The best organisational structure for enterprise change management

The best organisational structure for enterprise change management

Exploring Organisational Structures for Optimal Enterprise Change Management

Change is an inherent part of every organization’s journey towards growth and adaptability in an ever-evolving business landscape. In the realm of change management, one critical consideration is the structure or organizational design that best facilitates successful enterprise change management.  There are plenty of different ways to structure change management practices.  Like any type of organisational structures for organisations overall, there is not one way that is the most effective.  It depends on the circumstances of the company in concern.

Understanding Change Management Structures

Centralized Change Management Structure

Centralized change management structures consolidate the authority, decision-making, and oversight of change initiatives within a single, dedicated team or department. In such a structure, the change management team sometimes reports directly to either Strategy or Office of the CEO. This approach provides the change practice significant influence due to its direct linkage with strategy.

Reporting Lines: HR, IT, Strategy, and More

In addition to the choice between centralized and federated structures, change management specialists (and the senior leaders that they report to) often grapple with determining the optimal reporting lines for their change teams. Several departments within an organization are typically considered for hosting the change management function:

1. Human Resources (HR or People & Culture)

Reporting to HR aligns change management with employee/organisational development and engagement. This can be particularly effective when change initiatives heavily impact the workforce, as HR possesses expertise in people-related matters.

2. Information Technology (IT)

With the increasing digitalization of business processes, reporting to IT can ensure that complex technology-driven changes are well led and managed across the enterprise. The remit for change practices reporting to IT can range from including just technology changes, to all strategic and funded initiatives, through to all of change management as a function.

3. Strategy or Transformation Office

Reporting to the strategy or transformation office closely ties change management to the organization’s overarching strategic goals. This alignment ensures that change initiatives are directly linked to long-term vision and objectives.

4. Operations

For a lot of organisations, the Operations function can determine a lot about how the organisation is run.  This can include the change management function as well.  The advantage of having the change practice reporting to Operation can mean that the operating rhythm of the organisation can be designed with the right change management approaches.  The way employees are engaged, how they’re involved, and how BAU processes are run, measured, and reported can be designed with change management interventions.  

Key benefits of a centralized structure include:

  1. Consistency: Centralized control ensures consistent change management practices across the organization, reducing confusion and increasing effectiveness in terms of setting a common level of practice.  Consistency in terms of language and concepts mean that it is easier for the business to adopt change management principles and practices.
  2. Resource Allocation: Easier resource allocation, as the centralized team can prioritize and allocate resources based on organizational priorities.  With better economy of scale for a larger centralised team, the change group has the opportunity to resource initiatives using different levels of involvement, from sessional, part-time to full-time.
  3. Alignment: Enhanced alignment with the organization’s strategic objectives, as the change management team directly interfaces with top leadership.  This means that effort and focus areas as more likely to be on that which is most strategic and can impact the organisation the most.
  4. Change maturity.  The change practice has the opportunity to focus on building organisation-wide change maturity due to its ability to interface and influence across the organisation.  While other change management structures may also have the ability to focus on building business change maturity, a centralised function has the advantage of having a greater impact level due to its scale.  

To read more about developing change maturity visit our article How to implement change process when your business is not change mature, and A New Guide for Improving Change Maturity.

Federated change management structure

Federated Change Management Structure

In contrast, federated change management structures distribute change management responsibilities throughout various business units or departments. Each business unit maintains its own change management team, and these teams collaborate to execute change initiatives. Typically, these teams report to their respective department heads.  This means that there is no formal enterprise change management function.

The advantages of a federated structure include:

  1. Local Expertise: Greater understanding of department-specific needs and challenges, leading to tailored change strategies and therefore better change outcomes.  Different business units can have very different cultures and different business needs.  Having change professionals who understand the various intricacies of the business unit means that they’re able to design change approaches that will better meet business requirements.
  2. Ownership and relationship: There may be increased ownership and commitment among departmental staff, as the change teams sits in the same business unit and are ‘one of them’ versus someone sent from a centralised team.  Others in the business unit may be more conducive to advice and support from a colleague in the same broader business unit.  It is also easier to establish a closer working relationship if the change practitioner is always working with the same teams.
  3. Flexibility: Greater adaptability to changes in individual departments, as they can independently address unique issues.  Without any direction from a central team, the business-dedicated team can better flex their service offering to meet the business unit’s particular focus areas.  Whilst, a central team may de-prioritise departmental-level initiatives to be less critical, for a departmental team it is much easier to flex toward their priorities.

