Perhaps the simple answer for this question is … Yes! However, what may not be common is our response to the change process. Hopson and Adams (1976) postulated that an individual coping with change goes through a seven-phase process:

  1. Numbness (Shock) – The individual is overwhelmed, and unable to respond to the event
  2. Minimization – The individual tries to make the change appear smaller than it is
  3. Self-doubt – The individual is confused and uncertain of his/her ability (scared)
  4. Anger – The individual is irritated for being displaced from his/her state of equilibrium
  5. Depression – A dangerous phase which could last long and sometimes results in quitting or conflict
  6. Letting Go – The individual starts to let go of anxiety and stress associated emotions; detaches oneself from the past and turns to focus on the future
  7. Testing Out (Acceptance) – The person develops new energy, a sense of confidence, and agreement

Business executives and front line staff alike pass through this process in almost all projects that involve an element of change (with various intensities). Interestingly, however, this process is not always smooth and sequential as is outlined by Hopson and Adams. Rather, many individuals follow this process out of order; sometimes jumping or even looping between these phases. This is likely due to (at least) two important factors that directly impact an individual’s personal change response:

1. Genetic Disposition

Sometimes individuals differ in their ability to gain access to (and benefit from) different learning experiences. This often occurs due to inherited qualities such as physical appearance, special abilities, race, gender, and inclination to physical illness. Individuals of different genetic disposition often have had different learning experiences and hence perceive changes differently.

2. Environmental Conditions and Events

Oftentimes, external events that are outside of any one person’s control can affect perceptions of change. External events can include a diverse range of social, cultural, and economic conditions – whether they are positive or negative in nature. In particular, external events usually serve to alter people’s perceptions of the urgency of a particular change.

The Take-Away:

In any change project, from strategic refinements to process overhauls, there are always some stakeholders that are supportive of the particular change and there are always others that resist it. In many cases, businesses turn to consultants to help guide them through a successful change implementation because of their experience in dealing with the all-too-important, and often-times unpredictable human response to change. Part of the consultant’s challenge therefore, is to assist individuals in effectively responding to the challenges of each phase.

The result is that driving forces of change are enhanced, while restraining forces are either reduced or converted into new driving forces. It is only after the needs and wants of all groups of stakeholders are appreciated that a successful change can be implemented.

The best management consultants, however, look beyond conducting a fundamental stakeholder analysis. As many individuals do not follow the Hopson and Adams model sequentially, it follows that there is no single change methodology that can be applied to every project. Instead, the best management consultants leverage a variable set of practices, tools, and techniques; all of which may be adapted to meet an organization’s needs (or a specific group of stakeholders’ needs, for that matter). These consultants appreciate the factors that result in variable change responses, which in turn allows them to work with clients to more accurately forecast and plan for the anomalies to the Hopson and Adams model. The result is that the change initiatives are optimized for time and cost, as clients develop newfound momentum, boost their self-confidence, and are more accepting of the change as a whole.

In an earlier blog post that discussed non-market factors and their implication on business strategy, the concept of risk was explored a bit. More conservative businesses seek to manage risk, while more daring ones seek to actually leverage the risk and harness the opportunities that go along with it. The emergence of these different “cultures of risk” is psychological in nature, as different organizations perceive risks in different manners. And then, based on the perceived magnitude of the risk, together with the perceived ability to realize a reward, each organization has a different reaction. Let’s explore these concepts of “risk” and “cultures of risk” a bit further.

What is “Risk”?

Why do some young adults say they plan to set aside more money for retirement only after looking at an avatar of themselves at retirement age? Aging and the need to save for a rainy day are facts of life, so why should a vivid picture make any difference?

A clue can be found in the International Organization for Standardization (ISO)’s surprising but useful definition of risk—“the effect of uncertainty on objectives”. Normally, we think of risk in terms of external influences, but the “effect of uncertainty” also includes internal factors such as individual choices, priorities, and behaviours. Perception and reaction of the different uncertainties are part of what makes a threat a risk. As such, risks that may appear identical from an actuarial perspective are not actually identical in reality.

While many risk management experts consider these internal distortions to be rational choice, three distinct layers (at least) prevent humans from consistently making “rational” risk responses.

Nuclear Power: Genius or Disaster?

To illustrate the prevalence of these layers, a blog entry by marketing guru Seth Godin offers a powerful quantitative snapshot of the power of asymmetrical risk perception. Godin points out that by measuring the number of deaths per watt of power generated, coal production causes 4000 fatalities for every 1 caused by nuclear power production. Let’s now define each of the layers and see how they relate.

Layer 1: The Effect of Visual Representations

People react psychologically as individuals to visual stimuli. The perceived interest, intensity, and proximity of images in turn affect each person’s perception of the risk involved. In Godin’s article, his focus is on the first layer, stating “I think that any time reality doesn’t match your expectations, it means that marketing was involved”. Indeed, the sensational, wild-card nature of nuclear risk has been amplified through a tremendous amount of press and propaganda. This layer also helps explain why a persuasive image such as the aged avatar example invoked, in some cases, a strong will to save more money.

Layer 2: The Effect of Risk Modes

Different modes of risk affect perception and response too. For example:

i) People tend to focus on the blame that follows events or actions, rather than the outcomes themselves.

ii) The source of the threat is significant to many—for one thing, is it a natural or man-made hazard?

iii) Also important is whether a risk comes from action, or inaction. Think of the distinction between sins of omission and sins of commission.

Coal has been available by centuries and is perceived to be a natural resource. Nuclear energy on the other hand is new and mysterious, and is seen by some as “playing God”. This is a classic example of a “natural” versus a “man-made” hazard. Because coal power has been engrained into our lives for generations, people are more accepting of the risks involved. Nuclear risks, however, are often not treated as a “given”. These risks are often viewed as man-made and more easily preventable.

Layer 3: The Effect of Cultures

Risk is also shaped by the way of life of any group that shares risk. This layer of risk is often ignored or forgotten, in part because it is hard to quantify. It is very prevalent, however, in Cultural Theory, which is a discipline that has covered nuclear risk perception closely and is associated with the prominent intellectuals Aaron Wildavsky and Mary Douglas. Essentially, Cultural Theory examines four cultures based on characteristics of social stratification and personal control:

1. Egalitarian: Tend to minimize formal strata and exert strong personal control.

2. Individualist: Tend to minimize formal strata and exert weak personal control.

3. Hierarchical: Tend to maximize formal strata and exert strong personal control.

4. Fatalist: Tend to maximize formal strata and exert weak personal control.

Cultures of Risk

Each of these four cultures views the world in different ways, fears different things, and produces different kinds of leaders. Cultures of risk are created, as each culture also analyzes risks in different ways. Egalitarians are largely against nuclear power as their focus is on the threat of catastrophe. Individualists, on the other hand, are in favour of nuclear power as their focus is instead on the resulting opportunities.

This is merely an example. Cultures of risk affect every organization and help define each organization’s constituents, customers, and competitors. There is no right answer as to which culture of risk is the best. Since organizations can be effective with very different strategies and management styles, it follows that organizations can be effective with different risk cultures.

Risk is truly a multi-dimensional concept and can only be captured so well in the actuarial definition. The organizations that understand this tend to be more successful, as their strategic planning and execution efforts are based on a more complete picture of risk. Consequently, business processes and developments may be more truly optimized for minimal risk and maximum reward.

Optimus Think