 4:10 4:10 – 4:15 4:15 – 4:40 4:40 – 5:00 5:00 – 5:40 5:40 – 5:50 5:50 – 7:00 Copyright © 2011 Accenture All Rights Reserved.

28 Outcomes We will provide a summary of the discussion and relevant key learnings Next Steps Would you be interested in holding a forum like this on an ongoing basis? Outcomes and Next Steps Please fill out the survey on your desk and tell us what you thought about today’s event! All feedback is welcome. Copyright © 2011 Accenture All Rights Reserved.

29 Introductions Objectives Brief Overview of Change Management Peter Richardson: Measuring Change Outcomes Topic 1 - Change and Your Organization Topic 2 – The Business Case for Change Management Outcomes and Next Steps Networking Agenda 4:00 – 4:05 4:05 – 4:10 4:10 – 4:15 4:15 – 4:40 4:40 – 5:00 5:00 – 5:40 5:40 – 5:50 5:50 – 7:00 Copyright © 2011 Accenture All Rights Reserved.

30 Thank You! 30 Copyright © 2011 Accenture All Rights Reserved.