GB740 Unit 8 Stakeholder Cost Analysis Example

Who Gives Up What: A Unit 8 Stakeholder Cost Analysis for a Change at a Civil Engineering Firm

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Purdue University Global

GB740: Organizational Development

Unit 8 Stakeholder Cost Analysis

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[Date]

Tallis Engineering, its people and every figure are composite and illustrative; the sources cited are real.

Why Price the Losses

Change proposals usually list their benefits and treat opposition as something to be overcome. Ford et al. (2008) argue that this view of resistance is incomplete: what change agents call resistance is often a reasonable response to a real cost, or a signal that the change agent has misread something. Piderit (2000) adds that people often hold mixed views of a change at once, so they can support a change's purpose while objecting to its effect on them. Kotter and Schlesinger (1979) counted self-interest among the most common sources of resistance and suggested negotiation where a group clearly stands to lose, which describes several groups at Tallis. On that reading, the useful question about each stakeholder group is not how to overcome its resistance but what it stands to lose, how much, and what that loss reveals about the proposal.

This analysis takes the four interventions from Unit 7, shared margin credit, the resourcing forum, the lower utilization target and the project manager council, and estimates what each group gives up.

The Stakeholder Matrix

For each group, the matrix records what it gives up, the type of loss, its estimated size, what the loss reveals about the diagnosis and the response. The groups follow.

Office leaders. All twelve lose unilateral control over their staff, since the resourcing forum's decisions bind them. Leaders of the four largest offices also lose money. Finance modeled the 2025 projects under shared credit and found these offices, which lead most multi-office projects, would have been credited between $200,000 and $470,000 less margin each. At the bonus plan's rate of 3 percent of office margin, that is between $6,000 and $14,000 less per leader. The loss is of money and authority. It reveals that the current arrangement benefits the largest offices most, which is consistent with the diagnosis: they gain the most from a system that credits margin to the home office. The response is discussed below.

Acquired principals. The five principals who sold their firms to Tallis are still owed earnout payments, each figured on the profit of the office they lead, until the end of 2027. Under shared credit the profit behind those payments would be counted differently. For offices that mainly lend staff, the effect could be positive; for the two that lead multi-office water projects, it could be negative. The loss is contractual and financial. It reveals that the earnout terms, written before the firm's work became so interdependent, now reinforce the misfit.

Project managers. About ninety project managers would see their utilization target fall from 82 to 68 percent. Their bonus currently includes a payment for billable hours above target, so fewer billable hours could mean less bonus unless the plan changes. The loss is financial. It reveals that the bonus plan rewards the same behavior, billing rather than coordinating, that the diagnosis found harmful.

Senior engineers in demand. About fifteen senior engineers with specialties needed across offices, such as water treatment design and bridge inspection, would be requested more often through the forum, since requests would no longer depend on favors. The loss is of time and control over their own work. It reveals a capacity problem the diagnosis did not fully measure: some specialists are scarce, and favor trading had rationed them.

Finance. Allocating margin by hours across offices requires new accounting, estimated at about half a position. The loss is of time and budget.

The chief executive. He announced a project manager academy at two all-staff meetings. Under the proposal, the academy becomes one module. The loss is of standing: a public commitment reduced. It reveals no flaw in the diagnosis, but it is the loss most likely to stop the proposal at the executive table.

Revision One: A Cap on Cross-Office Hours

The senior engineers' loss changed the proposal. The forum, as first designed, would have filled every request for a scarce specialist, and the most requested engineers would have spent most of their time on other offices' projects, neglecting their own and burning out. The revised proposal sets a cap: no engineer will be assigned more than 40 percent of their hours to other offices' projects without their agreement. The forum will track requests for each specialty, and where requests exceed the cap, it will report a hiring or training need to the executive team. The cap accepts that some requests will go unfilled, but it turns a hidden rationing system into a visible capacity question.

Revision Two: A Parallel Earnout Ledger

The principals' loss changed the proposal too. Their earnout terms are contracts, and changing how office profit is calculated mid-term could expose the firm to disputes. The revised proposal keeps a parallel ledger: through 2027, finance will calculate each acquired office's profit both ways, under the old home-office rule and under shared credit, and earnout payments will be based on whichever is higher for that office. This costs the firm some money in the offices that would lose under shared credit, estimated at no more than $90,000 a year in total, but it removes the principals' reason to resist and protects the firm from contract disputes.

Two of the proposal's best features, the cap and the parallel ledger, exist only because the people who would have lost were taken seriously.

Responses to the Remaining Losses

For office leaders at the four largest offices, the bonus plan will add a component for the share of requests their office fills through the forum, partly offsetting the margin they lose. For project managers, the bonus payment for hours above target will be replaced by a payment tied to fade on their projects, which rewards the coordination the new target makes room for. For finance, the coordinator position in the proposal will be shared with the allocation work. For the chief executive, the chief operating officer will present the academy module as the first part of a larger development program, launched in the year he announced, which is accurate and preserves his commitment.

What the Analysis Suggests About the Diagnosis

The losses mostly confirm the diagnosis. The largest offices gain most from the current arrangement, the bonus plan rewards billing over coordination and the earnouts reinforce office boundaries. One loss, the senior engineers', revealed something the diagnosis missed: scarcity of certain specialists. The evaluation plan in Unit 9 will therefore track unfilled requests by specialty, so that this new finding can be tested.

References

Ford, J. D., Ford, L. W., & D'Amelio, A. (2008). Resistance to change: The rest of the story. Academy of Management Review, 33(2), 362-377. https://doi.org/10.5465/amr.2008.31193235

Kotter, J. P., & Schlesinger, L. A. (1979). Choosing strategies for change. Harvard Business Review, 57(2), 106-114.

Piderit, S. K. (2000). Rethinking resistance and recognizing ambivalence: A multidimensional view of attitudes toward an organizational change. Academy of Management Review, 25(4), 783-794. https://doi.org/10.2307/259206