Editor's note: Charlie Mihaliak is an executive director in Ernst & Young's Financial Services Office and is located in Hartford, Conn. Raj Sharma is a principal in EY's Financial Services Office and is located in Redwood Shores, Calif. Bill Smith is a principal in EY's Financial Services Office and is located in Los Angeles, Calif.

As insurers invest considerable resources in large-scale, technology-enabled transformation programs, organizational change management (OCM) helps them avoid common risks and pitfalls such as sub-par adoption of new technologies and lack of organizational alignment around new processes.

Given that new product development, new systems deployments, and claims, policy and billing transformations can command budgets in the tens of millions of dollars, project teams need to use every tool at their disposal to drive faster, more predictable results. OCM, historically seen as the responsibility of business leaders, is important to IT because proven techniques can drive faster execution, lower costs and better outcomes throughout a project lifecycle. Further, OCM can help IT organizations transform and mature their capabilities over the long term, increasing IT's value to the company.

In the past, conventional wisdom held that OCM equated to end-user training and some communication about major project milestones. While those elements are still necessary, they are not sufficient to the requirements of today's high-stakes, complex change programs. Nor do they meet the needs of CIOs and other IT leaders who understand that their roles now emphasize strategic engagement with the business and the enablement of performance improvement.

Rethinking the role of OCM and how it works allows organizations to proactively plan and strategize for change management at the outset of a project, rather than scramble to address it “mid-flight,” as so often occurs, usually in the midst of build and testing activities. In other words, IT leaders can and should be actively involved in shaping and executing OCM strategies, not just passively accepting whatever the business decides.

OCM can help accelerate projects by:

Minimizing rework on requirement and design activities by aligning teams around clear project objectives, scope and the future-state vision, as well as engaging operational leaders effectively to secure their buy-in.
Shortening timeframes for decision-making and issue resolution by driving leadership engagement and defining clear project roles, responsibilities and decision-making processes.
Ensuring IT and business resources are available to execute when needed by aligning leaders around the program, including appropriately prioritizing and integrating with other initiatives, and communicating effectively.
Promoting rapid user adoption by engaging stakeholders effectively throughout the project lifecycle.

OCM in action: a multi-faceted approach

Effective OCM extends beyond training and project communications to position the project team, IT and business operations to effectuate the desired project outcome. The components of an effective OCM approach include:

Leadership alignment. Leadership alignment is crucial to ensuring projects stay on track. Leadership alignment helps IT to be more productive by reducing rework, minimizing cross-project conflict and mitigating the risk of midstream project cancellations.

The basic idea is powerfully simple: projects that start with leadership buy-in, a clearly defined target-state vision, a strong project approach and appropriate funding will run more effectively because it's easier to control scope, identify risks sooner and escalate and resolve issues faster, especially when several projects are calling on the same resources.

Risk management discussions are more transparent when there is clear understanding of project needs and shared objectives across the business and IT leadership team. Leaders will be better positioned to prioritize between nearer-term enhancements and larger-scale projects when they have clearer visibility into ROI models and resource requirements.

Stakeholder engagement. Extending beyond the boundaries of IT, stakeholder engagement eases the path to success by aligning requirement definition and design decisions with project goals. When stakeholders understand the big picture of a project's mission and scope, they are better positioned to make informed decisions about the important details. Further, the chance of rework is greatly diminished when stakeholders have clarity and consensus on program objectives, the target-state vision and interdependencies with other initiatives.

Practically, it's about involving the right subject-matter experts from the business, operational teams and other IT units at the right time, and ensuring their management supports their involvement. Engaging business stakeholders sooner makes requirement and design sign-offs easier and increases the likelihood that appropriate resources will be available to support the project throughout its life cycle and that user adoption will occur rapidly at implementation.

Projects that utilize agile-like techniques are proving the value of effective stakeholder engagement.

Organizational alignment. Today, IT projects are increasingly judged on the achievement of expected business results. That's a pretty high bar compared to past measures, like on-time and on-budget performance or application-response time or defect density. Organizational alignment helps to ensure the business-specific benefits of IT projects are realized.

A key step in driving organizational alignment is to conduct organizational impact analyses for each group or function affected by the project. This effort should be highly structured and specify changes to roles, workflows, skills, performance management and other areas that will be necessary to achieve targeted results. Information and findings from impact analyses should be used to formulate an action plan to drive alignment.

Minimizing data challenges. Definitions, data stores, analytics tools and environments, data quality and management reporting may all be materially affected after new applications and processes are implemented. The incorporation of additional third-party data can also be a big change. Data represents the lifeblood of insurance companies and it brings a host of compliance issues and other challenges as well as significant potential impacts on critical functions across the enterprise – from product development, marketing and customer service to finance, actuarial and IT. Engaging these stakeholders early can advance a company's data strategy by reducing resistance to and drag on project speed.

Roles, responsibilities and communications. The most effective projects have certain notable characteristics. Chief among them are clearly defined roles, responsibilities and performance expectations for all team members, as well as effective ongoing communication. If these sound like self-evident hallmarks of success, it's important to remember that they are also comparatively rare. Project teams face significant pressure to begin as soon as resources become available and frequently give these important activities insufficient attention.

These steps are especially important for larger projects that require roles to be filled by individuals from many groups, including multiple functions across the enterprise and external service providers.

Deployment readiness. Veteran IT project managers know all too well how IT organizations bear the burden of any project bumps or issues, even if lack of business preparation or participation is a contributing factor. OCM can have a direct bearing on implementation success by ensuring that business operations are fully engaged and ready for deployment. Indeed, this is where OCM overlaps with general project management or release management best practices.

The key steps must be completed well in advance of launch day, of course. It's critical that business operations understand how new technology will impact current roles, workflows, work assignments, supervision practices and various operational forms and procedures. There are also significant management-information impacts as well. The details are many and minute. Business-side impact analyses must be comprehensive.

These challenges have been successfully addressed by defining business deployment roles and workstreams. In one successful project, deployment manager roles were defined as part of the central change management team and employed part-time local office deployment champions within each office affected. The deployment manager would assist the local office deployment champions in preparing for day 1 implementation and then provide support during the critical early days of deployment. Work activities were planned in detail using readiness checklists and managed aggressively. The company also implemented scorecards to track the achievement of readiness activities across the offices and shared the scorecards with program and senior leadership.

Preparing IT for new technology. One of the higher-risk areas in technology-intensive change programs is the impact on IT associates. It's also one of the most often overlooked areas and thus, a strong candidate for considerable OCM efforts. More specifically, new technology deployments often suggest to development and support teams that their core skill sets may be on the verge of obsolescence. Given that many IT resources equate their specialized knowledge of legacy systems with job security, anxiety levels can run very high when core policy administration platforms or customer data repositories are modernized. The more senior the resources and/or the longer their tenure, the more likely there will be turbulence in the change. Similarly, change programs that include new sourcing arrangements with offshore or external providers may require extra effort. In some cases, business or operational units may take on new technology-related responsibilities, leading to changes in IT roles and reporting relationships.

At a minimum, IT groups need to plan training or reskilling programs for associates who may be reassigned to new roles or teams.

If time and money are available, effective organizational change management should be embraced by IT as a “must-have” project activity rather than a discretionary add-on.

The payoff of OCM for IT leaders is twofold:

It helps IT teams address their traditional challenges related to project costs and duration — that is, it drives faster and more effective project performance through reduced risks and stronger decision-making.
It demonstrates IT's increasing business orientation, collaborative capabilities and focus on improving the bottom-line performance of their companies.

Special Reports /

Re-Thinking Organizational Change Management and Its Role in Insurance IT Projects

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