August  24,  2017

Successful companies are constantly disrupted as they chase the benefits of new technology. Today, the three main areas of business technology change are the move to the Cloud, Big Data and Data Security.

Companies trying to stay up to speed on each of the three have to manage a lot of change at once. An organization might have hundreds of concurrent initiatives to upgrade systems, analyze big data, or maintain infrastructure. Over 90% of the Fortune 500 are now in the process of moving some or all of their technology infrastructure to the Cloud; they are working primarily with Microsoft’s Azure, Amazon Web Services, or the Google Cloud Platform.

Based on current data, we can forecast with certainty that the move to the Cloud will dominate technology organizations and drive the demand for talent for the next decade. Many industries are putting in place new best-in-class solutions based on infrastructure-as-a-service and Cloud-based applications.

How then must an organization plan for such a disruptive change? What is the scope of budgets facing approval by senior management? What will it take to implement a whole new way of doing business using The Cloud?

The best organizations are thoughtful about technology transformation. Many perform a comprehensive study of potential solutions and chose the right technology vendor. They build a comprehensive budget based on the costs provided by the vendor for the technology.

Yet many don’t adequately budget for behavioral change, which drives most of the business case. How will your people perform with the new technology? Will roles and interactions change? What are the as-is and to-be processes? What are concurrent initiatives that might draw employees’ attention away from the transformation and impede success? Being thoughtful about technology means considering these as essentials.

A successful major technology transformation must include a strategy and budget for helping people manage the transition and perform during and after the change. Job roles and processes will change for most employees. To get the full benefits of the technology, every employee must adopt new behaviors, work within new processes, and respond to new team and organizational goals.

So how much should you budget to engineer the employee experience (otherwise known as change management)? There are several ways to estimate the investment. We don’t recommend anchoring it to the IT investment – one has little to do with the other, particularly as the cost of technology drops every year. But you can anchor it to the business case benefits: what percentage of the business case depends on your employees behaving differently? Or you can pick a reasonable amount to spend per employee, based on your particular technology and the degree of behavior change required.

The investment in employee performance is easy to justify. Around 60% of the business case for any technology change is driven by changes in behavior, while only 5% is driven by workforce optimization. Synergies, financial benefits and cost savings make up the rest.

For example, if the business case is $100 million, up to $60 million of the benefit will come from employees becoming more effective and efficient in their new roles, leading to increased sales and profitability. The budget to design the Employee Experience should be set in relation to the overall business case. Some of the most successful companies spend up to 10% of their business benefit on designing the Employee Experience. The success of the business case is driven not only by an investment in new technology, but by a purposeful investment in people and their performance.

For more on technology change budgeting, read this chapter from The Technology Change Book.