Thursday, April 5, 2012

Interrelationship Diagrams

Identifying the Full Consequences of Change (Also known as Change Impact Analysis, Impact Change Analysis and Solution Effect Analysis)

When things change in your organization, do you ever wish that someone would think things through a little better to avoid the confusion and disruption that often follows?

Or have you ever been involved in a project where, with hindsight, a great deal of pain could have been avoided with a little more up-front preparation and planning?

Hindsight is a wonderful thing – but so, too, is Impact Analysis. This technique is a useful and severely under-used brainstorming technique that helps you think through the full impacts of a proposed change. As such, it is an essential part of the evaluation process for major decisions.

More than this, it gives you the ability to spot problems before they arise, so that you can develop contingency plans to handle issues smoothly. This can make the difference between well-controlled and seemingly-effortless project management, and an implementation that is seen by your boss, team, clients and peers as a shambles.

About the Tool

Impact Analysis is a technique designed to unearth the "unexpected" negative effects of a change on an organization.

It provides a structured approach for looking at a proposed change, so that you can identify as many of the negative impacts or consequences of the change as possible. Firstly, this makes it an important tool for evaluating whether you want to run a project. Secondly, and once the decision to go ahead has been made, it helps you prepare for and manage any serious issues that may arise.

All too often organizations do not undertake Impact Analysis. This is one reason that so many projects end in failure, as unforeseen consequences wreak havoc.

The Challenge of Impact Analysis

The challenge in conducting an Impact Analysis is firstly to capture and structure all the likely consequences of a decision; and then, importantly, to ensure that these are managed appropriately.

For smaller decisions, it can be conducted as a desk exercise. For larger or more risky decisions, it is best conducted with an experienced team, ideally with people from different functional backgrounds within the organization: With a team like this, you're much more likely to spot all of the consequences of a decision than if you conduct the analysis on your own.

How to use Impact Analysis

To conduct an effective Impact Analysis, use the following steps:

1. Prepare for Impact Analysis

The first step is to gather a good team, with access to the right information sources. Make sure that the project or solution proposed is clearly defined, and that everyone involved in the assessment is clearly briefed as to what is proposed and the problems that it is intended to address.

2. Brainstorm Major Areas Affected

Now brainstorm the major areas affected by the decision or project, and think about whom or what it might affect.

Different organizations will have different areas – this is why it's worth spending a little time getting this top level brainstorming correct.

Figure 1 below shows a number of different approaches that may be useful as starting points for identifying the areas that apply to you.

Figure 1: Impact Analysis – Major Areas Affected

This figure gives a number of different frameworks that you can use as a starting point for Impact Analysis brainstorming. Pick the framework that's most relevant for you, "mix and match" them appropriately, and include other areas where they're more relevant.

And remember as far as you can to involve the people most likely to be affected by the decision: They'll most-likely have more insight into the consequences of the decision than you have.

A. Organizational Approach:

  • Impacts on different departments.
  • Impacts on different business processes.
  • Impacts on different customer groups.
  • Impacts on different groups of people.

B. McKinsey 7Ss Approach:

Using the popular "McKinsey 7Ss" approach to thinking about the things that are important to an organization:

  • Strategy
  • Structure
  • Systems
  • Shared Values
  • Skills
  • Styles
  • Staff

C. Tools-Based Approach:

There's a lot of overlap here between Impact Analysis and some of the other tools we explain on Mind Tools, particularly Risk Analysis, Risk/Impact Probability Charts and Stakeholder Analysis.

You can use the headings given within the Risk Analysis article as one set of starting points for brainstorming, and use Stakeholder Analysis for thinking about the people who might be affected by the decision.

3. Identify All Areas

Now, for each of the major areas identified, brainstorm all of the different elements that could be affected. For example, if you're looking at departments, list all of the departments in your organization. If you're looking at processes, map out the business processes you operate, starting with the process the customer experiences, then moving on to the business processes that support this.

The extent to which you're able to do this depends on the scale of the decision and the time available. Just make sure you go far enough, without getting bogged down in micro-detail.

4. Evaluate Impacts

Having listed all of the groups of people and everything that will be affected in an appropriate level of detail, the next step is to work through these lists identifying and listing the possible negative and positive impacts of the decision, and making an estimate of the size of the impact and the consequences of the decision.

5. Manage the Consequences

Now's the time to turn this information into action.

If you're using Impact Analysis as part of the decision making process, you need to weigh whether you want to go ahead with the project or decision proposed. You'll need to ask yourself whether it's worth going ahead with the project given the negative consequences it will cause and given the cost of managing those negative consequences.

If you're managing a project which has already been given the go-ahead, you'll need to think about things like:

  • The actions you'll need to take to manage or mitigate these consequences.
  • How you'll prepare the people affected so that they'll understand and (ideally) support change rather than fighting against it.
  • The contingency strategy needed to manage the situation should the negative consequences arise.
Remember that few changes happen in isolation. The effects they cause can be diminished or amplified by other things that are going on. When you are thinking about impacts, think about the context you're operating in, and also think about how people might react to the change and work with it or against it.
Thanks to Mind Tools

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