The biggest mistake that business leaders make when deciding on internal capital investments is their failure to consider the impact of these investments on their greatest asset: their people. Most business leaders are hyper-focused on how this capital investment will impact their operational systems and processes, and they fail to consider the impact these changes will have on their workforce and workplace culture.
Capital investments can be defined as the procurement of financial resources by a company to further its business goals and objectives. The term can also refer to a company’s acquisition of long-term assets such as real estate, manufacturing plants, and machinery. Whatever the capital investment may be, a leader’s failure to consider the implications of these investments will lead to negative outcomes or the inability to realize the full return on these investments as projected.
Capital Investments Require Change Management
According to the American Psychological Association’s (APA) 2018 Work and Well-Being Survey, 50% of workers in the US say that organizational changes have either affected them in the last year, are currently affecting them, or will affect them in the next year. These changes include capital investments.
Capital investments generally are made to increase operational capacity, capture a larger share of the market, and generate more revenue. These improvement objectives typically require human intervention in the form of technical or tactical execution. These organizational changes often require major restructuring, resulting in significant life changes for several employees.
Work requirements change. Leader expectations change. Technical requirements for execution change. Therefore, the fundamental question you must ask yourself is, “When making capital investments, is what must I change about the operational tools, processes, and procedures in my business to ensure my employees can successfully adopt these changes?”
Change management and culture performance management are two important components of an organizational leadership strategy that will directly influence the planning and execution functions within a business. A company culture that is not aligned with the core values and associated behaviors and interactions that are conducive to change acceptance will quickly become a barrier to progress and advancement.
The reality is most successful business environments are in a state of constant change and there is an ever-growing need to minimize employee resistance to the change process. This can only be achieved in an environment that promotes the sharing of knowledge by leaders while fostering a workplace culture that includes a collaborative and inclusive approach to attaining the strategic goals connected to the change.
Capital Investments Require Cultural Change
Your capital investments have a direct implication on your company culture. Why? Because most capital investments are tied directly to your ability to drive increases in products, markets, enhanced technology, and market competition; this challenges your employees’ ability to respond to and manage change effectively.
Responding to change requires the mobilization of leaders in a manner that may not align with your current company culture. Most business leaders are aware of the need for change; however, the challenge lies in implementing strategies that sustain. A barrier to change is often related to a lack of understanding of the deeper organizational culture issues that exist. Furthermore, leaders fail to recognize the cross-functional implications of change.
One of the greatest cultural performance barriers for business leaders attempting to implement change is tied directly to TRUST. Working Americans who reported recent or current change in their organization were three times more likely to say they don’t trust their employer (34% vs. 12%) and three times more likely to say they intend to seek employment outside the organization within the next year (46% vs. 15%) compared with those with no recent, current, or anticipated change.
The lack of trust amid organizational change is perpetuated by the lack of organizational transparency and inclusion of front-line employees and leaders prior to, during, and after the change occurs. Consider your capital investment initiatives. Ask yourself five key questions to determine how successful your investment outcomes may be:
- Did I include my front-line leaders and employees in the strategic discussions surrounding the investment?
- Have I determined the human intervention required as part of the investment?
- Have I evaluated what will be required of my leaders to foster adoption and compliance with the impending investment?
- Have I determined the tools and resources required by my people to effectively manage and respond to barriers during the implementation of this investment?
- Have I established a clear communication strategy surrounding my investment that includes a concise vision, purpose, value proposition, and expectations for all levels of the organization?
If any one of the responses to these questions is “no,” then you are contributing to a greater level of unpredictability and unsustainability relative to the capital investment changes underway in your business.
Underlying employee reactions to organizational change and the disintegration of a trust culture also results from their skewed perceptions of the leadership team’s motivation behind those changes and the likelihood of success.
The failure to investigate the potential implications of these changes on employees becomes a critical barrier to realizing the intended results from the investment in the first place. These misperceptions are represented in the form of vocal resistance, declines in productivity, or frustrations among leaders and subordinates. Do not make the mistake of separating your people from your capital investment decision. They are one in the same, no matter which way you look at it.
If you would like to explore additional methods to respond to recent or impending capital investments in a manner that ensures successful operational and cultural performance outcomes for your business, let’s talk.