change management merger case study

Organizational culture in mergers: Addressing the unseen forces

Cultural factors and organizational alignment are critical to success (and avoiding failure) in mergers. Yet leaders often don’t give culture the attention it warrants—an oversight that can lead to poor results. Some 95 percent of executives describe cultural fit as critical to the success of integration. Yet 25 percent cite a lack of cultural cohesion and alignment as the primary reason integration efforts fail.

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How can companies address culture more effectively during a merger? How can the transformational opportunity a merger offers lay the groundwork for a healthy, high-performing organization?

This article describes our approach to understanding and addressing culture in mergers and focuses on the actions needed to combine operations and deliver value. This approach has been refined over more than 2,800 mergers in the past five years.

What is culture?

Culture is usually defined as one (or a combination) of the following: national cultures (German versus American, for example), artifacts (such as a suit and tie versus jeans), and employee engagement (including satisfaction levels). We believe that these definitions of culture are red herrings and instead take a very practical view, which can transcend national boundaries. We define culture as the outcome of the vision or mission that drives a company, the values that guide the behavior of its people, and the management practices, working norms, and mind-sets that characterize how work actually gets done.

Case study one

“I can think of two examples where we did extremely cursory assessments of the existing organizational cultures. Based on these assessments, we thought the cultures were very similar. Only later did we learn just how different the cultures were, particularly in terms of decision-making style. In one company, the boss made the decision, and the employee’s job was to execute. In the other, the style was more democratic. Debate was encouraged on all topics, even outside your area of functional expertise.

“So, you get the situation where the head of finance—who is used to having decisions simply followed—is suddenly challenged by someone from HR who wants to debate the issue first. The head of finance feels criticized and can’t understand why. Half the people watching this incident feel the challenge from HR is normal and appropriate, while the other half can’t understand why HR wants to have a debate over something that has already been decided and is none of their business anyway.

“People feel uncomfortable, and they don’t understand why. Leaders from the acquiring company, whose ways of working are typically adopted by default, don’t realize how uncomfortable the people from the target business are feeling. No one is recognizing their concerns, their worries, and their fears over this new style of decision making, because executives from the acquiring business don’t understand that this is a new style for people from the target company.

“This discomfort can unfortunately develop into unhappiness and to people choosing to leave. This unhappiness can also permeate throughout the organization, particularly if key leaders start to leave. It can have serious implications and affects your ability to both maintain your base business and deliver the value expected from the deal.”

—Aileen Stockburger, former vice president for worldwide business development at Johnson & Johnson

A company’s vision and values are almost always clearly defined during a merger, usually by the CEO, with input from the leadership team. The real challenges come in managing and aligning how work actually gets done. At this level, misunderstandings, friction, and tension can make it difficult or impossible for teams to work together effectively and can jeopardize the success of the deal (see sidebar, “Case study one”).

Our approach to culture

There are three key steps to understanding and managing culture during a merger:

• Diagnose how the work gets done.
• Set priorities.
• Hard-wire and support change.

Five key success factors

Leaders in merging companies can establish a clear, structured culture by following these action items:

1. Create a fact base and a common language:

• Work to gain insight into existing cultures and to recognize differences, but don’t exaggerate them.
• Understand the similarities, the differences that could cause friction, and the joint opportunities.

2. Set the cultural direction early and use it to support the deal’s goals:

• Focus on the culture elements that drive economic value in the deal and tailor the integration approach to support them.

3. Align the top team around the planned cultural direction:

• Leadership alignment and role modeling are critical to success.
• The top team must be responsible for leading the way.

4. Deliver a clear, coherent program woven into normal integration activities:

• True behavioral change requires both rational and emotional intervention throughout the system.
• Don’t view a cultural program as a separate “Friday-afternoon job” for HR; it must be woven into all integration initiatives.
• Hard-wire the desired culture into the new company’s operating model.

5. Measure cultural integration during and after integration:

• Track metrics on retention, productivity, and employee satisfaction.
• Use the metrics to monitor progress.

To be successful, companies should start this process early—well before close if possible—and act before cultural integration becomes more challenging. The process must be led from the top, the top team must commit itself to the culture effort, and employees must be strongly engaged. To put it simply, culture is everybody’s business; it is not just another item on HR’s to-do list. In fact, HR is merely an enabler. Culture is the soul of the business (see sidebar, “Five key success factors”).

You can’t design your “NewCo” culture until you understand the culture you have already. Bill Kozy, former executive vice president and COO at Becton, Dickinson and Company

Step 1: Diagnose how the work gets done

As early as possible in the merger process, leaders must learn about the culture of each of the companies involved.

From the standpoint of strategy, several key questions should be considered. What is the “secret sauce” of the target company, and where are its “pearls,” or the factors that must be preserved because they are intrinsic to its value for the acquirer? How can the acquirer benefit culturally from the target? How can the target benefit culturally from the acquirer?

As for tactics, it’s important to understand how work gets done at both companies: their management practices and working norms. How do they make decisions (for example, are they centralized or decentralized)? How do they motivate their people (say, through financial or emotional incentives)? And how do they hold people accountable—individually or collectively (as teams)?

A scientific approach is required to diagnose culture. The leaders’ gut instincts are not sufficient to understand it fully at either company.

One thing I wish we had done was [to create] a culture diagnostic right at the start of our planning process. That would have eliminated some of the misperceptions about both company cultures. It would have established an objective set of criteria around which we could have had conversations based on facts rather than just anecdotes or beliefs. Beverly Goulet, former executive vice president and chief integration officer at American Airlines

A variety of diagnostic approaches, ranging from management interviews to employee focus groups to surveys, are available. Surveys can engage large numbers of employees and give people from both companies a voice. While one-on-one interviews and targeted focus groups can offer more specific insights, they are less effective at identifying organization-wide trends or “pockets” of differing behaviors. The best bet for a holistic view is using a combination of diagnostic approaches. But the structure and terminology used across these methods must be congruent. The goals are to generate a fact base about the existing cultures and to build a single common language around this understanding. What are the similarities? What are the opportunities? What differences could cause friction?

Step 2: Set priorities

Once leaders understand the existing cultures, they can begin to set the immediate cultural priorities, which should be based on two focal points. The first is on areas where the culture can help maximize the value of the deal (such as moving to a higher-performance culture to achieve ambitious sales targets). The second is on areas where companies must manage meaningful differences in ways of working to build a single high-performing organization. These are often expressed as a series of “from–to” shifts that are easy to communicate. Drawing on inputs from the diagnostic, the top team should develop a point of view about the shifts. This alignment ought to include target-company leaders where possible, since leadership alignment and role modeling are critical for successful implementation.

To really get at the essence of the challenge, the leadership team needs to understand how they have worked traditionally and to consider whether that’s the right way to work going forward. It has to be an introspective process that says, “What have we done well? What might we do better? And, frankly, does the culture we want to drive going forward even match the culture we’ve brought into this?” Beverly Goulet, former executive vice president and chief integration officer at American Airlines

The next step is to codify a specific set of behaviors, or management practices, that will further strengthen the new company. Articulating these behaviors is an important step in translating the higher-level from–to shifts into practical and tactical actions. For example, one shift could involve transitioning the organization away from a performance-management approach with unclear roles and responsibilities to one with very clearly defined roles and specific performance targets for each employee.

Cultural artifacts—for example, a new vision, mission, and values, reinforced further through symbols, emblems, and branding—can help signpost and encourage these behaviors. Such artifacts, important prerequisites for getting culture right, must be developed with a clear idea of exactly which behaviors they are designed to reinforce.

The top team should also quickly begin role modeling the change in behavior. A compelling, consistent change story should be developed centrally and collectively, and all top-team members should personalize it with their own experiences. They should then use this story to engage with their employees at every opportunity.

The fun thing about a “NewCo”: it’s a new company. So you’re building it. Bill Kozy, former executive vice president and COO at Becton, Dickinson and Company

Once the leadership team agrees on the desired behavior, a comprehensive change plan structured around cultural themes must be developed. Each theme can then be cascaded into concrete initiatives: activities and actions that constitute the change plan and are monitored through defined key performance indicators (KPIs). The target state could, for example, be to create a more agile and performance-driven sales force that works together to cross-sell (exhibit). This can be translated into supporting culture themes, such as working together well and making decisions quickly. For each theme, specific initiatives and metrics can then be developed. Taken together, these themes and their constituent initiatives encourage the desired behavior and promote the overall goals of the merger.

