Understanding the Change Funding Dilemma in Organisations
The question of whether organisational change should be funded from savings or be a new investment is a common starting point for many transformation debates. While this may seem like a simple binary choice, particularly in financially constrained environments, it’s not necessarily the right place to begin.
The cause behind most failed transformations is usually not a lack of ambition or intelligence but rather a lack of empathy with organisational reality. This includes an honest understanding of the constraints people are operating under, the actual delivery capacity, and the fragility leaders are trying to manage while still appearing proactive. Too frequently, transformation programmes are designed for the organisation leaders wish they had instead of the ones they are asking to change.
The Pitfalls of Self-Funding Transformations
The debate over funding often serves as a stand-in for the confidence the organisation has yet to earn. Empathy-led transformation, which is perceived as disciplined realism rather than sentimentality, begins by acknowledging that maturity must be developed incrementally. This is achieved through small, credible steps that demonstrate capability before attempting to scale it.
Regrettably, organisations persist in repeating the same unsuccessful transformation patterns. These include over-scoped programmes and premature expectations of benefits, along with massive changes unsupported by a realistic delivery capability. The result is a constant cycle of “reset” transformations, rather than consistent forward progress.
There are two familiar yet flawed positions often associated with self-funding:
“If it can’t fund itself, it’s not a real transformation”
This position reflects a genuine confidence in execution, capability, and control. However, it fails when savings are presumed to be available upfront. Business leaders anticipate large, cashable benefits early on, regardless of whether their organisation has established cost transparency or cross-functional trust.
Strict adherence to self-funding can then become a self-imposed constraint disguised as prudence. This pushes teams to over-scope change and attempt ambitious programmes that often result in another reset transformation once organisational memory fades from under-delivery.
“Savings-led funding constrains ambition and kills value”
This argument is often used to justify necessary investment in technology, mergers and acquisitions (M&A), or changes to the operating model. While it is often used to bypass true organisational readiness, funding transformation from savings can be sensible when treated as a learning and maturity mechanism. It becomes effective when initial activities are deliberately small, partial, and local, designed so that early gains can be reinvested.
Large, durable savings are rarely a starting condition for change but rather an outcome of transformation maturity. The goal of this approach is to demonstrate execution capability and justify the right to expand by building institutional confidence. While experimentation is expected, failure can be small, fast, and designed in, rather than excused after the fact.
Capability Compounding Isn’t Cost-Cutting
Both savings-led and investment-led approaches have had their successes and failures. The outcomes are determined by the context of maturity, trust, and governance, making it risky to simply copy another organisation’s funding logic. Funding from savings is only appropriate once the organisation accepts that large, durable savings are a result of transformation maturity, rather than a starting condition.
As organisations diverge in their ability to adapt to increasingly uncertain environments – political, economic, social, and so on – this distinction becomes even more significant. This is where empathy-led transformation comes into play. Not empathy as sentiment, but as a leadership discipline. It involves the ability to honestly recognise an organisation’s current maturity, design change that people can realistically absorb, and build confidence through small, credible successes that earn the right to scale.
Leaders are not choosing how to fund transformation; they are choosing what kind of organisation they believe they are today. When decisions are grounded in a realistic understanding, transformation is designed coherently. Here, scale, funding, and execution align to build maturity, rather than chase hype-driven resets.
Understanding Your Organisation’s Current Status
In the current volatile political and economic environment, the ability to be flexible is essential. However, flexibility is earned through repetition, not declaration.
Executives are increasingly asking practical questions to clarify the right approach for their organisation. These include understanding how well costs are currently understood, what changes as transformation accelerates, and what trade-offs exist between near-term progress and longer-term sequencing. These questions, rather than funding ideology, determine whether transformation compounds or stalls.
Rather than deciding whether transformation should be funded from savings or new investment, leaders must recognise whether they are clear-eyed about the organisation they are leading today, or rather the one they hope to fast-forward to. Funding discipline only works when it is grounded in the reality of your delivery capability. With this realism, small, well-sequenced steps build the trust that eventually unlocks the conditions for meaningful, durable savings to finally be realised.
Richard Churchill, Principal Consultant at Leading Resolutions
Source: Here
