DC55: How much does it cost?
In-Depth Analysis: Budgeting for Organisational Change Initiatives
Organisational change is a complex process that requires significant investment in time, resources, and finances. However, budgeting for these initiatives often remains an overlooked or misunderstood aspect.
Insights from the recent survey on organisational change revealed critical patterns, challenges, and opportunities in how organisations allocate and manage their change initiative budgets. This article delves into these findings, offering a detailed analysis and actionable strategies for organisations aiming to optimize their budgeting practices.
Budget Allocation Patterns
Survey respondents highlighted significant disparities in budget allocation for change initiatives:
1. High-Resource Organisations:
Large multinationals and well-established entities allocated between 15-20% of their budgets to change initiatives.
These organisations often had dedicated budgets and formal processes for resource distribution, reflecting their capacity to sustain long-term transformation efforts.
2. Small to Medium Enterprises (SMEs):
Smaller organisations struggled to allocate more than 5% of their budgets to change initiatives.
Limited resources often forced these organisations to prioritize operational needs over strategic transformation.
3. Sector Variability:
Tech and finance sectors demonstrated higher budgetary commitments, aligning with their fast-paced and competitive landscapes.
Public sector and non-profit organisations often operated within tighter financial constraints, impacting their ability to drive large-scale change.
What was most interesting to me was that large organisations, when budgeting in a departmental way against headcount rather than budgeting centrally for change outcomes, had a similar budgetary effect as a smaller, under-resourced organisation BUT expected the results to be the same as a Corporate spending 15-25%.
For example, one client with 2 Coaches for about 300 people expected radical change. Assuming all salaries are equal, 2 / 300 = 1/150 = 0.67%.
Of course, meetings need to be added for all other staff, in terms of time allocation, but this is hardly likely to bring about changes anyone can call a ‘transformation’.
Transparency and Communication Challenges
A recurring theme among respondents was the lack of transparency in budget allocation:
Opaque Processes:
Many employees and mid-level managers were unaware of how much funding was dedicated to change initiatives or how these funds were distributed.
This lack of clarity led to perceptions of mismanagement or insufficient prioritization of change efforts.
Impact on Stakeholder Trust:
Organisations with transparent budgeting practices reported higher levels of stakeholder trust and engagement.
Conversely, ambiguous or inconsistent communication about budgets eroded confidence and reduced buy-in for change initiatives.
Most respondents who had the role of ‘agile coach’ were unaware of the size of the change budget or if there was even one. This surprised me.
As a Lead Developer or Architect, the first thing I wanted to know was the project's budget so I could see what kind of scope the product would have, etc. This is very normal. However, it seems coaches are not asking these questions and are unaware of the budget allocated to their work.
I don’t know, but I expect that this simple question—or rather, the failure to ask it —has a significant role in reducing the number of Agile Coach roles available. Just asking this would tell any business-aware coach a lot about what was expected of them, how long it is expected to take, and who wants results.
The Role of Metrics in Budgeting
One of the most striking findings was the absence of robust metrics to evaluate the return on investment (ROI) for change initiatives:
Undefined Success Criteria:
Organisations struggled to define clear, measurable outcomes for their change efforts, making it difficult to assess financial efficiency.
Overreliance on Short-Term Gains:
Many organisations focused on immediate cost savings or operational improvements, overlooking long-term cultural and strategic benefits.
I have seen this phenomenon for many years, so I am unsurprised. However, it seems very simple to fix. The Enterprise Change Pattern (ECP) (that I created as the people-first pattern for coaching organisations to success) has this step as the first one, and nothing can take place until there is a clear problem-outcome pair.
It reminds me of the saying, “You can’t score if you don’t have a goal”.
Best Practices reported:
Successful organisations implemented metrics such as:
Employee engagement scores.
Process efficiency improvements.
Market responsiveness and customer satisfaction.
Long-term profitability linked to change outcomes.
Using the ECP, the metrics we encourage ARE the business metrics. The change program should improve the business. It seems a no-brainer, but it is amazing how many people measure proxy or secondary metrics, such as ‘How Agile are we?’.