Accountable business leaders must drive all the initiatives instead of delegating them to HR or communications groups. Initiatives should contain a mixture of hard measures (such as structured incentives) and soft measures (including communication and celebration). It’s important to remember that changing a company’s culture often requires a lot of incremental and mutually reinforcing gains. Many of the initiatives will—and should—be very tactical. For example, introducing a disciplined approach to the way meetings are run can help embed a culture of respect for other people’s time. Defining decision rights clearly can directly increase the sense of empowerment and streamline decision making. But the real power lies in the cumulative effect of these individual actions, which must therefore be part of a structured approach.

Step 3: Hard-wire and support change

Case study two.

“To the credit of our CEO and senior-management team, they decided, as this process started, that ‘NewCo’ needed a new purpose. Of course, everybody on the buyer’s side said, ‘You can’t change the purpose of a 117-year-old company.’ But our CEO and our board said, ‘Yes, we can, and it’s in the best interest of the new company to do so!’ They changed the purpose, and they recrafted the values to fit together nicely with this. This was thoughtfully done by our senior-management team. And the organization, particularly on the buyer’s side, was really taken by this. You could hear people saying, ‘This really is going to be a new place.’

“As an individual, you therefore had two choices. Do I want to be a part of this and really get out in front of all these new expectations? Or is this just not for me? And people engaged with this challenge enthusiastically. You quickly saw a series of very practical initiatives grow up, led by business units and regions, including work to really define what we mean by being more agile and to completely redesign a series of key processes.

“When people know exactly what’s expected of them, right from the very early stages, they are more comfortable changing things and moving faster to make improvements. That clarity releases positive energy. You see leaders championing change, communicating broadly, and getting their organization more engaged on what we are trying to do.”

—Bill Kozy, former executive vice president and COO at Becton, Dickinson and Company (who led the CareFusion integration)

Once a series of coherent themes and initiatives has been identified, they can be hard-wired into the new company’s operating model and daily practices (see sidebar, “Case study two”). The redesign of policies, processes, and governance models must reflect these important cultural aspects if change is to stick. For example, nurturing a culture of respect might be reflected in company policy and values statements. It could also become an assessment criterion in individual performance reviews and compensation calculations. And at the end of every governance meeting, participants might reflect on how respected they felt by others during the conversation. Cascading and reinforcing the desired cultural changes through a series of such mutually reinforcing initiatives helps companies to change behaviors quickly and establish the new normal.

To manage cultural integration properly, the merger team must also ensure that the right messages and behavior cascade throughout the new company. That requires more than just passing messages down through the ranks. Formal structures are not always the best way to influence an organization, and executives do not always understand who the real influencers are. By identifying the most influential employees, leaders can recruit them as change agents and give them the training and skills they need to be effective in this role. This would include instruction in how to communicate the change story and how to role-model the behavior required in the influencers’ parts of the business. Signature initiatives involving the top team can also help underline its commitment and create a sense of shared endeavor. This could include changing the company dress code, to match that of the acquired company, to signal the change on both sides.

Companies often fall short when they try to realize their cultural aspirations during this third step. They should track the implementation of themes and initiatives with the same rigor they use for financial targets. Leaders should develop clear milestones, incorporate them into a centrally monitored master plan, and track them closely. KPIs should also be monitored regularly to measure whether the goals of cultural integration are being met, and leaders should take corrective action when needed. Additional employee surveys and focus groups can monitor the effect on workers. The top team should own the process, holding theme leaders accountable and proactively addressing pain points.

A merger provides a unique opportunity to transform a newly combined organization, to shape its culture in line with strategic priorities, and to ensure its health and performance for years to come. By establishing a clear fact base and understanding of the existing company cultures, leaders can use a common language to set the cultural direction for a high-performing new company. An aligned top team can begin to role-model the specific behavior needed and to lead a clear, coherent program of initiatives that communicate and embed the behavior more broadly. By tracking the effect of these initiatives, companies can take further action to correct the course as required.

As we have seen, over the longer term, companies with aligned corporate cultures and strong norganizational health deliver, on average, total shareholder returns three times those of companies whose cultures and organizational health are not closely linked. Given the magnitude of the benefit, cultural alignment should be central to any merger integration

Oliver Engert is a senior partner in McKinsey’s New York office, where Kameron Kordestani is a partner; Becky Kaetzler is a partner in the Frankfurt office; and Andy MacLean is an associate partner in the London office.

The authors wish to thank Beverly Goulet, Bill Kozy, Aileen Stockburger, and Franziska Thomas for their contributions to this article.

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Change in the Context of Mergers & Acquisitions

Case Studies of Business Mergers and What They Teach Us!

• First Online: 09 February 2023

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The following chapter presents a series of current case studies on change management in the context of mergers and acquisitions (M&A), which were researched on the basis of guided interviews. The aim of the case studies is to make the challenges of change transparent by means of practical examples and to show practical solutions for these challenges in accordance with the success factors of change management.

In the context of mergers and acquisitions (M&A), this primarily concerns the following challenges:

Overcoming different corporate cultures

Power imbalances due to enormous size differences

Cultural differences in international M&A

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Bühler, M., & Klose, N. (2017). Mehr als nur Zahlen. Warum M&A-Transaktionen scheitern und wie ein ganzheitliches Controlling zum Gelingen beitragen kann. In W. Funk & J. Rossmanith (Eds.), Internationale Rechnungslegung und Internationales controlling (pp. 445–467). Springer Gabler.

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Lauer, T. (2023). Change in the Context of Mergers & Acquisitions. In: Quick Guide Change Management for all Cases . Springer Gabler, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-66625-8_3

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M&A Change Management Strategy: High-Growth Approach (2024)

Kison Patel is the Founder and CEO of DealRoom, a Chicago-based diligence management software that uses Agile principles to innovate and modernize the finance industry. As a former M&A advisor with over a decade of experience, Kison developed DealRoom after seeing first hand a number of deep-seated, industry-wide structural issues and inefficiencies.

Transformation. Evolution. Revolution.

Whatever world you choose, there is no denying that M&A at its core is about change - for the acquirer and the target.

Even growth, the most commonly cited motive for undertaking M&A given by managers is just a different word for change.

It’s a mystery, then, why the M&A community has largely overlooked the value of change management. This is a potentially costly oversight.

Where a business stands at the other side of change is ultimately a measure of how well it was managed.

The Change Manager Role

The easiest way to think of the change manager role is as a project manager, where the project is fundamental change for your organization.

The bigger the acquisition, the more processes, technology, job roles, structures and culture can (and indeed, should) change.

Traditional manager have neither the time nor the experience to oversee this transition, which is where change managers come in.

What is Change Management?

Change management is the process through which a company creates value from change. It takes an analytical approach and considers all of the areas which traditional M&A overlooks in the M&A process from people and values to processes and technologies.

Underestimating the Power of Change

A well-trodden maxim goes that the biggest investment anybody will make over the course of their lifetimes is their house.

And for a company?

If we’re talking about one-time investments, invariably the biggest investment that a company will ever make involves some element of M&A. That is as true for tech firms as it is for the thousands of medium-sized firms whose deals fill Capital IQ every year.

And yet, despite the transformative impact that M&A has on businesses of all sizes, change management is almost never mentioned. Perhaps managers equate the acquisition of companies with that of capital expenditure - a balance sheet addition.

Whatever the reason, it’s a potentially disastrous mistake to make. Having had privileged access to the inner workings of thousands of deals, we believe that change management deserves a role all on its own in the M&A process.

As competent as you believe your office manager or HR director to be, you can’t put them in charge of change management. Nor is it good enough to say that it’s a ‘collective responsibility.’ Being serious about M&A involves creating a dedicated change management role.

This could be a hired hand brought on board for an extended period, or someone who will fulfill the role over a series of acquisitions that your company is planning. Bringing someone of this nature onto your M&A team has several benefits:

Within your business, having a dedicated role for change creates a culture prepared for M&A. It moves from being a process based on ad hoc procedures to one where the goal is to maximize value at every stage of the process (particularly after the deal has closed).

Outside the business, the presence of a change management officer creates a smoother relationship between the buyer and its targets, before, during and after any transaction has taken place.

Perhaps this is best captured by renowned change management expert Dawn White, who says that when it comes to change management: “Methodology is the driver.”

