Tuesday, September 18, 2012

Financial Change Management or...... Dollars and Change

Image: FreeDigitalPhotos.net
"It is never too late to be what you might have been" ~ George Eliot

Human beings are generally resistant to change. Remember a few months back when Facebook's new Timeline format was introduced? I have never seen so many angry status updates!! All because the format in which you receive information on your Facebook page (a free service, I might add) would be altered. So why were people so opposed to the new Facebook look? I believe it was mainly because people didn't see any immediate need or purpose for a new way to view status updates. They were completely satisfied with the way things currently worked. Or basically.....if it ain't broke, don't fix it.

Resistance to Financial Change
If a change to Facebook can instill anger in the hearts of many, imagine what a financial overhaul can do to the average American family. The decision to pay off debt rather than take the family vacation or eat out is a HUGE change for many, including myself. It wasn't until Day 93 of our $60,000 debt payoff before I could finally say that "eating in more and spending less is starting to feel more like a habit rather than a sacrifice". Three entire months before I could say I was accepting of our lifestyle change!! Getting rid of cable was even more awkward and uncomfortable, resulting in one night where "Mike and I pretty much sat and stared at each other because we hadn't quite figured out what to do with our time" now that there wasn't a TV to watch. What can you do to minimize the perceived negative impact of financial change on you and your family?

Dollars and Change......Management
What's the first thing you do when you decide to make a significant change to your personal finance habits? Make a budget? Although this may be most people's answer, I say wrong!! Before you even get to the numbers part, you've got to prepare yourself and your family for the major changes ahead. To try to figure out the best way to do this, I have been reading up on the concept of change management - defined by Wikipedia as an "an approach to shifting/transitioning individuals, teams and organizations from a current state to a desired future state". One change management book I found particularly interesting was John Kotter's The Heart of Change. The basic premise of this book is that people are going about implementing change all wrong. Acceptance of change doesn't happen by getting people to think differently. Rather, acceptance comes when you can get people to feel differently. Kotter believes people will change what they do when they are shown a truth that influences their feelings. See, feel, change.

My favorite example of "see, feel change" is the Gloves on the Boardroom Table story in the book (full story here). To summarize: an executive believed that a large amount of money was being wasted because each of the organization's factories handled their own purchases (rather than having a centralized procurement process). He thought that a tremendous amount of savings could be realized by consolidating procurement and put together a "business case" analyzing the issue, but nobody seemed to think it was a problem. So the executive took a different approach and gathered up all 424 different kinds of gloves the different factories purchased and marked each one with the supplier and price charged. He dumped the pile of gloves on the boardroom table in the middle of a senior executive meeting. The executives were speechless at the image before them - so many different gloves, some appearing to be the same glove purchased at vastly different price points. People were suddenly very interested and demanding a change in the procurement process. By creating a compelling physical display (as opposed to a typical Powerpoint presentation that includes a bunch of numbers on spreadsheets), the executive was able to "shock" the senior executives into feeling an urgent need for change.

So how can you create a see, feel, change scenario when it comes to your personal finances?

Generate a sense of urgency. Rather than getting the family to think differently, get them to feel differently about money and how it affects them. Rather than appealing to their intellect or logically trying to convince them that a financial change is needed, appeal to their emotions. Because just like exercise and eating healthy, we all already know we should be doing it but we often still don't. By appealing to their emotions, you may be able to bridge the gap between "should" and "want to".

Create a dynamic example. Maybe a bank statement or Excel spreadsheet isn't the way to get people to want to change their money habits. There might be a better and more dynamic way, like Gloves on the Boardroom Table, where you get your family to say "Oh wow, we've got to do something about our finances right now!". When you can see, touch or hear something it becomes more tangible and real.

Walk the Walk. As the leader of this financial change initiative, it is your responsibility to lead by example. If you fold on Wednesday night and take the family out for burritos because you are too tired to cook, you are sending the message that this kind of behavior is all right.If you aren't fully committed to your financial goals, don't expect any more from your family.

I'm not saying any of this will be easy but it's critical to achieving your family's financial goals. Give it a shot!

Stay tuned,

Creating that "see, feel, change" sense of urgency for your family is imperative if you want to meet your long-term financial goals. What kinds of dynamic examples have you used that helped convince your family that a financial change was urgently needed?
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