Change management is when companies undergo significant shifts in operations as a result of internal or external forces. Management often spends time reviewing and evaluating changes prior to starting the process, in hopes of saving capital and preventing significant disruptions to the company’s operations. All types of change — including financial or non-financial — need evaluation by owners or managers who will determine the impact of the change. Change is not always good for an organization, which can lead to reduced economic value for the company.

Calculate the net present value (NPV) to measure the change’s financial impact. The NPV formula discounts future revenues or cost savings from a change to today’s dollars. Management can compare this figure against the initial expenditure to alter operations and determine if the change will add value to the organization.

Determine the return on investment from the impact of change. The return on investment formula is another financial measurement tool. A basic formula is to divide the estimated dollar benefits by the cost of the change. This allows a company to determine a percentage return for money spent on change.

Compare the new productivity levels to previous productivity levels. Business owners and managers can measure the change in units produced, employee output or number of customer inquiries answered in a specific time frame for this process. This operational analysis allows for comparison of estimated productivity levels to actual levels for determining the impact of change.

Conduct an audit on operations. An external audit can provide a third-party opinion about the impact of change. Auditors can follow specific guidelines from the company’s management and measure only the areas directly affected by change.

Tip

Evaluating change may be time consuming depending upon the changes involved and the number of areas affected by the change. Business owners and managers may also review external factors to see how competitors respond to the company’s change.

Warning

Employees are frequently resistant to changes in processes and procedures. Getting input from these individuals can help avoid any negative issues. Failing to do so can increase the time spent on change management and evaluation.