Impact on Business Results

The choice of change management structure and reporting lines can significantly impact an organization’s overall business results. Here’s how different structures can yield varying outcomes:

Centralized Structure Outcomes

  • Efficiency: Centralized structures can excel in efficiency of delivery due to its scale of economy.  Whereas small departmental change teams may structure to flex and resource projects efficiently, larger change practices can avoid this by leveraging its range of practitioners with different levels of skill sets and availability.
  • Consistency: They ensure a consistent approach to change management, reducing confusion among business stakeholders and employees.  The consistency of standards also mean that there is less risk that initiatives may experienced a change intervention that is less effective due to the centralised capability standards reinforced.
  • Top-Down Control: Change initiatives are closely aligned with strategic objectives set by top leadership.  This means that any ‘pet projects’ or less prioritised divisional initiatives may not be as likely to be granted change management support.  This does not necessarily mean that those departments won’t focus on those initiatives, it just means that change management resources are more prioritised toward what top leadership deems to be most critical.

Federated Structure Outcomes

  • Local Engagement: Federated structures promote local ownership and engagement, fostering a sense of responsibility among departmental staff.  Department-specific change practitioners will be more familiar with ‘what works’ at the department level. They are better able to leverage the right engagement channels and have the ability to access management and leadership roles at the department to garner support and drive overall initiative focus and success.
  • Adaptability: They allow for greater adaptability to unique departmental needs, which can be crucial in complex organizations.  For example, the types of change management approaches and interventions that work for Sales organisations will be very different compared to that for call centres or processing centres.  The ability for the change practitioner to adapt locally can make or break an initiative’s success.
  • Innovation: Different units can experiment with various change approaches, leading to innovative solutions.  This can be done without the confines of what is the overarching ‘standards and guidelines’ from the centralised change team.

Choosing the right structure for enterprise change management

Choosing the Right Structure

The decision regarding the optimal change management structure should be rooted in the organization’s specific context, culture, and the nature of the changes it is undergoing. Experienced change management specialists understand that a “one-size-fits-all” approach does not exist. Instead, they carefully consider the organization’s goals, resources, and capacity for change.

Also, it may not need to be either centralised or federated model.  It can be a combination of both.  For examples:

  • A federated model by reporting lines, however with a strong community of practice that is centralised and that promotes sharing of practices, standards, and even resources.  This ensures that the overall group is connected to each other and new innovative approaches can be shared and proliferated
  • A centralised model by reporting lines, however with dedicated business-specific change partners that are focused on particular business units so that they are delivering business-focused change solutions.  At the same time, the team still maintains a lot of the advantages of a centralised team.

The organisational structure and reporting lines for a change practice may influence various aspects of its work, however, this may not be the most critical part of how it creates value for the organisation.  Other aspects in which a change practice should focus on in its development include:

  • Resourcing model.  How to fund change management resources and the service delivery model to support a range of different projects with different needs for seniority, skill set, and even organisational tenure
  • Change methodology/framework.  Organisations should work on at least a change management framework to set a minimum standard for change delivery.  Using a generic off-the-shelf methodology may be OK, however they may not cater for the particular language and business needs of the organisation.
  • Change capability and leadership.  Outside of project change delivery, the team should also work on gradually building change capability within the organisation to enhance the ability to drive and support change.  This may not need to be in the form of training, it can also be done through structured development through real change projects.
  • Change portfolio/Enterprise change management.  Beyond individual change delivery, the change team should also focus on how to deliver and land multiple initiatives at the same time.  Most organisations need to drive change at a faster speed than previously and there is no luxury to only focus on one change at a time.  How the team measures, tracks, and ‘traffic controls’ the multiple initiatives is crucial for its success.

To read more about managing a change portfolio visit our Change Portfolio Management section for a range of articles.

Change management structures and reporting lines are not just administrative choices; they can, in some ways, have a profound impact on an organization’s ability to achieve successful change outcomes. Experienced change management specialists must weigh the benefits and drawbacks of centralized and federated structures and align them with the specific needs of their organization. By doing so, they can maximize their ability to navigate the complexities of change and drive the organization toward a more agile, resilient, and adaptive future.