Monday, February 21, 2022

Transition Costs: Whether or Not to Make the Change

Actions to take: When you see an improvement to be made, wait and consider before implementing it. Examine how much it will improve things. Assess how resistant your staff would be to the change. Recognize that even with zero resistance, there are still transition costs in the form of time, effort, energy, and resources. Accept that sometimes the right move is to leave sub-optimal processes in place. 

New managers often make the mistake of making changes too early in their tenure. They implement changes before they've developed goodwill or understanding with their employees. It inevitably backfires, even if the idea itself was good. Most of us learn this lesson after our first or second management position and stop trying to implement changes right away in new positions.

There is a more subtle mistake that the average boss never fixes: failing to account for transition costs.

Sometimes the problem isn't that you introduced a new idea too early. Sometimes the problem is that you introduced a change at all. My background is mainly in libraries, so let's use an example from that industry. A big part of running a library is checking in, sorting, and shelving items that patrons bring back. Some staff like to sort items as the check them in: check the item in, put it onto your cart into the proper place for later shelving. Other staff like to do it one step at a time: get everything checked in and then sort everything onto carts for shelving. 

Workflow studies have shown that sorting as you go is faster, without a doubt. The staff who sort as they go can get more books checked in and shelved over the long term. Time is saved, efficiency is gained, more work gets done. If your library's employees do the one-step-at-a-time method, they could improve their process by switching to the sort-as-you-go method.

However. The improvement for any one cart of books is small enough to barely notice. It might take 30 minutes to check in and sort a full cart of books. A 10% improvement means 27 minutes instead of 30 on average—a bathroom break takes longer than that. Furthermore, that average varies depending on the types of items that come in. It could take 20 minutes to fill a cart with long novels or 40 minutes to fill it with tiny kid's books. Over the course of the year and millions of books checked in, a 10% improvement is huge. For the employee, though, it feels like no improvement at all.

If employees didn't have opinions how to do their jobs, we could still institute this change and get our benefits. They'd say, "I don't get what the boss is talking about," shrug their shoulders, and that would be that. 

That isn't the reality we live in. Employees have opinions about how to do their jobs. You do, right? If you like managing a certain way, and your boss tells you "change it to this" with no explanation, what will happen? Even if you are a perfect employee, you'll need more than that to get on board. You'll need explanation. You'll need your boss to help you see why it is an improvement. You'll need them to address your concerns (after all, you presumably believe that your way is better). You'll need to practice the new way. You'll need time

The time (and resources) it takes to move from one method to another is called the transition cost. Managers vastly underestimate transition costs, leading to disastrous results. 

Here is a common scenario. The boss sees an improvement they want to make. They implement that change without realizing how much resistance they'll get, or sometimes realizing and not caring. The change takes longer than they anticipate. It is a year down the road, and the efficiency improvement they expected haven't materialized. In fact, things are slightly slower (because the employees never really embraced the new method). The manager incorrectly concludes that their idea was the problem and moves back to the old way, causing even more slowdown with this second transition. A ton of time lost and goodwill spent just to end up back where they were in the first place.

Do not be this boss. Consider transition costs when you consider making changes. People are used to the way they are currently doing things. Even in a highly functional environment with great trust, all change carries some transition cost. Your new method may be objectively, unequivocally better. It is objectively, unequivocally better to sort books as you check them in. But only if employees commit to the new process and do it well. Ask yourself how much better your new method will be. Take time to examine how much resistance there would be to this change (casually probing during one-on-ones is a great way to go about it). Remember that even changes with zero resistance have transition costs. Make absolutely sure that your change is worth the effort, energy, resources, and time.

Before we become bosses, we see a bunch of improvements to be made. We cynically wonder why the management never fixes these issues—the solutions are obvious! Then we become managers. When the average boss tries to make these "obvious" improvements and fails, they draw the wrong conclusion: the ideas or the employees are the problem. Better bosses see the underlying issue. They recognize transition costs. Better bosses know that sometimes the right move is to leave things less than 100% perfect. Sometimes the cost of making the change outweighs the value of the improvement.

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