If you would like the experiment template that includes what you are measuring, you can download it from the AWA website resources section.
Key Challenges in Budgeting for Change
Competing Priorities:
Balancing budgets between operational needs and strategic transformation remains a significant challenge for most organisations.
Respondents noted that without a clear mandate, change initiatives often took a backseat to immediate business pressures.
Many participants who have attended our training courses have experienced this and are wondering how to overcome this short-term bias. I have heard this story (as well as the leadership observations below) from many frustrated change makers.
Leadership Alignment:
Misalignment among leadership teams regarding budget priorities frequently resulted in fragmented or underfunded initiatives.
Successful organisations ensured alignment through cross-functional budget planning and regular strategic reviews.
Insufficient Flexibility:
Rigid budgeting frameworks left little room for adapting to unforeseen challenges or opportunities within change initiatives.
One of the biggest challenges I see is that the budget is provided at a certain senior leadership level; this level delegates downwards, and the budget information is not conveyed. The challenge comes because the problems that the Change-Maker is trying to solve often have its source in the leadership level, that has the budget but is no longer available to the Change Project. The Change-Maker makes superficial changes with no ability to fix the Senior Management source of the problems and has no idea of the ROI (or budget).
Recommendations for Optimizing Budget Practices
To address these challenges and enhance the effectiveness of change initiatives, organisations should consider the following strategies:
1. Enhance Budget Transparency:
Clearly communicate budget allocations for change initiatives to all relevant stakeholders.
Publish regular updates on spending and progress to build trust and engagement.
A budget should not be a secret artefact only for the few. It is an essential part of any project, and making it transparent can align prioritisation and expectations.
2. Implement Metrics for ROI:
To evaluate their financial and strategic impact, develop clear, measurable objectives for change initiatives.
Incorporate both short-term and long-term metrics to capture comprehensive results.
A simple problem-to-outcome workshop can align stakeholders and change the perspective from a problem-orientated one to a solution and exploration-focused mindset. This is the first workshop we have run on our Enterprise courses and consultancy programs.
3. Prioritize Leadership Alignment:
Engage leadership teams in collaborative budget planning sessions to ensure alignment on priorities.
Use data-driven insights to inform decision-making and allocate resources effectively.
As mentioned above, leadership alignment is a key first step when using the ECP and cannot be missed. Aligning leadership is a critical and essential step in any change program.
4. Adopt Agile Budgeting Practices:
Introduce flexible budgeting frameworks allowing iterative adjustments based on project needs and outcomes.
Reserve contingency funds to address unexpected challenges or opportunities.
Organisational Change is a complex adaptive problem. It's not a linear, straightforward ‘digging a ditch’ problem. As such, it must be run using agile principles of iterative discovery that reduce risk and add the highest value items first.
This chicken-and-egg problem is why the Agile Coach role was invented. It is challenging to run a change program using agile methods when the organisation has not yet embodied this mindset.
Agile has been absorbed to a certain level in many organisations, and as a result, this role is declining. Whether the organisation has absorbed enough will be self-evident in how the change programs are run.
5. Tailor Budgets to Organisational Size and Complexity:
Large organisations should invest in dedicated change management budgets to sustain long-term initiatives.
SMEs can focus on targeted, high-impact projects that deliver measurable value with minimal resources.
In my opinion, this needs to be a centralised budget. The person heading the change program should report to the board, or at least very senior management, who have the remit to change anything they want in the organisation.
Running change programs from department headcount hardly ever results in significant cultural or organisational structure change that improves delivery.
Conclusion
Effective budgeting is a cornerstone of successful organisational change.
Addressing transparency issues, implementing robust metrics, and fostering leadership alignment can help organisations optimise their financial investments in change initiatives.
Tailored strategies that align with organisational size, complexity, and sector dynamics will further enhance the impact of these efforts.
As the pace of change accelerates, proactive and thoughtful budgeting will be essential for organisations striving to remain competitive and resilient.
For Change-Makers (whatever your role is now), a good first step in any engagement is to ask about the budget and understand the ROI and expected outcomes.
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