Building Internal Change Management Capability To

Achieve Competitive Advantage

Michael WrightDirector, Learning, OD and Change Management,

Constellation EnergyBill Young

Director, Education Alliances, Capella University

2

Welcome

“In the long run, the only sustainable source of competitive advantage is your organization’s ability to learn faster than its competition.”

-The Fifth Discipline Field Book

3

Agenda

• Introduction to Constellation Energy 10 minutes– DVD (4 minutes)

• Building Change Management Capability 10 minutes

• Components of Change Management Capability 10 minutes

• Case Study: Application at Constellation 10 minutes

• Questions & Closing 10 minutes

Introducing Constellation Energy

5

The Constellation Energy Family

6

Powering Our Growth

Revenue

Employees

Fortune 500 Rank

3.9 Billion

9200

432

4.7 Billion

8700

421

9.7 Billion

8650

352

12.5 Billion

9570

203

17.1 Billion

9700

167

TBD

TBD

125

7

Energizing Our Future

8

Our Next Phase of Growth

• Florida Power & Light and Constellation Energy to merge, creating the nation’s largest competitive energy supplier

• Constellation Energy will be the second largest electric utility

• $28 Billion transaction

• Will create a Fortune 100 company

9

Managing our enterprise wide changes is a huge investment of money, assets, time, and resources.

Change Management, The Next Generation Manufacturing Report, 1997

Common Challenges In Managing Business Change

1. Lack of (effective) leadership: a.) actions (or inaction) by the leaders of the organization b.) the style and approach used by those leaders

2. Poor (or no) framework/model and tools for change

3. Failure to set metrics and benchmarks 4. No disciplined change process

Our Challenges In Managing Change

10

Failure Is Not An Option

All other obstacles32%

Management behavior not supportive of the change

29%

Employees fearfuland resistant to change

23%

Inadequate resources (time, knowledge, money)

16%

Greatest Change Management Obstacles

Best Practices in Change Management, ProSci, 2000.

Given the cost and people impacts, we can not leave managing change to chance.

11

• Time/cost over-runs (delayed results)…………… • Cost of project restarts…………………………..……. • Lost market opportunities……………..…………….... • Market share erosion to competitive forces…... • Reduced features or functionality………..….…….. • Loss of desired efficiencies……………..…………….. • Reduced productivity……………………………..……... • Increased HR expenses for turnover…..………….. • Unanticipated marketing expenses for delays.. • Stock valuation fluctuation…………………….….…...• THE ULTIMATE: Project write off……………….….

$ ? __$ ? __$ ? __$ ? __$ ? __$ ? __$ ? __$ ? __$ ? __$ ? __$ ? __

Managing Change Is Important To Our Bottom Line

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Managing Change Vs. Building Change CapabilityManaging Change Building Change

CapabilityChange Happening To Us We Are Making Change Happen

Event-driven, Focused On Specific Change Execution, Limited Knowledge Capture For Future Changes

View Managing Change As The Way We Do Our Business

Requiring Ongoing Skill And Knowledge To Manage Whole-

scale, Constant Change

Bottom Line Impacts Can Be Significant

Bottom Line Impacts Are Minimal Given The On-going Nature Of Building Capability And Focus

On Change

Time To Adoption Can Vary Depending Upon People’s Experiences Of Change

Accelerate Adoption Rate Of Change

When The Pressure Is Off, Go Back To Old Ways Of Doing Things

Future State Focused

Event-Based Change Transformational Change

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“True change takes time; it is not a simple quick fix where you bring in the change agents and

straighten out the organization. It is the systematic creation of a change capability

through learning how to build and use outsider insider expertise.”

J. Klein, True Change: How Outsiders on the Inside Get Things Done in Organizations

Building Change Management Capability:

A Source of Competitive Advantage

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Insider-Outsider Approach to Building Capability

INSIDER SKILL, KNOWLEDGE, RELATIONSHIPS, CULTURE

OUTSIDER BEST PRACTICE,KNOWLEDGE, COMPETENCY

CHANGE MANAGEMENT CAPABILITY

An “insider-outsider” infrastructure accelerates Constellation Energy’s approach to building internal

change capability.

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The Transformation Support Continuum

DEPENDENCEINTERDEPENDENCEINDEPENDENCE

Internal skills and capabilities are

believed adequate.

Underlying belief: Little support is needed to successfully execute

the change.

“We need just do it.”

Internal skills and capabilities can be developed to support

the change.

Underlying belief: A combination of external

guidance and the development of internal capability is the best means to ensure that

there is adequate, well-trained support through the formation

of a transformation.

“We develop the capability for success over the long haul.”

