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5 change management risks CHROs must plan for
Change management risks can derail initiatives and drive compliance issues, costs and employee resistance. Learn how CHROs can identify, mitigate and reduce their impact.
Even well-planned change management initiatives can encounter setbacks. CHROs must ensure they and their teams plan for potential change management risks to reduce their impact.
Possible challenges include potential legal ramifications from reductions in force, insufficient employee training for new technology and issues with benefits changes. These problems can lead to major issues such as noncompliance. However, many of these change management risks can be mitigated if CHROs understand them and take proactive steps to prevent them.
The following change management risks commonly hinder the execution of company changes.
1. Lack of understanding of legal ramifications
HR faces legal risks whenever employees are let go from their company.
Prior to layoffs, CHROs and their company's legal counsel must conduct an adverse impact analysis to determine whether a reduction in force disproportionately affects protected employee classes. Laying off employees who are members of protected classes or disproportionately laying off members of a certain demographic group can result in litigation.
CHROs should also document objective criteria that could help the company defend its decisions.
2. Insufficient employee training
Implementing new company technology, such as an ERP system, often requires employees to acquire new skills. A lack of employee training can hinder the adoption of new systems or processes.
To prevent this problem, the CHRO should ask the company's CFO to provide the financial resources for adequate training, direct HR managers to identify skills gaps and schedule employee training.
3. Lack of understanding of employee benefits requirements
CHROs must ensure that their companies take state and international benefits requirements into account during transactions such as mergers or acquisitions.
Most M&A agreements mandate that benefits of equal value be offered across corporate hierarchies. However, benefit requirements differ from one U.S. state to another, and employees located in multiple countries make the situation even more challenging.
CHROs might need to budget for additional benefits providers, many of whom will be offshore, to ensure that benefits are implemented consistently and in compliance with local labor laws.
4. Financial penalties for technology changes
Companies involved in a merger often have contracts with different vendors, which can require integrating technology systems or migrating applications.
However, these changes could lead to early contract termination with some technology vendors. The CHRO must ensure that their company's IT department has determined whether early cancellation will incur penalties and that their organization budgets accordingly so it does not face unexpected expenses.
5. Employee resistance
A company might change technology platforms because of new services or better competitor pricing. However, employees and customers could be unhappy with this change.
The CHRO should instruct HR managers to respond to employee complaints by candidly explaining why the new technology is needed.
By identifying and mitigating change management risks early, CHROs can reduce disruption, maintain compliance and improve the success of enterprise initiatives.
Lynda Spiegel is a freelance writer and former global HR executive for financial services, telecommunications and SaaS companies.
