Good financial management is all about good change management
In my line of work, I live with change every day. Actually, it’s part of my job title.
When I think about my own financial journey, my objectives to achieve financial freedom, I see many parallels between good financial management and good change management principles. Let me share with you what I mean, including an 8-step recipe I’ve adapted by a change management guru to help you and I both get better at it.
In the business world, from an organizational perspective, employees should not be burdened with the responsibility to manage change. Instead, it is the employee’s responsibility to do their best – whereby “best” is different for every person and “best” depends on an array of factors (such as mental and physical health, maturity, experience, motivation, etc). In the business world, in organizations, the responsibility to manage change rests with management – management must manage change in a way so employees can understand it and execute on it. Management has a responsibility to facilitate change by creating an environment to think about change in a positive manner; help employees understand it so employees can ultimately get behind it. Whether most managers realize it or not, management’s main role is not to manage the work but to manage the people doing the work, focusing employees to see, think, believe, feel and act on change differently. Effective and efficient change management practices are key to long-term business success.
If change management is such a critical factor in organizational success, is it surprising to understand why financial management is so challenging for many households?
Without a household “management team” focused on managing change, financial change more specifically, many households are doomed – ultimately there is no change. Without a household management team there is no catalyst for change. In my opinion households are like very small organizations – they too need to be managed – and on the financial front they need to apply some change management principles to be successful.
Why are some households more successful than others? Consider some of the excuses first:
- They have more income.
- They get good breaks.
- They had a better upbringing.
While more income, more luck and a good start in life are certainly enablers for financial success they don’t mean it will happen. So, regardless if you live in a household of one or many people consider some of the following steps to become better at financial management, some tailoring from John Kotter’s 8-steps for organizational change management in bold font:
Increase urgency – make problems and the need to solve them real.
Build the guiding team – get you and/or your spouse talking about finances, get an emotional commitment.
Get the vision right – get you and/or your spouse focused on a simple vision. Make $50 in extra mortgage payments each month.
Communicate for buy-in – involve others. Share your approach and your vision with others. Get some feedback.
Empower action – identify your obstacles then empower yourself to act. Good thoughts and good actions don’t produce bad results.
Create short-term wins – set aside some items that are easy to achieve. One example could be to save $50 every month in a savings account. Start slow, start small and learn to do one thing really well before starting something else.
Don’t let up – monitor your progress, mark milestones on the fridge, your smartphone or wherever progress is highly visible.
Make change stick – weave it into your daily life; reinforce the success you had this month, this week or even today and share it with others.
You can “Google” Kotter’s 8-step change management model anywhere.
I think good financial management is really all about good change management. I suspect the more you and I can learn about change management principles the better our chances of financial success will become.