Methodology is the driver

Putting Dawn White’s advice into practice, we recommend that companies implement some variant of the methodology that DealRoom has constructed (see below), which is based on findings from thousands of deals.

This constitutes change management best practice and should include:

Change Management Best Practices

• Set up one-to-one interviews and focus group sessions
• Use surveys to find the big picture
• Produce a comprehensive report of your findings and present it to stakeholders
• Be sure the comprehensive report includes personalized calls to action
• Consider conducting a potential resistance analysis

Let’s now take a detailed look at these points in order.

1. One-to-one interviews and focus group sessions with the target company

Nothing sends shockwaves through a group of employees like telling them that their company is being acquired.  

The mere mention of another firm on the horizon can create a siege mentality among target company employees, who all start to look around wondering whose job is first to go.

Facetime between these employees and the change manager serves to reduce this anxiety, bringing a more human aspect to the process. Employees who may have become hostile, or even left the target company, can be won over to the new vision being proposed.

Furthermore, by interviewing a broad swathe of employees within the firm - from top to bottom - the change manager can learn about the company’s internal workings, its culture and possibly even some problems that wouldn’t have been encountered without the face-to-face interaction.

2. Use surveys to flesh out the big picture

What people may be reluctant to put across in a face-to-face meeting, they should be more willing to express in a confidential survey that allows them to vent their emotions. A well-designed survey should draw out insightful answers.

For example, suppose one of the employee concerns that came up again and again during your interviews was the lack of opportunities for promotion within the firm. Fantastic - it could be that you’re going to inherit an ambitious workload. Structure the survey around this. Ask questions like “how can you contribute more to the company?” and “How could we value your contribution more than it is being valued now?”

Thus, well thought-through surveys will build on the findings from the interviews to paint a clearer picture of what’s going on.

3. Produce a comprehensive report of your findings and present it to stakeholders

By now, you should have some insightful findings which can be presented to stakeholders within the acquiring firm.

There could be a number of issues which the findings show up. For example - a lack of knowledge in a certain area, cultural problems that exist within the workforce or any number of so-called ‘soft’ (human) issues which, left unchecked, have the potential to bring down deals.

The positives and negatives drawn from the findings should be laid out in the clearest terms possible: “The positives we see in acquiring this firm are _____________ while we are somewhat concerned about _________________.”

4. Be sure the above report includes personalized calls to action

This is possibly the area in which the change management expert adds most value to the acquisition process.

By adding personalized calls to action, they assign responsibility (and by extension, accountability) to important tasks which could become sidelined otherwise. If drawn up - and of course, implemented - well, this report should be the basis for the company to drive value generating changes from this point on.

5. Consider conducting a potential resistance analysis

Similar to the face-to-face sessions with employees, a potential resistance analysis allows both sides of the acquisition to see what potential resistance (i.e. value destroyers) are within the organizations.

At this step, don’t fall into the same trap that employees may have fallen into at an earlier stage - i.e. a ‘them and us’ mentality. The idea here is to drive this forward, not to drive people out. Uncover what employees on each side are anxious about, what they see as being the negative points about the deal for them and for others, and - where they see their roles in the company’s future.

Create a mood of transparency and this will almost certainly yield some valuable insights.

Six months after the transaction, conduct a climate survey and present findings to executives

This is a repeat of the previous steps with a change in perspective: You’re now asking the questions after the fact. Some of the initial concerns expressed by employees six to nine months before could now be shown to have had real foresight. Other concerns - hopefully - will have been unfounded.

The purpose of the climate survey is to work out one from the other, how everyone is adapting to the new changes and what concerns still remain (or, more worryingly, have arisen) since the companies merged. This should all be presented to management, as before, to be dealt with as soon as possible.

Why change management is often forgotten in M&A

Because it is not tangible .

We cannot always see what is being done like we can with traditional project management - change management is often overlooked or inadvertently forgotten. Unfortunately, it is when you start seeing what is not happening (people are not embracing new culture, work is not getting done properly, and synergies are not being met) that you realize change management is not being implemented.

‍ To combat this, M&A change management needs to be brought to the forefront and differentiated from project management .

Specifically, change management cannot be thought of in terms of tasks and checkmarks, rather it needs to be seen as an approach to make sure the people on both the acquiring side and target side are being “taken care” of across all functions.

Using change management to identify and prioritize roadblocks

One of the areas in which change management can garner the largest impact is identifying deal and synergy killers.

Using an impact analysis, change management team members can look at areas such as foreseen debt, differences in operational styles, and benefits and bring them to the forefront early on. Once these issues are identified, mitigation can begin, which ultimately gives these roadblocks less destructive power.

When early identification of issues  is not wielded as a weapon against roadblocks, small issues can wreak havoc on a deal later on. We have witnessed something as seemingly simple as payroll moving from weekly to biweekly lead to problems and lack of employee retention.

Here are some strategies for prioritizing and addressing issues related to culture and change management

• Look at what is high priority to employees and ensure they are dealt with quickly - again, people are key.
• Examine and gravitate towards roadblocks that line up with the key objectives of your integration.
• Another approach is to identify low hanging fruit - simple issues that can be quickly and easily rectified - this will allow you to gain some momentum.

Overall, consider  impact and effort when deciding where to start. Once you believe you have fixed an issue, change management teams should check in with both sides to see if employees truly feel/see a difference.

Where and Why You Might Face Resistance?

It is essential to remember employees from the target company might be resistant.

Remember, they did not ask to come to the purchasing company.

Some common feelings and signs of resistance are members of the target company may feel as though the purchasing company is of less value than them, or they are not interested in being a part of a new organization.

Finally, resistance may come about because the purchasing company has not put in the extra effort to truly teach the acquired company about its organization's structure and core practices or how to be successful in the new work environment.

These feelings often result in acquired employees not bringing all their energy and talent to the table.

Conclusions

Just reading through this article, you can probably get a feel for just some of the issues that tend to arise during the integration phase.

But imagine trying to conduct a deal without going through the steps we’ve just outlined.

Change management is an ongoing process.

Coming to terms with this and taking the necessary steps within your organization to accommodate for change is the first step to ensuring a successful M&A process.

Get your M&A process in order. Use DealRoom as a single source of truth and align your team.

Publications Effective Management Of Change During Merger And Acquisition

• Publications

Effective Management Of Change During Merger And Acquisition

• July 14, 2014

Symbiosis Institute of Management Studies Annual Research Conference (SIMSARC13)

The on-going dance of merger and acquisition happening every week is hard to miss. But it has been found that most mergers and acquisition fail because of poor handling of change management. Change is the only thing that will never change so let’s learn to adopt by change management. This paper will analyse all the factors that lead to change. The major reasons that lead to change are system dynamics, structure-focused changed, person-focused change, and profitability issues. The resistance to change can be attributed to the lack of communication, no clear vision, no proper reward system, confusion and frustration, force of habit, fear of unknown, fear of insecurity, loss of competency and lack of support.

It presents different model that can be used for change management and different theories that can be used to handle change during M&A. It also highlights the strategies this can be followed by the leaders of the organization: Integration plan, Employee Involvement, Clear Vision, Customer Focus, HR structuring and Downsizing. The factors discussed are based on the empirical findings, case study and earlier papers. To, support that the change can be managed effectively and efficiently, the paper shows as to how change was managed in the merger of ICICI bank and Bank of Madura.

1. Introduction

In mergers, two or more companies engage in some negotiation which ultimately leads to transaction. Acquisition also involves two or more companies but in acquisition the bigger company swallows the smaller company. So merger and acquisition is the process of integrating two or more companies with different values, cultures and forces into one cohesive unit. From an economic point of view, there are 2 types of mergers: Horizontal mergers and Vertical mergers. Horizontal mergers involve companies with similar area of work e.g., Chevron and Texaco. Vertical mergers involve companies with diverse area of work e.g. AOL and Time Warner.

The merger is not only seen from the financial perspectives but it is the union of two different companies and two different cultures which is bound to bring some anomalies. It is very important that the concern departments should be actively involved in the process so that they under these difference and plan in an orderly manner for the smooth transition During M&A, the leaders of both the companies face many challenges: cultural management, stress management, redundancies, HR restructuring, resistance to change, job insecurity, talent drainage, low motivation etc. All the aforementioned factors are responsible for change. KPMG has found that 80% of the mergers and acquisitions fail because of improper handling of change management. Below is the list of few companies which failed miserably because of poor handling of the aforementioned reasons.