Internal skills and capabilities are

completely lacking.

Underlying belief: High levels of

external expert support are needed

to successfully implement the

change because internal capability is

so lacking.

“We need to let them do it to us.”

At Constellation Energy, we have a significant need to develop internal change capability that will build and

improve over time.

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Competitive Advantage: Our Future State

CHANGE MANAGEMENT

CAPABILITY

Structure: A well positioned, functional and visible infrastructure with roles and responsibilities, tools and technology

Process: A robust, disciplined, easy-to-use work flow. A set of action steps and tasks that are flexible and adaptable. Integration into SIRIUS, integration framework & processes. Aligned to High Performance Teams, Leadership Development, Performance Management, corporate culture, business & organizational needs

People: Internal coaches, consultants, trainers. Skilled and capable change leaders as sponsors of change. Experienced change agents. Knowledgeable partners in change capable of dealing with the ambiguity of a constant changing organization

Culture: Belief in risk-taking, disciplined approach and cross department orientation. Behaviors that show tolerance of change

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Building Our Future State

SIRIUS SIRIUS TOOLKITTOOLKIT

FAST STARTFAST STARTTOOLKITTOOLKIT

SIRIUS SIRIUS FRAMEWORKFRAMEWORK

ENTERPRISEENTERPRISEPMOPMO

LEADINGLEADING CHANGECHANGE

PERSONAL PERSONAL STRATEGIESSTRATEGIES

IN COPING WITHIN COPING WITHCHANGECHANGE

EFFECTIVELYEFFECTIVELYMANAGING MANAGING

CHANGECHANGE

ONLINE ONLINE TRAININGTRAINING

CHANGE AGENTCHANGE AGENTNETWORKSNETWORKS

COMMUNITYCOMMUNITYOF OF

PRACTICEPRACTICE

INTERNAL CMINTERNAL CMCONSULTANTSCONSULTANTS

CM KNOWLEDGECM KNOWLEDGESUITESUITE

CHANGE MANAGEMENT

CAPABILITY

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CHANGE MANAGEMENT

CAPABILITY

Cementing Future State Capability Through

Learning

Managed by L&OD

Delivered by L&OD

Delivered by BPI

Supported by: SIRIUS Executive Coaching ePMO Business and financial simulation Consulting skills development

SIRIUS GP Course Depth of Understanding

Pro

jec

t P

rio

riti

zati

on

Wo

rks

ho

p Basic Principles of:

Project Management Change Management Problem Solving and

Process Improvement

Integration of Constellation Leadership Competencies

PROJECT MANAGEMENT Curriculum

SIRIUS-I

All aligned with SIRIUS Framework and are designed to build internal capability in all areas

CHANGE MANAGEMENT Curriculum

SIRIUS Curriculum

Effectively Managing Change

Leading Change Personal Strategies Course

PM Principles

Integrated Cost &

Scheduling

Risk Mgmt

Leadership & Communication

Skills

MS Project

Co-Delivered by BPI/L&OD

SIRIUS-C

Managing Project Mgrs

Bre

ad

th o

f U

nd

ers

tan

din

g

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Supporting Just-In-Time Change Consulting

• Executive understanding and commitment to our change management approach (SIRIUS)

• Enough capable in house expertise (change agent networks and internal change management consultancy)

• Sufficient resources and time to support continued development of change agents and internal change consultancy

• Visibly positioning and sponsoring internal resources as dedicated and competent to assist with major change efforts

• Ensuring external consultants understand our change management methodology, as the change framework, partnering with internal resources to create and execute change plans

CHANGE MANAGEMENT

CAPABILITY

21

Future State Impact

Training• 1079 staff trained from 1/06-7/06 • Increase in SIRIUS training• Course feedback is very positive (~6.5

out of 7 satisfaction rating )• Seeing higher enrollment: SIRIUS-GP &

Community of Practice for continuing education

Methods & Support• Community of Practice is actively

sharing examples, best practices, updated tools and providing ad-hoc mentoring via Share Point

• Internal CM consultants are partnering with engagement directors to better leverage internal capability

• Toolkit v3.0 Design Review feedback from Focus Group participants, ”Love it … when can we use it”

We are leveraging our COP to hone our methods & provide a wider-reaching support model.

