How is the State of the Economy related to the Change Management Industry?

Kerrie Smit
Jun 20, 2024
3 min read

Updated: Oct 28

One of the highest trending search topics for Australians at the moment (and - as it happens Slovenians, French, Swiss and Slovakians), is the search for real estate and the latest information on interest rates.

The realities of our domestic economy instinctively influence business operations. If money is tight at home, we alter our spending and saving patterns to accommodate, we might also alter our relationship to debt and credit. We might postpone larger purchases like holidays or trading in a motor vehicle.

When consumers participate in a competitive market like real estate, they are not just making a purchase; they are also fuelling the behaviour of the market itself. A buoyant housing market with insufficient stock drives people to think about selling their house. Once they've sold their house, they will have decisions to make about what to do with the sale proceeds, including potentially entering the market as a buyer.

Micro changes in consumer spending aggregate to form market behaviour. These shifts, in turn, drive the need for businesses to respond proactively.

We previously wrote about the contract rates for Change Managers, and how cost-cutting through reducing the change function can be tempting, but a false economy: Market Corrections in a Flexible Industry: Fine-Tuning Change Management.

How is the state of the economy related to change management? Today, we take a broader look at how economic performance significantly influences the change management industry.

Drivers of Change

A couple buying vegetables in the market

Micro changes in household earning and spending patterns drive markets, and changes to markets result in economic transformation. Economic shifts inevitably result in both challenges and opportunities, making this a key driver of organisational change. Market changes prompt organisations throughout the economy to adapt and evolve.

Uncertainty in the economic landscape is a top concern for business leaders and professionals. If businesses fall more into the 'challenged' column (rather than the 'opportunity' column) following market changes, they may face limited growth and productivity challenges. Depending on market adjustments and government policy, key drivers of business performance may be adjusted. Wages may stagnate, resulting in other flow-on effects like the movement of skilled labour out of the sector. In turn, labour shortages create another market response, and so it goes.

Organisations must build resilience to navigate economic fluctuations and the downstream impacts that can occur.

Agility and Adaptability

Successfully responding to economic change requires agility. Organisations must be prepared to pivot swiftly, as demonstrated during the global Covid-19 pandemic. Being able to pivot first necessitates a thorough understanding of the current business, the current and future business opportunities; and it involves a thorough understanding of how to implement change throughout the organisation.

Naturally, industry changes and organisational agility are recognised as key drivers of change by business leaders. However, business leaders working collaboratively with change management professionals can significantly enhance organisational agility.

A futuristic production line showing Change Management as a central part of controlling the chaos and smoothly turning inputs into outputs

A well-prepared change management function enables organisations to turn around operating model changes more rapidly.

Digital Transformation

Digital technologies play a crucial role in driving economic change. Uneven participation across economies creates new opportunities and challenges. Where niches and pockets of excellence occur, these can be leveraged to open new market opportunities and improve overall market and economic participation.

Digital technologies have lowered many barriers to entry and forced social changes unthought of just years prior. As digital transformation continues alongside social and economic shifts, organisations must be ready to pivot to a more democratic competitor, customer, and consumer landscape A move towards a more even playing field will again drive alterations in household earning and spending, aggregated market behaviour, and organisational challenges and opportunities.

Organisations must be ready to pivot to a more democratic competitor, customer and consumer landscape.