The idea that “change is the only constant” was first put forth some 2,500 years ago by the Greek philosopher Heraclitus, who lived before Socrates. However, the rate of change in today’s business environment frequently appears to be faster than executives’ and their teams’ ability to adjust.
The phenomenon known as “change fatigue,” which is hardly a fad driven by HR, can have a negative impact on the bottom line through decreased productivity, workforce turnover, and employees’ diminished capacity to adjust to additional change.
According to Hilary Richards, vice president and analyst in the finance practice at consulting firm Gartner, based in Stamford, Connecticut, executives should “be treating change fatigue as a business risk.”
When it comes to implementing new technologies or responding to external changes, the majority of businesses seem to be constantly changing.
According to a survey conducted by San Francisco-based software-as-a-service company WalkMe, more than 75% of businesses update their business models every two to five years. Corporate finance is the one area where change fatigue is most evident.
When a business adopts enterprise resource planning, digital transformations, and artificial intelligence (AI), finance departments take on a variety of new strategic roles.
According to Richards, CFOs are tasked with managing cash, promoting growth, and implementing process changes. However, the WalkMe study indicates that only one-third of corporate change initiatives are considered successful.
Around 8% of US healthcare spending is related to workplace stress, and two-thirds of employees report burnout during transformation drives.
According to a recent survey from Orgvue, a platform for organisational design and planning with headquarters in London, around 38% of CEOs would prefer to resign rather than oversee a significant change.
Change fatigue
According to Jenny Magic, founder and CEO of Build Better Change, a consultancy based in Austin, Texas, and co-author of “Change Fatigue: Flip Teams From Burnout to Buy-In,” her clients’ capacity to adjust to change started to decline in 2017.
She remembers, “Middle managers and the people who do the work were less capable of carrying it out, even though top leadership was interested.” Her firm’s most recent report “validates that things are not getting better.”
“The average employee experienced 10 planned enterprise changes in 2022, up from two in 2016, and there is no reason to expect the pace to slow. But the workforce has hit the wall; the share of employees willing to support enterprise change collapsed to just 38% in 2022, compared with 74% in 2016,” a Gartner report notes.
In response, some companies are coming up with innovative solutions; examples include relative upstarts and corporate behemoths like Danone and Liberty Mutual. Businesses are also opting between hiring change management consultants from reputable consultancies or from niche, up-and-coming rivals.
Apart from offering executive advice, these more well-known experts also conduct conferences, conduct training, and write articles like “Three Ways to Minimise Change Fatigue Among Financial Teams.”
Large-scale transformation, done better
Consultants advocate for solutions that tackle two types of change: accumulative change and large-scale transformation. Larger scope and faster speed are typically preferred in major initiatives. However, there are indications that more gradual solutions may be less traumatic and more effective.
These initiatives are typically put into place in response to significant outside events, like a sharp decline in the economy, the COVID-19 pandemic and its aftermath, or significant technological advancements like AI. However, Orgvue CEO Oliver Shaw contends that this may be a reflection of antiquated thinking.
“Change came along a lot less frequently, even a couple of decades ago. Executives developed impulses, to act: ‘Change is needed now!’ As a banker who lived through the 2008 financial crisis, I thought at the end of that, I would never see anything like it again,” he said.
Events that used to be considered unique, now seem commonplace. Shaw argues that in a world that is constantly changing, full-bore transformation might be too harsh. Risks include high severance pay and additional expenses associated with widespread layoffs.
According to Orgvue’s data, Fortune 500 companies that experienced significant workforce restructuring in 2023 paid out $32.7 billion in severance pay that year and carried over an additional $10.9 billion in charges or liabilities into 2024.
A 2024 Bloomberg study of Securities and Exchange Commission listings found that additional costs of dumping workers include decreased productivity (roughly six months), a rise in voluntary departures, higher unemployment insurance taxes, and higher legal fees, primarily to avoid lawsuits over accusations of discrimination.
In order to avoid expensive, reactive, and high-risk transformation projects, Danone adopted a different strategy when considering a significant change.
According to an Orgvue case study, this was achieved by using a “continuous design approach to organisational development.”
To better monitor labour demand and supply, the Paris-based multinational food and beverage company reduced its planning period from annual to quarterly and redesigned its human resources procedures rather than eliminating jobs. Shaw claims that they were able to understand how to make adjustments over time.
Like any disease, prevention is sometimes the best “remedy.” In 2023, the Swedish payments fintech Klarna sought to cut costs by outsourcing roughly 500 jobs across 10 markets to two partner companies, thereby reducing trauma through layoffs.
Internally, it started a campaign to embrace cost-cutting AI and put a stop to hiring.
Shaw observes, “They are using AI to increase their margins.”
Companies with leaders who “understand organisations as systems” include Danone and Klarna. Shaw claims that if the typical company has an attrition rate of 15%, it should be able to use that in conjunction with internal reassignments to make significant reductions without causing undue stress.
Slow down now, speed up later
San Diego-based broker C3 Risk and Insurance Services plunged into what initially appeared to be an extremely challenging and intricate integration process following a merger. Employees were worried about their futures at the company. On the technology to use, no one could agree.
In order to aid in the process, Imperio Consulting, based in Florida, brought in Eric Brown, its founder and CEO. As a former member of the United States Special Forces, Brown utilises his experience in his work. Instead, the US military refers to it as “operator syndrome.” Uncertainty and constant pressure can deplete people.
“The corporate world mirrors that experience in many ways, especially in finance, with its tech overload, unpredictable markets, and ever-changing regulations. It’s like trying to stay steady on shifting sand, and it can be exhausting,” he said.
“We should slow down now so we can speed up later,” Brown remembers saying to a client. Soldiers perceive it as a “crawl, walk, run” pattern.
With support from C3’s senior leadership, Brown was able to use team-building activities and resources to help integrate that strategy into the integration plan.
He said, “They took it to heart,” spending money on staff training and communication.
“Both the San Diego Business Journal and Business Insurance named C3 a top place to work in 2023 and 2024. C3 is a rock star,” Brown continues.
C3’s experience also points up the need to address the second of the two types of change fatigue that consultants identify, namely the accumulation of small changes. The structural integrity of an organisation may eventually be threatened by them, much like water that accumulates behind the figurative creaky dam.
According to Gartner, the almost constant accumulation of relatively minor changes that impact job descriptions, team composition, and managerial strategies has made employees feel more stressed. When changes are implemented top-down without discussion or debate, employees feel disempowered. With the goal of preventing 1,000 cuts due to fatigue, Liberty Mutual created a procedure to determine the assumptions and fears of its workers.
The initial questions were designed to assist employees in embracing change. Employee engagement and feedback, along with change workshops, were among the tools. These kinds of programmes can aid in addressing issues that are hidden beneath the surface.
“Most of the senior C-suite focuses on the tip of the iceberg. It’s what they’re paid for. But your team will run into that iceberg,” Richards concluded.