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Best practices for change management in M&A

Poorly planned post-merger integration is a common reason for deal failure in mergers and acquisitions. According to one study, cultural differences between two companies that occur during the transition phase lead to deal failure in 41% of cases .

The solution to this challenge is to implement effective post-merger integration change management.

In this article, we focus on the basics of M&A change management and suggest best practices to carry out this process effectively. 

The essence of M&A change management

Change management is an important part of the post-merger integration phase. It’s the process that involves the implementation of certain tactics and approaches to manage the change the merging companies face.

Essentially, M&A integration change management is the process of ensuring a smooth transition after the transaction. It involves managing employees’ expectations, winning stakeholders’ buy-in, and orienting them through the transition. 

As stated by PwC’s 2023 M&A Integration Survey , Fortune 1000 management teams named the following elements as the key drivers of their change management programs: 

The function of change management in M&A

The key function of change management during M&A is to ensure that the acquiring and acquired companies successfully merge and achieve expected synergies. The process must consider factors such as existing cultures, operations, communications, and leadership structures.

A recent Deloitte survey found that effective change management was ranked as a critical factor for successful post-merger integration.

Mergers and acquisitions change management is an integral part of the post-merger integration plan as it helps to:

• Minimize disruptions

A thorough change management plan enables a company to avoid the risk of disruptions in day-to-day operations, as well as the overall negative impact on employees’ productivity and morale.

• Manage resistance

Employees can often be resistant to a new corporate culture or operating model, as the change can cause feelings of uncertainty. Change management helps to overcome this issue by including a resistance analysis that identifies potential problems and how to address them.

• Preserve culture and values

During the transition process, there’s a risk for companies (often, the target company) to lose their unique culture or to have it diluted. Change management helps to prevent that by preserving and strengthening organizational culture and ensuring transparent communication at all levels.

• Maintain customer satisfaction

The transition phase can disrupt or negatively impact customer service. Change management helps to preserve an uninterrupted customer experience and maintain general customer satisfaction and loyalty.

• Ensure efficient integration

Change management provides a structured framework for planning, executing, and evaluating the integration process, making it more efficient and reducing problems.

Preparing for change in the main 6 steps

So, where to start with M&A change management? Let’s discuss the main preparatory steps to be taken before the process rolls out.

1. Define the change objectives

Transition planning starts with the understanding of what goals you want to achieve. This will help all the participants and responsible parties move in the same direction when managing change and have a clear vision of what results they have to achieve.

Define the objectives of the change management program, outline desired outcomes, and specify how success will be measured. 

2. Assess current state

To define the key areas for change, there first has to be a change readiness assessment. This is the process of evaluating how ready and prepared the entire organization is for change.

Additionally, the current state of the organization’s affairs should be assessed. This also helps determine what actions should be taken in each area of business operations to achieve desired change objectives.

3. Identify key stakeholders

A stakeholder analysis helps to identify all stakeholders that will be affected by the change. It includes employees, the senior leadership team, customers, suppliers, and all other relevant participants of the transition phase. 

To ensure a smooth integration and effective change management, you should understand their perspectives, concerns, and potential resistance to change. 

4. Communicate the need for change

All stakeholders should be aware of the upcoming changes, how they’re going to impact the current operations, and what to expect in the company’s future.

For this, create a comprehensive communication plan, that involves communication strategies, communication channels, and the list of stakeholders. Doing so will help to win stakeholders’ buy-in and minimize resistance. 

The main reason behind a well-developed communication plan is to inform all the relevant parties about the need for change, the purpose behind it, and its potential benefits. 

5. Establish a change management team

A change management team or integration management office is an assembled team of people who are responsible for overseeing the change management process.

The team typically consists of employees from different departments and levels within an organization to ensure that diverse perspectives are considered. It’s a mistake to put this responsibility solely on the HR department.

6. Develop a change management plan

Finally, develop a comprehensive change management plan that outlines the findings you have after conducting previous steps.

It should include specific steps, timelines, resources, and responsibilities associated with the change initiative. Additionally, it should address potential risks and conflict resolution strategies. Such a plan should provide all the parties involved with a clear vision of the direction they should move to, guiding the entire combined organization through the change process.  

Developing the right change management strategy: 6 main components

An effective change management strategy should address the following components: 

• Assessment and planning
• Communication plans
• Leadership alignment
• Employee engagement initiatives
• Training and development
• Measurement and evaluation

Let’s now take a closer look at what each of these components involves.

1. Assessment and planning

• Conducting a thorough evaluation of the need for change, including the reasons behind it, potential risks, and expected outcomes.
• Developing a detailed change management plan that outlines the scope, timelines, objectives, resources, and responsibilities for the change management process.

2. Communication plans

• Creating a comprehensive communication plan that specifies how information about the change will be delivered to stakeholders and other relevant parties.
• Identifying key messages, communication channels, and frequency of communication to keep stakeholders informed and engaged throughout the entire transition process.
• Tailor communication strategies to different audiences: employee groups, customers, clients, suppliers, leadership teams, and other stakeholders.

3. Leadership alignment

• Specifying the tactics that will help to ensure alignment among senior leadership teams and key decision-makers regarding the vision and objectives of the change management process.
• Engaging leaders in the change management process and providing them with the necessary support, resources, and training to effectively lead their teams through the transition phase.
• Fostering a culture of open communication among leadership teams to facilitate decision-making and problem-solving during the change management process.

4. Employee engagement initiatives

• Ensuring employees’ engagement early in the change process by soliciting their feedback and ideas for improvement.
• Providing employees with opportunities to engage in decision-making and contribute to the change management process at the relevant levels.
• Implementing such employee engagement initiatives as town hall meetings, surveys, focus groups, and feedback mechanisms to ensure that all the change information is communicated, and employee concerns are heard and addressed.

5. Training and development

• Identifying any skills gaps or training needs that might occur in the process of change and developing target training programs.
• Providing employees with the necessary knowledge and resources to help them adapt to the new culture, processes, and operations.
• Offering ongoing support and training to help employee groups navigate the change effectively. 

6. Progress measurement and evaluation

• Defining the key performance indicators (KPIs) and metrics to measure the success of the change process.
• Regularly monitoring and assessing the progress of KPI completion and making relevant adjustments if necessary.
• Regularly collecting feedback from stakeholders to evaluate their perception of change and identify areas for improvement.

Note: To learn more about winning strategies for M&A read our dedicated article.

The role of effective communication during M&A change management

Transparent communication with employees during a transition period is among the most crucial factors for post-integration success.

According to Leadership IQ’s survey, only 15% of employees always understand the rationale behind their leaders’ strategy. Such findings can result in a loss of motivation among employees and cause some of them to leave the organization. This, in turn, can lead to a talent retention problem.

Note: Explore the general risks of mergers and acquisitions in our dedicated article.

The importance of effective communication is also proven by WTW’s research, which shows that very successful deals typically have one thing in common: they pay great attention to clear and effective communication with employees during the transition.

Best practices for leadership and culture alignment

Research by Culture Amp found that mergers and acquisitions negatively impact employees’ perception of decision-making, alignment, and motivation. 

At the same time, culture clashes are the reason for 30% of failed post-merger integrations , based on Deloitte’s findings. 

This shows the importance of ensuring leadership and culture alignment during the transition phase. To do so, consider the following recommendations.

Conduct one-on-one interviews and focus group sessions

This helps to bring a more human aspect to the whole transition process. 

Ensure that a responsible change manager  conducts one-on-one interviews with senior employees (or with particular focus groups) to assess their readiness to change and learn about their fears and worries. This will help to identify ways to address those concerns and mitigate potential resistance risks.

Carry out surveys

Another way to evaluate leadership and employee perception of the whole change process is to conduct surveys. 

Unlike one-on-one meetings, where employees might hesitate to share their thoughts openly, surveys allow for gathering honest feedback without putting a respondent under stress with face-to-face conversations.

Conduct a potential resistance analysis

Similar to one-on-one meetings, a potential resistance analysis helps to uncover how employees are feeling about change. The key focus here is to search for a “them and us” mentality, which prevents people from embracing change as a positive thing.

Present findings to stakeholders in a comprehensive report

The assessment’s findings should be presented in a well-drafted report, with key gaps and areas for improvement specified. 

What’s more, it has to include calls to action and responsibilities assigned to relevant stakeholders.

