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Calculating a Change ROIWhat is the return on your investment in Change Management for your project?Change ROI builds from the business case for the initiative. Even if that business case is not welldocumented, understanding the value of managing the change initiative can still be determined. Thevalue is based on how much of the business case value is connected to what people will do differently.It’s often possible to put in the new technology or change the procedures or sign the new policy, but ifthe people don’t adopt as intended, at least some of the business case value is lost.This approach will work for any kind of change. Whether a social good without a monetary businesscase or a cultural change with only a desire for improvement, this Change ROI calculation can providethe insight to understand the value of managing the change. Because of this approach, it can also guidein the determination of how much effort to apply. The idea is to make sure that the right amount ofeffort is applied to the change, too little and the desired results are not achieved, too much and thereturn is too low.The focus is on the probability that the change is adopted as desired without any focus on the people.In the Change ROI calculation, the probability is multiplied by the value of the change, hardcorebusiness case, or not. That value is what’s at stake if the change initiative is not managed well.1 © 2020 The Change Decision

1: The Business Case ValueWhat is the Business CaseAlthough the term is used often, a definition will inform the approach for calculating a Change ROI.A Business Case is a justification for a proposed initiative based on its expected benefit.It is useful to remember that a business case is future looking. It’s an estimate. Therefore, a calculation of aChange ROI is also an estimate. Since a business case is a justification (the reason for doing an initiative)and not a roadmap to completing the initiative, it tells an organization the “why” for an initiative expressedas a value (usually monetary, but not always). The project plan can be thought of as the “what” to make theinitiative happen. The change plan can be thought of as the “how.”Change ROI CalculationThe Change ROI Calculation is the amount of the business case that’s dependent on people multiplied bythe probability they will adopt as intended without any management of the change and, finally, subtractingout the costs of doing the change management work.Business Case Value from PeopleThis is the amount of the business case that’s attributed to people acting differently (adopting the change).Any components of the business case that do not involve people should not be included. Components suchas lower rental costs or interest savings or other structural costs that do not depend on people adoptingthe change are excluded. This business case value should come from the business leader.Probability of Adoption without Change ManagementThis is the likelihood that people will adopt the change without the impact of a change management effort.A useful test is to imagine that an email is sent telling people what to do. The probability is the likelihoodthat the group will do it. It can also be thought of as the percentage of people that will adopt the changebased on just the email. It’s best if this estimate comes from the business leader.Cost of Change ManagementThis is all of the costs for all of the people and actions and initiatives that will be part of the change plan. Itmust include everything in order to be accurate and credible. This estimate should come from the changepractitioner.2 © 2020 The Change Decision

2: An ExampleConsider a Change Initiative to implement a new Customer Resource Management (CRM) system.Business Case ValueThe business case may have the following major components:1. Reduce licensing cost: $1,500k2. Better outreach to incoming sales inquiries: $1,100k3. Better closing of sales: $3,300kThe value of this business case that is attributable to people is $4,400k (= $1,100k + $3,300k). Thereduction in licensing cost is not included because it is not dependent on change adoption.Probability of Change SuccessWith a new CRM system, the likelihood of success could depend upon many factors such as ease of usewith the current system or frustrations with access to data as well as others. In this case, we’ll assume thatthe likelihood of success is high at 70%.Cost of Change ManagementThe costs for executing the change plan may have the following components:1. Change Manager: $80k2. Project Manager for change: $65k3. Value from all stakeholders: $220k4. Meetings/Events: $250k5. Other Materials: $275k________Total: $890kCalculating the Change ROISubstituting into the equation:$4,400k * (1 - 70%) - $890k = $430kAlthough this is not a particularly robust ROI, it is positive and ensures the capture of 30% of the businesscase that would not otherwise happen without the effort. It’s also useful to note that a 70% probability ofsuccess for a technology implementation without any change management is unusually high. However,even with that high estimate from the business leader, the Change ROI is valuable.To start building trust in your approach to change, it’s important to get the Business CaseValue from People and Probability of Adoption without Change Management part ofthe equation from the business leader. Involving them in the calculation can increase theirconfidence in the numbers and help them see the potential value in applying ChangeManagement. This is a great way to start the relationship and sets you up for betterconversations and decision-making as the initiative progresses.3 © 2020 The Change Decision

Deeper ThoughtWhen you put forward your businesscase it may be useful to contemplate thecontext in which the decision-makershave to go about their business:● How much do decision-makers relyon quantitative analysis?● Who do the decision-makers relyupon to make decisions when itcomes to costs?● Who do the decision-makers relyupon to make decisions when itcomes to people?● What has gotten in the way in thepast from including changemanagement as part of an initiative?● What actions could you take toreinforce the case for change?4 © 2020 The Change Decision