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For modern business, change is not only healthy but it's also essential for success. However, managing change comes at a cost. You will have to allocate time, money and people resources to plan, implement and sustain change.

What is the cost of change?

It's important to understand the cumulative costs of change management. Many costs may be hidden or crop up unexpectedly.

Most costs associated with change management relate to:

Communication

You may need to explain openly and frequently the reason for the change and the actual changes themselves. In some cases, a formal public relations strategy can help you keep employees, customers and suppliers informed. In cases such as downsizing, you may have a legal obligation to consult your staff. 

Branding

You may need to reflect the organisational change in your branding, eg on stationery or delivery vans. This may happen, for example, in a merger or acquisition situation, or if you relocate, add new product lines, etc.

Training

You may have to retrain your employees or carry out development and cultural change programmes to help them adapt to the organisational change and new business practices.

Resources

You may need to invest resources such as time, effort, new technologies, infrastructure and particularly human resources to help with the organisational changes. This is likely to add to the costs of change.

Restructuring

You may need to consider the costs of restructuring - for example, redundancy payments to staff or costs of relocation to new business premises.

You may also incur additional costs, eg for consultancy, recognition and general expenses. Some of the costs will be difficult to quantify, but others may be easier to measure. Measuring costs accurately may allow you to find ways to reduce or avoid certain costs entirely.

A cost-benefit analysis can offer you a methodical structure for assessing the actual costs of change against the benefits of its desired outcomes.

Budget for organisational change management

It is a good idea to work out a detailed budget for the business change programme, to avoid any unforeseen expenses that could derail or halt the change. 

Don't feel you need to follow your original plan or budget precisely when implementing any changes to your business. You may need to modify your proposals, policies and procedures to take into account changing circumstances in the business and in the marketplace.

Costs of managing organisational change poorly

Poor change management opens you up to risks of incurring significant costs, both at the project and the organisational level. For example:

• loss of money needed to address staff issues
• loss of investment if the change doesn't deliver the right outcomes
• inability to realise the value you need from the project in the first place

As well as money, poorly managed change may also result in wasted time and people resources, dented morale and confidence, and increased resistance to change.