Note: Discover the overall M&A best practices in our dedicated article.

How to measure the success of change management initiatives?

Here’s how you track the progress of the change management initiatives and assess their effectiveness:

• Ensure key KPIs are specified

Measuring success is only possible when there are clear KPIs in place. This way, you know what results are expected from the changed operating models. KPIs can include employee engagement levels, customer satisfaction levels, productivity, revenue growth, and cost savings.

• Establish regular monitoring and tracking

Continuously monitor and track the identified KPIs throughout the change management process. This allows for real-time assessment of progress and early identification of any issues or challenges that may arise.

• Collect feedback

Perform a change impact analysis and gather feedback from stakeholders and all the relevant parties to assess their perception of change and its impact. This can be done through surveys, focus group sessions, one-on-one meetings, and other feedback-sharing mechanisms.

• Compare results to goals

With the results of the assessment ready, the change management team can then compare them with the predetermined KPIs and overall change objectives. This allows for identifying success areas and those where certain challenges or obstacles have been identified.

• Conduct a root cause analysis

To understand the underlying factors contributing to the observed results, perform a root cause analysis. This helps to identify all the barriers and gaps that prevent the merging organizations from achieving predetermined change objectives.

• Make adjustments

Based on the findings, make the necessary adjustments to the change management process. This could involve refining strategies, providing additional support or training, and revising timelines.

• Communicate changes and progress

To ensure a transparent process, communicate all the changes and progress to stakeholders. This will keep them informed about changes or improvements and help to foster their trust and confidence in the change management process.

Key takeaways

• M&A change management is the process of implementing certain tactics and approaches to ensure a smooth transition during the post-merger integration phase.
• The key function of change management is to ensure that existing cultures, operations, communications, and leadership structures of two companies successfully merge in a way that helps the combined company achieve expected synergies.
• The main components of the right change management strategy include assessment and planning, communication plans, leadership alignment, employee engagement initiatives, training and development, and measurement and evaluation.

Other insights

Middle market mergers and acquisitions: Opportunities, challenges, and best practices

Case Study: Merger & Acquisitions

The increased trend of more frequent merger & acquisitions has pushed companies to develop repeatable models for successful integration and to ensure the primary value of the transaction is not missed. Well-conceived and properly executed integration models can deliver greater value and reduce the common pitfalls of post-merger integration such as missed targets, loss of key people and poor performance of the base business. Often the “soft” issues such as culture integration are forgotten, with focus being more on the financial aspects of the acquisition itself rather than the successful integration of the two companies. This can lead to loss of key people, conflict and ineffective integration. Change management can assist organisations in improving the transition process, post-merger integration and culture alignment during merger & acquisitions.

• Target Company: 3,200 employees
• Acquiring Company: 40,000 employees
• Roll-out Duration: 1 year
• Change Management Duration: 4 months
• Size of Change: Medium scale
• Change Management Resourcing: Executive Change Consultant, Change Consultant., Graphic Designer

The Results

• Information sharing: 100%
• Satisfaction with information provided: 85%
• Satisfaction with issues addressed: 92%
• Alignment to the vision
• New structure & roles filled
• Integrated decision framework & internal employee brand established
• Structure & systems stabilised
• Management reporting integrated
• Accounting standards aligned & training completed
• Processes streamlined
• Training need analysis done
• IT infrastructure & policies Processes standardised &training completed
• Revenue protection plan defined & measurable tracking system implemented

The Approach

The Triple A model was used to create awareness, acceptance and adoption of the change. This was achieved through:

• Executive engagement
• Building awareness
• Equipping leaders as leaders of change
• Integrated structure and roles
• Finance system and processes
• Changes to the payroll system
• Changes to operational processes
• Change of the corporate brand
• Retention of key talent
• Customer and supplier satisfaction
• Revised performance contracts

Lessons from the Frontline

• Move to one brand early on
• Work closely with target co. Executives to ensure alignment
• Have a structured approach to creating awareness and getting buy-in from target co. clients
• Have a structured approach for monitoring and measuring targets to ensure the primary value of the acquisition is realised

Testimonial

We employed CF to assist with the Change Management component of the integration of a business acquired by ourselves. It was particularly challenging because it involved integrating a Family business with a Corporate business. ChangeFolio is very competent in: Understanding our needs and defining the required scope of their involvement; Executing their role in the project according to a well-structured methodology which made use of appropriate tools and techniques; Highlighting risk areas and recommending and implementing the associated mitigation actions; Providing regular feedback on progress & issues; Managing project costs within the agreed values ChangeFolio is a very professionally run and capable consulting firm.

– CEO

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IBM Change Management Case Study

Change is a constant in the business world, and organizations that can effectively manage change are more likely to succeed. 

Change management is the process of planning, implementing, and controlling change within an organization to minimize negative impacts and maximize benefits. 

One company that has successfully implemented change management is IBM.

With a history spanning over a century, IBM has undergone significant changes over the years, including the implementation of change management to ensure a smooth transition. 

In this blog post, we will take a closer look at IBM’s change management case study, examining its background, change management strategy, and results. 

Brief History and Growth of IBM 

IBM, also known as International Business Machines Corporation, is an American multinational technology company that was founded in 1911. 

The company was initially formed as the Computing-Tabulating-Recording Company (CTR) through the merger of four separate companies: the Tabulating Machine Company, the Computing Scale Company, the International Time Recording Company, and the Bundy Manufacturing Company. 

In 1924, the company was renamed International Business Machines Corporation (IBM). IBM’s early products included tabulating machines, time clocks, and punched card equipment, which were used for data processing and information management. 

Over the years, IBM has evolved into a leading provider of enterprise technology solutions, including hardware, software, and services, serving clients in over 170 countries around the world.

IBM experienced significant growth in the mid-20th century, as it became a leading provider of computers and data processing equipment. 

In the 1950s, IBM introduced its first electronic computer, the IBM 701, which was followed by a series of other computer models that became increasingly advanced and sophisticated. 

IBM also played a key role in the development of the personal computer, releasing its first PC in 1981, which quickly became a standard in the industry. 

In the 1990s and early 2000s, IBM shifted its focus to software and services, becoming a leader in areas such as cloud computing, artificial intelligence, and cybersecurity. 

Today, IBM is a major player in the technology industry, with a global workforce of over 350,000 employees and revenue exceeding $70 billion in 2020.

Key drivers of change for IBM  

There were three dominant factors that created a need for IBM to implement effective change management processes to successfully navigate the challenges and opportunities it faced.

1. Technological advancement 

Technological advancements have been a key driver of change in the technology industry, and IBM was no exception. In the 1980s and 1990s, IBM faced significant disruption as the market shifted from mainframe computers to personal computers, which were smaller, cheaper, and more accessible to individuals and small businesses. 

This shift threatened IBM’s dominance in the computer industry, as it had built its reputation on large-scale mainframe computers. To adapt to this changing market, IBM had to shift its focus to services and software, invest in research and development to create new technologies and innovations, and develop new partnerships and alliances to expand its offerings. 

Additionally, the emergence of cloud computing and artificial intelligence in the 2000s and 2010s further pushed IBM to adapt and innovate to stay ahead of the competition. These technological advancements required IBM to adopt a more agile and flexible approach to business, with a greater focus on innovation, speed, and collaboration.

2. Globalization 

As IBM expanded its operations globally, it faced a range of challenges related to cultural and regulatory differences across different countries and regions. In order to effectively navigate these differences, IBM had to develop a more flexible and adaptable approach to business, one that was able to respond to local market conditions and customer needs while also maintaining a consistent global brand and corporate identity. 

This required IBM to invest in building a diverse and multicultural workforce, to establish strong local partnerships and alliances, and to develop a deep understanding of local cultures, languages, and customs. 

Additionally, IBM had to comply with local regulations and laws in each country it operated in, which often required significant resources and expertise to navigate. By embracing globalization and developing a more flexible and adaptable approach to business, IBM was able to successfully expand its operations globally and establish a strong global presence.

3. Market competition 

IBM faced intense competition from emerging tech companies in the 1990s, particularly in the areas of personal computing and software development. 

Companies like Microsoft and Intel were challenging IBM’s dominance in the industry, and IBM had to adapt quickly to remain competitive. 

To address this challenge, IBM shifted its focus to services and software, investing heavily in research and development to create new products and innovations that could compete with emerging technologies. 

