5 hidden costs of poor change management you can’t afford to ignore

PEX Network’s key takeaways:

• People, not technology, are the main barrier to successful change management – neglecting the human side of change creates hidden costs that erode ROI and slow growth.
• Hidden costs are real and measurable – poor change management leads to productivity loss, talent attrition, knowledge drain, shadow IT, and diluted ROI.
• Active leadership and structured change management drive adoption – organizations that invest in training, communication, and sponsorship see faster adoption and sustained value from their investments.
• Change management is a strategic advantage, not overhead – when done correctly, it reduces risk, strengthens culture, protects institutional knowledge, and enables innovation.

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Within business transformation, the focus often lands squarely on the “hard” assets: the new ERP system, the revamped supply chain, or the artificial intelligence (AI)-driven analytics dashboard.

However, as PEX Network's Global State of Business Transformation report highlights, the biggest hurdle isn’t the technology itself – it’s the people.

While 58 percent of businesses cite cost and budget limitations as their primary challenge for the next 12 months, many are unknowingly hemorrhaging capital through poor change management.

According to the report, change management is the most applied methodology (58 percent), yet it remains the second-largest challenge (39 percent) facing leaders today.

When the “people side” of change is neglected, the costs are rarely line items on a balance sheet. They are “hidden” costs that erode ROI and stifle growth. Here are six hidden costs of poor change management you cannot afford to ignore.

1. The productivity “valley of despair”

Every change initiative involves a natural dip in productivity as employees learn new systems. However, without structured change management, this dip becomes a permanent valley. When employees are not properly prepared, “confusion sets in, morale dips, and tasks take longer to complete,” notes Julie Whitten, VP of change management at Upstate Niagara Dairy Cooperative.

This slump is often extended because organizations fail to bridge the gap between “knowing” and “doing,” according to PEX Network’s Digital Adoption and Change Management report. Without a focus on digital adoption, the time-to-proficiency stretches, leading to a sustained loss in output that can cost organizations millions in unrealized gains before the project even reaches maturity.

2. Talent attrition and the “knowledge drain”

High performing employees are often the first to leave when a transformation feels chaotic or unsupported. The cost of replacing a single employee is staggering when factoring in recruiting, onboarding, and the “ramp-up” time to full proficiency.

Beyond the dollar amount, there is the “knowledge drain.” Poorly managed change creates “performative adoption,” where employees pretend to comply while quietly searching for the exit. This results in the loss of institutional knowledge that PEX Network's Global State of Business Transformation report notes is already in short supply, with 31 percent of firms struggling to access required skills and talent.

When your “change champions” leave because of poor communication, you aren’t just losing headcount – you’re losing the engine of your transformation.

A real-world example of poor change management can be found in Revlon’s rollout of its SAP ERP system in 2018. The cosmetics giant launched a major SAP S/4HANA implementation intended to streamline and consolidate operations after their acquisition of Elizabeth Arden.

However, the rollout was poorly planned and executed, with insufficient preparation, training, and organizational alignment – all hallmarks of weak change management. 

The resulting service level issues at Revlon’s North Carolina manufacturing facilities severely disrupted production and shipping, leading to an inability to fulfil approximately US$64 million in customer orders during 2018. These operational failures also contributed to material weakness in internal controls, delayed financial reporting, investor lawsuits, and reputational damage among key stakeholders. 

3. Direct ROI dilution

Many leaders fall into the trap of believing that “Go-Live” equals success, but as Laura Karpf, senior manager of change management at Sodexo, suggests in PEX Network's Global State of Business Transformation report, transformation “lives and dies by how well you prepare people to adopt, adapt, and sustain it.”

If you spend millions on a new platform but only a fraction of your staff uses it correctly, the ROI is not only delayed, but also permanently diluted. Technology alone does not drive value; it is the utilization of that technology.

This adoption gap is often rooted in the lack of “active and visible sponsorship,” according to PEX Network's Digital Adoption and Change Management report. Without leaders modelling the change, employees never truly move past the “awareness” stage into “ability.”

Listen to Isolde Kanikani discuss building business value from change management

4. Escalating “shadow IT” and workarounds

When a new process is clunky or poorly communicated, employees find ways to bypass the system to get their jobs done. This leads to the rise of shadow IT, where teams use unauthorized tools.

The hidden cost here is twofold: security risks and data fragmentation. As the PEX Digital Adoption and Change Management report warns, if people don’t believe in or know how to operate in the new environment, they will revert to old, unmanaged ways of working. This renders the expensive new system useless and forces the business to incur the cost of maintaining “ghost” processes that were supposed to be retired.

5. The “legacy of resistance” and cultural antibodies

Resistance is a top challenge for 33 percent of organizations, according to PEX Network’s Global State of Business Transformation report. When a project is managed poorly, it doesn’t just fail, but also creates a “cultural antibody” response. Employees who feel blindsided by previous failed initiatives develop a default setting of skepticism.

This cost is born from failing to acknowledge the “loss of identity” or “loss of status” that new technology brings. If leadership fails to rebuild trust, they build a legacy of mistrust. This makes every subsequent change harder and more expensive.

A tip for leaders: acknowledge emotional and cultural impacts, celebrate quick wins, and involve employees in co-creating solutions to minimize resistance and build long-term engagement.

The power of effective change management

Too often, change management is viewed as an overhead or an optional “soft” activity. The hidden costs outlined here – lost productivity, talent attrition, diluted ROI, shadow IT, and cultural resistance – show what happens when it’s neglected.

The flip side is just as powerful: when approached strategically, change management is the engine that turns investment into value.

For information on free change management training courses, click here.