Why do so many government financial management information system (FMIS) and digital transformation projects fail to achieve objectives?
Root Cause: Public finance change management and digital transformation are often seen as separate standalone functions that are periodically leveraged. Process and digital transformation needs to be integral to project implementation for any digital government resource planning (GRP) system.
Implementing a new GRP solution or FMIS has a significant impact across many public sector organizations. Even when these projects are not called “digital transformation”, day-to-day public finance operations are transformed. These processes continue to change throughout implementations, and evolve through future cycles of process improvement and legal reform.
Embedding an understanding of organizational context and change management into the implementation of these projects helps to ensure they are successful. Ongoing future cycles of continuous improvement should be supported by the GRP.
Transformation Scope
In a previous article we explored the journey from digitization to digital transformation. Digitization, digitalization and digital transformation require different levels of change management.
The government process change challenge comes from the combination of large IT, complicated enterprise-class software, and organizational transformation.
Public finance transformation is often combined with digital transformation. The FMIS system of record becomes the digital core for functional transformation across systems of engagement, systems of intelligence, and systems of innovation. Public finance digital Implementation approaches differ depending on organizational digital readiness. The implementation of a new FMIS is usually considered large scope with small change, or “digitization traditional”:
- Scope: typically covers budget planning, treasury, commitment accounting, assets and inventory; with many also including human resources, payroll, procurement, grants, and fiscal transparency
- Change: typically based on current practices with process and design changes in line with recent legal reform
Multiple-year FMIS implementations sometimes include digitalization for end-to-end process automation with the use of agile techniques for future fiscal digital transformation. It is safe to conclude that these digital deliverables will be needed in the future even when not specified in FMIS contracts.
Challenges of Managing Change in PFM Digital Transformation Projects
Continuing Business as Usual Delivery
FMIS and digital transformation projects involve material changes to the way civil servants work. There is usually the need to:
- review processes and activities
- consider roles, and how these relate to processes and tasks
- learn new ways of delivering services.
These activities are time-consuming and take employees away from day-to-day tasks.
Involvement of Multiple Departments
For many governments, reforming management of public finances will involve a range of roles, teams and even departments. Delivering change not just in one area but across an organization makes things more complicated as it increases the number of people and processes involved. An understanding of how teams and team processes interact becomes important, and balancing the different priorities of different stakeholders can be challenging.
Enterprise-class technology also requires a higher degree of change than a smaller scale addition to the tech stack.
Cross-Project Involvement
There may also be wider organizational transformation going on across multiple projects at once. Having multiple projects running concurrently drives maximum impact in a relatively short period of time, but does bring complexity for stakeholders on one project as they are impacted (even indirectly) by the other projects. There will often be a wider range of internal and external stakeholders involved too, increasing the need for effective communication and prioritization.
For example, FreeBalance is involved in digitally transforming Costa Rica’s public expenditure management, driving a new, citizen-centric, digital-by-design system for planning, budgeting, public expenditure, accounting, human resource management, reporting and treasury. This is one of three PFM reform projects the Costa Rican Government is currently undertaking, as part of its wider Hacienda Digital (Digital Treasury) programme. Each project has its own milestones and deliverables, however Hacienda Digital is by nature a more complex programme to manage than any of the three would be independently.
Stakeholder Involvement
Change at an organizational level is disruptive. Even if the current ways of working are not ideal, end users of financial systems may still be uncomfortable with the proposed changes. This can result in objections to changing informal or existing processes (“how we’ve always done things”) and to the potential introduction of individual accountability (through project audit trails). Add to this the potential threat of automation and concerns about whether they have skills and knowledge to cope with new demands, and a technology project can generate strong emotional responses (anxiety, fear, disengagement) which might not be anticipated.
Big projects also attract outside attention. There may also be political interventions which impact progress and delivery. And there are many more stakeholders to be considered, consulted and kept up to date. Citizens, civil society organizations, businesses, donors, credit agencies, opposition parties and employees will all have an interest in the project, and regular engagement with these audiences helps to smooth the path for project delivery. This can be challenging due to government constraints including bureaucracy and resource availability, as well as balancing different stakeholder motivations.
An Integrated Approach
With this many potential pitfalls, how can project leaders keep implementations on track? The key is to make organizational change management and capacity building integral to the project. These are critical and cannot be delivered piecemeal.
Change Management
Change management supports the people using any new system to use it effectively, with minimum worry or disruption to service. Successful change management activity recognizes that individual job roles, processes, approvals and potentially team structures may all be altered as a result of the implementation, and helps employees to work through this in a structured and inclusive way.
One example of this in action is change management workshops, which set the precedent for how change is viewed within the organization. They build capacity in the business and soft skills which help individuals and teams work together to ensure a successful implementation.
Building Capacity
Building capacity within government organizations early helps overcome change resistance and reduces unnecessary code customization. Improvements in knowledge and understanding can also set the expected cadence for ongoing FMIS modernization (which we refer to as ‘progressive activation’)
Enhancing skills in both public financial management in general and an IFMIS specifically can be delivered in a number of ways, including PFM training courses, workshops and train-the-trainer sessions. These hands-on activities help to build skills and knowledge in both the big picture and the detail.
Providing access to proof-of-concept GRP configurations, and incremental progress updates, is an additional tool which can be helpful. This helps increase understanding of the project, the tools and the expected impact. Demonstrating progress and quick wins also helps to overcome change resistance, as stakeholders can see how a new IFMIS will work in reality, and have the opportunity to feed in questions and comments.
Communication
As well as providing ongoing training and support to build capacity and manage change, effective communication should also be considered an integral part of successful project delivery.
Providing regular, scheduled and consistent updates to employees about what to expect helps to allay fears and proactively manage objections before they are raised.
It’s important to remember that stakeholders outside the project also need to be regularly engaged. Establishing ongoing and transparent communication channels with citizens, businesses, donors and civil society organizations builds trust that the investment in the project is going to deliver the expected returns and can help to mitigate the risk of negative media coverage.
Supporting Change in Costa Rica
FreeBalance has long advocated for taking an integrated approach to delivering transformational change, and this has been a critical factor in our customer’s success with implementations.
Most recently, the Government of Costa Rica recognized the need for this type of integrated approach when planning the digital transformation of its Ministry of Finance. From the outset, the Government specified the need within any programme implementation for change management activity, organizational alignment and transformation not just of the digital operations but of the organizational culture.
As a result, change management specialists are located in FreeBalance’s Costa Rica offices, providing operational support to project stakeholders. Ensuring a cohesive and strategically aligned operation is a key focus for the project team, working from excellent foundations created at the recent joining Ministry of Finance and FreeBalance project kickoff meeting in January 2024.
Conclusion
In summary, building knowledge in new technology and embedding skills in coping more widely with change helps end users and managers to embed the transformed digital approaches and realize the benefits of the new tools. These, along with effective internal and external communication, should never be considered an add-on to implementation. Instead, these should be integral to the project delivery. This helps to mitigate the risk of delays, disengagement or non-delivery (failure) of the project.
To find out more about FreeBalance’s implementation advisory services, including our proprietary, ISO-9001:2015 certified agile implementation methodology A-i3+qM™, get in touch with one of our PFM experts.