IBM also streamlined its operations to improve efficiency and reduce costs, while exploring new markets and opportunities for growth. 

This required IBM to be more agile and responsive to market conditions, and to take calculated risks in pursuing new ventures and partnerships. Ultimately, these efforts enabled IBM to remain a major player in the technology industry and to continue innovating and expanding its offerings.

Change management strategy of IBM 

IBM responded to these three drivers of change in several ways, as explained below:

1. Technological advancements

To adapt to rapid technological advancements, IBM invested heavily in research and development to create new products and innovations. It also embraced emerging technologies such as cloud computing and artificial intelligence and developed new partnerships and alliances to expand its offerings.

IBM also shifted its focus to services and software, which helped it to stay competitive as the market shifted away from mainframe computers. Additionally, IBM adopted a more agile and flexible approach to business to enable it to respond quickly to changing market conditions and customer needs.

2. Globalization

To effectively navigate different cultural and regulatory environments, IBM invested in building a diverse and multicultural workforce, established strong local partnerships and alliances, and developed a deep understanding of local cultures, languages, and customs.

IBM also complied with local regulations and laws in each country it operated in, which required significant resources and expertise to navigate. Additionally, IBM developed a consistent global brand and corporate identity while also maintaining the flexibility to respond to local market conditions and customer needs.

3. Market competition

To remain competitive in the face of intense market competition, IBM explored new markets and product offerings while streamlining its operations to improve efficiency and reduce costs. IBM also invested heavily in research and development to create new products and innovations that could compete with emerging technologies.

IBM adopted a more agile and responsive approach to business, which enabled it to take calculated risks in pursuing new ventures and partnerships. Additionally, IBM developed a culture of innovation and collaboration to foster creativity and agility, which helped it to stay ahead of the competition.

Positive outcomes and results of IBM successful change management implementation

IBM’s successful implementation of change management led to several positive outcomes and results, including:

Increased profitability: IBM’s shift to services and software helped to increase its profitability by creating new revenue streams and reducing costs. By focusing on high-margin businesses such as consulting and software development, IBM was able to improve its financial performance and profitability.

Improved competitiveness: IBM’s investments in research and development, partnerships, and new markets helped it to remain competitive in the face of rapid technological advancements and intense market competition. By adopting an agile and responsive approach to business, IBM was able to adapt quickly to changing market conditions and customer needs, which helped it to stay ahead of the competition.

Enhanced customer satisfaction: IBM’s focus on innovation, collaboration, and customer service helped to enhance customer satisfaction and loyalty. By developing new products and services that met customer needs and expectations, and by providing excellent customer service and support, IBM was able to build strong relationships with its customers and earn their trust and loyalty.

Increased employee engagement and retention: IBM’s culture of innovation, collaboration, and diversity helped to increase employee engagement and retention. By fostering a culture of creativity and agility, and by valuing and supporting its employees, IBM was able to attract and retain top talent, which helped it to drive innovation and growth.

Strong brand reputation: IBM’s successful implementation of change management helped to strengthen its brand reputation and identity. By maintaining a consistent global brand while also remaining flexible and responsive to local market conditions and customer needs, IBM was able to build a strong and respected brand reputation that is recognized around the world.

Final Words 

IBM’s successful implementation of change management serves as a powerful case study for businesses facing rapid technological advancements, intense market competition, and globalization. By adopting an agile and responsive approach to business, investing in research and development, exploring new markets and partnerships, and fostering a culture of innovation and collaboration, IBM was able to remain competitive and relevant in the technology industry. 

About The Author

Tahir Abbas

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The 10 Change Management Steps in Mergers & Acquisitions

Change management in m&a: the steps on how to implement changes during post-merger integrations.

Many merger/acquisition events are likely to be unpopular, at least with those groups of employees who are negatively affected. What people don't like they will probably resist.

Management cannot keep everyone happy during post-merger integrations. But a number of things can be done to overcome some of the resistance and minimize that which remains.

EXPLAIN THE REASONS FOR THE CHANGE.

Usually the best steps in dealing with problems are the preventive ones.

Perhaps the most effective way to minimize resistance is to make sure people in the organization have a good understanding of the rationale for the changes.

The people in charge should be very open, very willing to share their perspectives or the line of reasoning that led to the changes. When this sort of information is communicated, the odds increase that everyone else will come to see the move as appropriate.

But even those personnel who disagree with the logic behind the change, and who are personally against it, are far more likely to accept the situation than if they had it shoved at them without any explanation.

So giving people in the workforce the story behind merger changes is helpful in several ways. First, some people will be persuaded that the move was an appropriate one. Others will not be convinced, but at least they will understand why it’s happening, and therefore will accept it. Finally, still others who neither agree with nor understand the reasoning behind the change will elect not to fight it, because at least someone took the pains to try and explain the situation for them.

LEVEL WITH PEOPLE ABOUT THE PATHWAY TO CHANGE.

There is a need for people to understand what the road to change looks like—that typically the pathway is a sequence of events where things get worse before they get better.

Several brief examples may help make this point. First, think of the young boy who wants to learn how to ride a bicycle. He can walk without any problem and generally gets where he wants to go. But his mobility actually becomes less successful when he starts trying to ride the bike. He falls down, bruises an arm, scrapes a knee, and cannot make forward progress as well as if he were walking. His mobility actually deteriorates. But he keeps working at the change, and  pretty soon is traveling in a faster, more pleasurable style than he was when merely walking.

Similarly, consider the example of a woman with circulatory problems who enters the hospital to have heart surgery. She may very well walk into the hospital feeling quite fine. However, they will wheel her out of the operating room flat on her back, keep her in intensive care for a while, and generally weaken her physical condition such that she cannot be very active for a period of days. So in a sense she’s gotten worse, but that’s part of the pathway toward overall improved physical health.

Mergers, and the changes they bring, typically reflect the same sort of sequence. Top management needs to prepare employees for this scenario.

Growth—and mergers usually imply organizational growth—generally carries a little bit of pain and discomfort with it, and these growing pains are part of the process that people need to understand and expect.

ARRANGE FOR PARTICIPATION AND INVOLVEMENT.

Participation is critical to a successful change effort, but indiscriminate participation creates its own set of problems.

Conventional wisdom has held that participation brings ownership of ideas and that ownership generates commitment. This argues that instead of trying to force change down people’s throats, there is a need to get them involved in the process of designing the change and planning how it is to be implemented.

This is not to say, though, that people should be sourced for their ideas and opinions automatically. If they don’t know about the subject at hand, there is reason to question how constructive their ideas might be. When they don’t really have much at stake in the outcome, their contribution may be questionable. Further, if the person soliciting their involvement doesn’t really give a hoot about what they have to say, it might be better not to even go through the motions.

Participation is valuable when the people involved are capable of contributing worthwhile ideas. It can be a productive exercise when the participants are able to help define and solve key problems.

But mere participation for participation’s sake can be highly dysfunctional. It can waste people’s time and energy and result in an overall weaker game plan for change.

So the key to effective participation is involving the right people. When that happens, people do end up with a better understanding of how complicated the situation is. And if there are no perfect solutions—which there almost never are—then they are probably going to be much more inclined to live with “reasonable” solutions that are fair minded and that they have helped to shape and bring to life.

PROVIDE A CLEAR SENSE OF DIRECTION.

In the disordered environment of mergers and acquisitions, where changes themselves are constantly being changed, employees need an aiming point. They need a target to shoot at.

Otherwise, there is a tendency to wallow or flounder in the waves of change. People will resist the changes because they cannot determine where the new forces are carrying them.

It’s one thing for a military commander to march his troops across an icy, rugged mountain range with their knowledge that on the other side will come victory over the enemy and glory for the individual soldier. It’s something else altogether to give only the order, “Okay, men, today you climb mountains and crawl through snow and ice. Move out!”

There are two very important components to the needed sense of direction.

First, there need to be very short-range objectives that are specific, highly structured, and vigorously promoted. But at the same time there needs to be an overarching goal, something that people can orient toward well into the future. There is much less resistance to change when people can view the changes as part of their pursuit of a vision.

This visionary objective gives employees something they can get excited about. It needs to be articulated by the leader, and should be the sort of challenging goal that might be defined as a unique mission, calling, or purpose that really inspires people.

This is the kind of thing that can justify for employees all of the upheaval, confusion, stress, and destabilization that change brings. In other words, vision is what allows people to conclude that all the effort and headaches associated with change are worth the price.