SIRIUS Training Participants 1/06-8/06

0

50

100

150

200

250

CEPS

CCG

CNE Gas

BGE Home

BGE

CGG

CNE

Corporate

193180

199

150

13

204

12

62 66

CHANGE MANAGEMENT

CAPABILITY

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Contributors To Our SuccessCHANGE

MANAGEMENTCAPABILITY

INTEGRATION OF CHANGES

LINKAGE TO ALLKEY DRIVERS

ANALYSIS OF CHANGE IMPACTS

ALIGNED TO PM METHODOLOGY

QUANTIFIABLEMEASURES AND

RESULTS

PROACTIVE PLANNING

COMMITTED LEADERSHIP

ENGAGED EMPLOYEES

Case Study:

Lessons Learned

QuestionsMeeting Close

Thank You

Contact Information:

michael.wright@constellation.com

410-783-3234

Appendix

Change Framework, Tools & Training

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Scope

Investigate

Reason

Innovate

Undertake

Sustain

Define the opportunity and potential benefit to our customers and to Constellation Energy.

Determine baseline of the current performance and define customer requirements for improved performance.

Explore the root causes and identify gaps.

Evaluate quick hits and potential solutions, prioritize them and develop a strategy for implementation.

Implement the quick hits, pilot the more complex solution, and validate the improvement.

Transition the solution to the owner, confirm the results, and share the knowledge

Ch

ang

e M

anag

em

ent

an

d P

roje

ct

Man

ag

emen

t

Constellation Energy’s Change Management Framework

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Investigate Reason Innovate Undertake Sustain Scope

Index

Glossary

Identify Risks & Issues • Identify & manage the risks & issues • Review project with sponsor and key

stakeholders• Implement project tracking

Project Definition

•P

rob

lem

S

olv

ing

Tools

•P

roje

ct

Man

ag

em

en

t •Tools

Define the Project

• Understand business problem• Collect any existing data• Understand impact areas• Identify & assess stakeholders• Define boundaries & constraints •

Ob

jecti

ve

s

Develop the Charter

• Identify key metrics• Estimate the effort and resources• Define team & mobilize resources• Develop draft project charter

•C

han

ge

Man

ag

em

en

t •Tools

Core tools … help meet objectives Additional tools provide added depth for understanding, analysis and/or engagement

Voice ofCustomer

High LevelProcess

Map

LessonsLearned

EngageSponsor

StakeholderPlanning

ManageRisks

Project Tracking

ProjectReview

EstimateResources

EstimateSchedule

EstimateCost

DraftCharter

ManagingBig Scope

EngageTeam

FacilitationTechniques

ChangeTracking

ProjectComms

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Internal Change Management Curriculum

32

Supporting Change Management Resources

Communication Vehicles

34

Transformation Communications

Revenue

Employees

Fortune 500 Rank

3.9 Billion

9200

432

4.7 Billion

8700

421

9.7 Billion

8650

352

12.5 Billion

9570

203

17.1 Billion

9700

167

TBD

TBD

125

35

Change Management Community of Practice

36

Change Management Knowledge Suite

Internal Change Management Consultancy

38

Internal Change Management Consultancy

People

Process

Our approach to change management focuses on transitions – helping people bridge the gap from current to future state in the quickest and most efficient way

EnablersOutput/Results

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Our Change Management Practice

• Internal – we have change management resources on staff who understand the organizational culture and are ready to help you when needed

• Experts – from our Business Process Improvement Group who’s distinctive competence is change management; we have years of hands on experience across a broad range of initiatives

• Flexible - our level of engagement can be adapted to suit your needs; we can offer full time or part time support

• Lower costs – our fees are lower than those of external resources

Change Agent Networks

41

• Creates ownership among impacted employees by giving them an opportunity to be involved, voice their opinions, and shape the approach being used to implement the change

• Increases effectiveness and trustworthiness of communications through respected peer delivery

• Reduces change resistance by encouraging associates/”end users” to understand the need for change and its potential advantages

• Supplements communications coming directly from Business Unit Management / Supervisors

• Coaches and enables associates to take action and make the change effort successful

• Provides feedback of the change effort back to the project team

• Builds change leadership for the future

• Input into design of change

Why do we need a Change Network?

Change Network Overview

A Change Network is a structured group of employees who work with the projects to support the implementation of change.

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Change Network RolesThe design of the Change Network focuses on cascading commitment from Executive Sponsors to Change Targets that are being asked to adopt the change in a consistent

and rigorous way.

