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IBM Global Study: Majority of Organizational Change Projects Fail

Changing Mindsets and Culture Continue to Be Major Obstacles

ARMONK, NY - 14 Oct 2008: IBM (NYSE: IBM) today announced the results of a study of more than 1,500 change management executives from 15 countries, which reveals that nearly 60 percent of projects aimed at achieving business change do not fully meet their objectives.

The major obstacles to implementing change in an enterprise are centered on people and corporate culture. Nearly 60 percent of the executives and project managers surveyed say changing mindsets and attitudes is the biggest challenge to implementing change in an enterprise, followed by corporate culture at 49 percent. These challenges were flagged as more important than shortage of resources, highlighting that these problems are seen as inherently more difficult to solve even if given sufficient resources.

While 41 percent of projects were described as successful, the top 20 percent of the sample, referred to as "Change Masters" in the study, reported an 80 percent project success rate -- nearly double the average. In sharp contrast, the bottom 20 percent of the sample, referred to as "Change Novices" reported a project success rate of eight percent.

"The dynamic pace of today's globally integrated economy is causing organizations to re-frame their traditional view of what 'normal' is in an enterprise," said Lawrence Owen, vice president, IBM Global Business Services. "Companies need to anticipate change and develop more systematic processes so they can tackle it quickly and effectively to stay ahead of the competition. The ability to manage change must be a core competency for organizations today."

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The study's authors analyzed the vast difference between the Change Masters' 80 percent project success rate and the eight percent success rate of the Change Novices, and have identified a significant correlation between project success and four important areas of focus. When used in combination these activities provide a synergistic benefit that is even greater than the sum of their individual impacts. Companies that utilized all four of these facets nearly doubled their average project success rate.

Real Insights, Real Actions -- There is a strong correlation between successful projects and a realistic awareness of the challenges involved in change. Those organizations that are fully aware of the challenges of implementing change have double the percentage of completely successful projects, and 27 percent fewer troubled projects or outright failures.

Solid Methods, Solid Benefits -- A consistent and structured change management approach yields tangible benefits. Respondents who always follow specific and formal change management procedures had a 52 percent project success rate, compared to a 36 percent success rate for those who improvise according to the situation.

Better Skills, Better Change -- Engaging employees through involvement and two-way communication is a powerful combination: 72 percent of project leaders believe employee involvement is crucial and 70 percent believe honest and timely communication is important.

Right Investment, Right Impact -- On average, organizations spent around 11 percent of total project budget on change activities. However, the top 20 percent of performers in terms of project success invested on average only an additional two percent. But they invested more strategically. Rather than simply "throwing money at the problem" they invested in building awareness of project complexity, spending more on building change skills and developing their long term tools, methods and capabilities.

The new study, titled "Making Change Work," developed by IBM Global Business Services' Strategy and Change consulting group, provides analytical perspective on the change-related challenges firms face today, examines how organizations can manage change, and identifies strategies for improving project outcomes.

For more information on this report, visit hhtp://www.ibm.com/gbs/makingchangework

For more information on IBM, visit http://www.ibm.com.

Contact(s) information

Linda Hanson Hunt
IBM Media Relations
Office: (914)766-2015
lindah@us.ibm.com

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