GIVE LEADERSHIP.

When things are changing, when an organization is destabilized, people need someone to follow. It has to be someone they have confidence in, someone they feel has the ability to lead them out of the struggle safely. When leadership is missing, resistance festers and spreads.

All too often when a company is being acquired and merged some of the key people— who are the best leaders—leave the scene. Others get reassigned, with the result being a lot of people who feel they have been left leaderless. They easily fall into the ranks of the passive resisters.

MOVE RAPIDLY IN MAKING THE CHANGES.

A key step in managing past resistance to change is to expedite the change process.

This is not to advocate recklessness or a haphazard approach. But very often the people in charge decide they don’t want to overwhelm their employees with change. So out of the spirit of compassion or misguided sensitivity, they put together what sounds like a very logical argument for staging changes in a fairly slow-paced or measured fashion.

On the surface this sounds like a very humanitarian approach. The problem is, it simply doesn’t work.

Almost always, people instinctively know when this is happening, and they end up feeling like they’re kind of hanging in the wind. They intuitively realize that the changes aren’t all made and that things aren’t “finished.” This adds tremendously to the uncertainty of the situation.

So while the people in charge may elect to move slowly and thus not overwhelm their people with change, they are likely to overwhelm them with ambiguity.

The most promising approach is to make the needed changes rapidly and get them over with. Sure, it should be done in an informed fashion and not willy-nilly. But the company should move with real dispatch rather than dragging things out.

So often what people really resist is the sluggish pace of change, or the ambiguity and uncertainty that accompany the change because everything is proceeding so slowly.

The kindest sword is the one that cuts quickest and cleanest. So don’t “hack around,” making the changes over a long period of time. That just prolongs the agony. It creates more pain and suffering, while also slowing down the healing process.

It’s not hard to understand why people would resist that.

PROVIDE APPROPRIATE TRAINING.

When people have doubts about their own ability to perform up to par in a new situation or under a new set of expectations, their primary defense may be to resist the changes that are threatening. It’s human nature not to want to set ourselves up for failure.

Frequently, people are against change not because they are opposed to it per se, but rather because they lack the skill, talent, or simply the understanding needed to cope with it very well. If they are given the necessary training and coaching on how to handle change effectively, the resistance can disappear.

All too often, though, companies are acquired and merged without employees ever being given sufficient guidance or assistance on how to do things the new way.

To begin with, people are likely to need help in understanding merger dynamics together with training on how to manage transition and change. It’s a very different process from “maintenance management” or taking care of the status quo.

Ordinarily, there also are technical matters that are handled differently from one company to the next, and if they are to be synchronized, employees can benefit from training.

Invariably, the parent company and its acquisition will need to reconcile numerous formal policies and procedures as well as a variety of unwritten practices. Rather than have people struggle along for months trying to figure out on their own how to do things according to the new game plan, special training sessions should be scheduled very early in the merger integration process.

The area where a specialized kind of training is almost always needed, and is usually ignored completely, has to do with the complex area of corporate culture. In spite of the fact that corporate culture has a pervasive and profound influence on employee behavior and the way business is conducted, acquiring companies take it largely for granted. They more or less assume that those personnel who are being acquired and integrated will manage to “catch on” and get the hang of it without any help from the parent firm.

The truth of the matter is that companies find it difficult even for themselves to identify all the important, deeply held beliefs and corporate values that comprise its culture.

How much harder, then, is it bound to be for newcomers to really understand what’s going on and why? Granted, having more of an outsider’s perspective, people from the acquisition will quite readily perceive certain values and beliefs that people in the parent company are oblivious to. But they need to be provided carefully orchestrated training—indoctrination, if you will—on the new corporate culture within which they will be expected to operate. In the absence of such training, acquired company personnel are likely to be accused of resisting change when, in fact, they are just doing what comes naturally, unaware that it is not in sync with what the parent company expects.

CREATE A SUPPORTIVE ENVIRONMENT.

Change is accepted by people more readily in a nurturing, supportive environment. When this kind of atmosphere exists, people are more willing to take some risks and experiment with new ways of doing things.

If they feel threatened, insecure, or vulnerable, they become inhibited. They don’t want to go out on a limb. They become more cautious, more tentative and, quite frankly, more likely to fail.

So the people in charge need to concentrate on shaping people’s behavior instead of grading people’s behavior.

This is almost an attitudinal issue. People very quickly get a feel for the boss’s or leader’s stance. They can intuitively grasp whether or not there is much safety in trying to do things the new way, and maybe failing or at least falling short to some degree.

The atmosphere needs to be encouraging and affirming. As the saying goes, there is a need to “catch people doing something right.”

That creates an environment where people flourish, and where change can take root. The boss needs to give positive strokes merely for movement in the right direction instead of waiting for people to get it perfect.

MONITOR THE CHANGE PROCESS CAREFULLY.

Another key point in overcoming resistance to change is to keep tabs on the situation.

More than likely there will be problems that develop. Certainly if the change is very complex or very involved, there will be some glitches. If these problems aren’t sniffed out and met head-on—that is, sensibly addressed by top management—then the people are going to bow up. They are going to become more resentful. Furthermore, they will view the problems as tangible evidence that the changes were poorly conceived, destructive, and less effective than the old way of doing things.

So managers and executives should really keep a finger on the pulse of things in terms of how well the changes are going, or how well the new approach is working.

Essentially, what is being said here is that top management should go looking for trouble and be particularly alert to bad news. People should be encouraged to come forth with their complaints, concerns, and gripes—that’s how management ends up with the information needed to fine-tune the situation.

Sometimes the information that comes forth when people gripe and complain or offer suggestions may be very faulty. It may be off target, and a very parochial viewpoint.

Nevertheless, if that is the perspective or the viewpoint of the people who have to live with the changes and who will carry a large part of the responsibility for making the changes work, then those opinions are important.

Success at overcoming resistance to change is heavily dependent on keeping the information channels open. The company should do whatever is possible to keep the communication flowing regarding what’s working, what’s not, and what’s needed.

If people don’t feel comfortable coming forth to express their problems or report the difficulties they’re having, resistance is just driven underground. The result is a bunch of employees who may mouth the party line before top management, but who behind their backs proceed to undercut the changes and keep them from working.

EXHIBIT MANAGERIAL COURAGE.

Sometimes managers will find that in their particular part of an organization the change isn’t working well at all. There will be feedback from their people, or they may observe firsthand, that there are some very significant problems. It is entirely possible that some of the change will have been ill-conceived or poorly implemented.

Maybe those changes were force-fed to the managers. Maybe they didn’t have any say-so in deciding whether or not the changes should be made in the first place. Perhaps these were directives that came down from on high, with the managers simply being charged with the responsibility for implementing them and making them work.

When they aren’t working, or when some real fine-tuning is needed, managers have to have the nerve or managerial courage to report problems to their superiors. And they may not want to hear that upstairs.

It takes real inner strength to blow the whistle on a problem and to ask for what’s needed. It may be, though, that this is the key step in handling the resistance.

As mentioned earlier, there are certain instances where change should be resisted. Regrettably, in the merger environment managerial courage is sometimes in short supply. This is understandable, given the fact that the trust level is low and people are concerned about protecting their own careers. But it also helps explain why change is usually under-managed in merging organizations.

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Tale Of Two Mergers: A Case Study In Leading Change

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Mergers And Change Management At The Micro Level: A Case Study

2005, SA Journal of Human Resource Management

The transformation of the South African higher education landscape resulted in, among other things, the merger of three distance education institutions: Unisa, VUDEC and TSA. The macro level of the merger will no doubt be studied in detail. This article explores a micro level process for two departments merged by a top-down decision that did not take cognisance of their dissimilar functions and structures. The result was both a merger and a demerging process. The two departments first had to confront the realities of their different functions and structures before a reconfiguration could occur, including the emergence of a strategic plan focusing on aspects such as specific contribution, drivers, objectives and structure. The change management principles adopted to ensure the success of the process are outlined, analysed and reflected upon.