Initiating Sponsors

• Set vision, defines changes, and communicates priorities

• Provide resources and support • Publicly demonstrate commitment• Aligning change to business strategy

SustainingSponsors

Change Agents

• Support change and communication efforts within respective organization; partner with supervisors to deliver key messages

• Provide a designated communication point• Surface issues/concerns; work with project to

resolve / address

Change Targets• Listen to / read communications• Ask questions and identify issues• Understand / adopt change

• Demonstrate commitment to outcomes• Allocate resources / support and provide

project guidance• Publicly support and validate change effort• Support and coach change agents

Change Network

CM

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Bui

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chan

ge n

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ork

•C

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nd c

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es m

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Pro

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nsis

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43

Change Network Structure

Initiating Sponsors

Steering Committee

Sustaining Sponsors

Advisory Committee

Sustaining Sponsors

Controllers Committee

BU 1Change Agents

- Finance*- Procurement**

- Operations

BU 2Change Agents

- Finance*- Procurement**

- Operations

BU 3Change Agents

- Finance*- Procurement**

- Operations

BU 4Change Agents

- Finance*- Procurement**

- Operations

Other Non-RegChange Agents

- Finance*- Procurement**

- Operations

BU 1End Users

BU 2End Users

BU 3End Users

BU 4End Users

OTHEREnd Users

Representatives from all impacted business units create a “spider web” of change agents across the organization. Depending on the impact of the change, the appropriate

change agents would be called into action

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Change Network Structure

Project PYXIS

Initiating SponsorSteer Committee

Sustaining Sponsor Sustaining Sponsor

BU Change Agents

Change Targets

BU Change Agents

Change Targets

Initiating SponsorSteer Committee

Sustaining Sponsor Sustaining Sponsor

BU Change Agents

Change Targets

BU Change Agents

Change Targets

E-Time Project

HR Transformation

Initiating SponsorSteer Committee

Sustaining Sponsor Sustaining Sponsor

BU Change Agents

Change Targets

BU Change Agents

Change Targets

Initiating SponsorSteer Committee

Sustaining Sponsor Sustaining Sponsor

BU Change Agents

Change Targets

BU Change Agents

Change Targets

Initiating SponsorSteer Committee

Sustaining Sponsor Sustaining Sponsor

BU Change Agents

Change Targets

BU Change Agents

Change Targets

Initiating SponsorSteer Committee

Sustaining Sponsor Sustaining Sponsor

BU Change Agents

Change Targets

BU Change Agents

Change Targets

Merger & Integration

Initiating SponsorSteer Committee

Sustaining Sponsor Sustaining Sponsor

BU Change Agents

Change Targets

BU Change Agents

Change Targets

Initiating SponsorSteer Committee

Sustaining Sponsor Sustaining Sponsor

BU Change Agents

Change Targets

BU Change Agents

Change Targets

Building

Internal Change Capability

To Support

Rapid

Deployment

Business Transformation Office

45

Change Networks Accelerate Change Deployment

• Acting as a ‘sensing network’ identifying business specific issues, escalates change barriers and assisting in identifying current skill and knowledge levels of target groups

• Being involved in deployment of communications, design, delivery and evaluation of learning solutions locally

• Having credibility with target groups and ensure overall alignment of change to business culture—they bring business perspective and language to the change implementation and know what works for sustainability of change

• Building local acceptance and commitment of the change—accelerating targets through the change curve, managing transition issues associated with change

• Maximizing speed to competency and overall time to productivity and performance

Change networks support rapid deployment of business change

46

Change Agent Time Requirements

The estimated time commitments required of a successful Change Agent are identified below, and may increase with later stages

• Half day workshop

• TBD (Project Project-specific)

• TBD (Project Project-specific, close to rollout date)

One-time / Periodic• Change Agent Kickoff

Workshop

• Confirm training needs analysis and training curriculum for organization

• Support training effort

Specific Activities

Time Commitment

• 2 hours

• 1 hour

• 1-2 hours

• 2-3 hours prep and delivery time ~ every other month

• 2 hour8-12 hours / month

Monthly• Monthly Change Agent Briefing

• Pre-reads / review of communication materials

• Periodic informal communication with associates

• Periodic formal communication delivery with associates

• Sharing feedback / communicating questions & concerns with the PMO

49

Motivating Change Agents

Participation in the Change Network requires hard work, so Change Agents must believe their contribution and input is valued and respected

Recommendation

Increase Visibility

Development Opportunity

Recognition

• Develop extended network of support

• Expand sphere of influence

• Expand view of potential career opportunities

• Increase skills and leadership competencies

• Experience documented

• Letter of commendation from Senior Executive

• Spotlights in Business Communication Channels

• Promotional / thank you “awards” based upon contribution and participation

• Team One Awards

50

Reviewer Metric ToolMeasures

• Activity completion

• Meeting attendance

Change Management Team

Controllers Committee

Advisory Committee

Activity Tracker

Change Network Member

Effectiveness Survey

• Approachability

• Interpersonal skills

• Informative

• Reliability

Peers

Supervisors and Managers

Monitoring the Network

To provide on-going coaching and continuously improve, implementing mechanisms to measure overall effectiveness of the network