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Mediterranean Journal of Social Sciences

Lunga Mantashe

Thierry M Luescher

The restructuring of the South African higher education system ranges widely across mergers, incorporations, the creation of new institutional forms, and regional-level programme collaboration and rationalisation. The focus of this investigation is the governance of merger in South African public higher education, with a subsidiary focus on governance in the contexts of incorporation and multi-campus institutions. Merger is taken to mean the combination of two or more separate institutions into a single entity with a single governing body and chief executive body. Incorporation refers to the process whereby a subdivision of one institution is incorporated into another institution, without affecting the latter’s legal status. The term multi-campus is used to refer to unitary institutions with geographically distant delivery sites. By governance is meant the structures and processes of policy design, decision-making and oversight of policy implementation. The first chapter of this report sets out the objectives, scope and methodology of the investigation. The enquiry’s three primary objectives are: To develop a conceptual and contextualised framework for merger governance in South African public higher education; To interrogate the state of preparation, with respect to governance capacity, of the higher education system and its institutions, for the complex process of restructuring on which they have embarked; and To make proposals regarding system-wide and institutional-level governance to facilitate effective and efficient restructuring that will enable a sustained focus on transformation in the higher education sector. The methodology was developed on the basis of four key considerations: The work needed to build upon prior research into how to promote effective governance in South African higher education; The timing of the investigation meant it had to take into account theoretical, policy and legal viewpoints affecting mergers, as well as rapidly emerging realities to be interpreted and commented upon; The study had to be sensitive to the position of institutions directly affected by restructuring; and The study had to achieve a sharp and manageable focus in a complex field. The second chapter draws together frameworks that support the enquiry, namely: a review of international perspectives on higher education mergers and their governance, a review of the policy and legal framework for restructuring South African higher education, and the development of an analytical framework for merger governance against which the findings of the report can be interpreted and tested. Finally, the chapter derives from these frameworks a set of principles for good merger governance in South Africa’s restructuring higher education system. The chapter argues that, given South Africa’s history, higher education restructuring in this country is essentially sui generis: it is a politically-driven process that aims in the first instance to achieve the fitness of purpose of all institutions. Thus international perspectives serve to provide useful experience and insights, but not to define, in and of themselves, the policy directions South Africa should take. The policy and legal framework for restructuring must be evaluated in terms of what it reveals about, and how it supports, specifically South African reasons for structural change. An analytical framework for the governance of restructuring must ascribe values of good governance that are consistent with the transformative goals of South African policy. The third chapter focuses on issues which arise at the point of intersection between higher education system-level governance and institutional governance. It discusses key questions of substance, capacity and resources in the process of merger which could influence the nature of the relationship between state and sector, and hence the nature of restructuring outcomes. In particular, this part of the report highlights potential mismatch in the respective expectations of the state and the higher education sector, especially as these relate to the nature of capacity and support provided by the state, and the Ministry’s framework for financing mergers and incorporations. The chapter argues that a key danger of South Africa’s higher education restructuring process, as driven by political will, is the absence of alternatives to mandatory mergers. Yet if restructuring is to be a means to the achievement of the goals of national policy, state and sector must see their way clear to negotiating mergers and incorporations to common benefit. The fourth chapter considers institutional (and inter-institutional) governance in the process of merger, linked to three distinct phases, namely: pre-merger, transitional and integration phases. A particular focus of the chapter is to highlight potential ‘unintended consequences’ of the merger process, drawing on the perspectives of institutions in the study sample, and to make suggestions for good merger governance in each of the phases. The study finds that the pre-merger phase is characterised by institutional merger structures, as well as joint merger structures. It investigates the necessary linkages to be established between such structures, and with statutory institutional governance structures and stakeholders, in order to give effect to ‘equal partnership’ and participation. The study considers critical outcomes of the pre-merger phase, in so far as these are required to support effective merger governance. In addition to those items required by the Minister for gazetting a merger or incorporation, the report gives particular attention to due diligence investigations, the Memorandum of Agreement and the merger plan. It argues that these are essential elements in ensuring sound decision-making and adequate preparation for transition to a merged institution. With respect to the transitional phase, the report gives particular attention to the Interim Council which is the key statutory governance structure of this phase. It finds that key challenges are posed for and by the Interim Council in constructing effective linkages between the pre-merger and integration phases. Accordingly, it argues that institutions must prepare carefully for the transitional phase, in order to ensure that the Interim Council, interim management, and other interim governance structures, which are set out in the Standard Institutional Statute, serve the needs of the merger process to an optimal degree. The integration phase of merger is the period during which the merged institution establishes and implements its vision and mission, establishes its culture, integrates teaching and research, and aligns policies, systems and procedures. The integration sections of this chapter evaluate how governance can best support these aspects of the merger. Particular attention is paid to Council’s overall accountability for merger integration and the establishment of institutional culture and identity, to the complexities and needs of academic integration, and to considerations in creating a governance model for multi-campus institutions resulting from merger. The final chapter draws together and summarises the key findings, interpretations and conclusions of the aforegoing chapters and formulates them as a set of observations that are seen as important for informing a full consideration of the governance of merger. Thus the chapter may be read on its own as a summary of this investigation. Conclusions include: Successful restructuring outcomes will depend upon the ability of state and institutions to negotiate specific mergers and incorporations to common benefit. There is a danger that the principle of ‘equal partnership’ in mergers, and especially in incorporations, may not be applied consistently in practice; governance in the premerger phase must give careful attention to this. Councils should carefully assess the specific due diligence needs of the merger or incorporation in which they are involved, notwithstanding the due diligence guidelines that have been published by the Ministry. A Memorandum of Agreement and merger plan are key frameworks for merger governance that should be developed in the pre-merger phase; mechanisms are required to ensure that goodwill and momentum established through these mechanisms are carried through to the transitional and integration phases of the merger. Given inherent challenges posed by and for the Interim Council, institutions must take into account the specific circumstances of their merger in selecting a preferred model for the Interim Council. In governance terms, the process of establishing institutional culture and identity requires conscious attempts to plan, implement and monitor institutional development; the Council of the merged institution must exercise its accountability in this respect. Decisions respecting academic integration should be driven by a defined vision and mission and should be taken only once that is in place. Models for multi-campus governance should be evaluated in terms of their likely impact on effective operational and academic integration, as well as on the creation of a new institutional culture and identity in the merged institution.

Bethuel Sibongiseni Ngcamu

Higher education institutions in South Africa have been merged with high expectations and lofty goals which have spawned a plethora of challenges including tensions and clashes amongst the key stakeholders in their understanding of transformation. This study aims to provide a perspective on the course of the transformation process post-merger and incorporation of the Durban University of Technology (DUT). The study is grounded in both quantitative and qualitative involving a structured questionnaire and in-depth interviews with the university leaders. The questionnaires generated the reliability coefficient Alpha of 0.947.The non-probability purposive sampling was used for the qualitative approach. This study demonstrates a disproportionately high percentage of the university leaders as having limited understanding of the transformation agenda of the university and its responses to transformation challenges.

Roger B Mason

Higher Education

Driekie Hay

Many higher and furthereducation institutions in South Africa arestruggling to survive in a context of financialstringency, declining student enrolments andincreasing competition. For some of theseinstitutions merging or amalgamation with otherinstitutions in the near future is becoming astrong likelihood. The perceptions of staff whowill be directly affected by these processesseem to be very important, as knowledge andunderstanding of those perceptions will empowerdecision-makers and ensure that effectivemanagement of the merging process can beaccomplished. This investigation focused onstaff perceptions of possible merging of threeinstitutions in the Free State Province, whichhad been identified for possible merging withother institutions. The results indicate thatstaff is not opposed to the idea ofinstitutional combinations or merging, but thatcareful consideration needs to be given toparticularly personal factors and that stafffears will have to be addressed in the processto ensure effective merging.

Risk Governance and Control: Financial Markets & Institutions

Renitha Rampersad

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Heather Leslie

Purpose The purpose of this paper is to examine the merger of two distinct higher education institutions. The change process was studied from the perspective of multiple stakeholders, and its major outcomes were evaluated in terms of various dimensions of success. Design/methodology/approach The study uses a qualitative research design. For the purpose of data collection, semi-structured interviews with open-ended questions were used, targeting key decisions makers that led the change process. Additionally, university constituents, comprising students, faculty, and staff who were present during the merger, were invited to participate in an online survey. Findings Findings indicate that, although the merger deal appeared good on paper, it was not executed as well as it could have been, and the aftermath yielded lower than expected returns. The systems were not integrated properly, and cultural elements were overlooked, resulting in an anomic organizational environment, in place of wh...

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Krishna Govender , Dinkwanyane Mohuba

International Education Journal

Reitumetse Mabokela

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