Change management in M&A integrations is a complex and widely defined subject. Practitioners use various interpretations of change management during an integration project. Here are a few examples of what types of changes are encountered during an M&A integration:
Organization’s acquire other companies as part of a new strategy
Type of organization (market-facing, product facing or technology facing organization, meritocratic, hierarchical) changes from one type to another. This happens specially, when smaller organizations get acquired by larger organizations.
Almost every acquired organization goes through leadership changes. With leadership role changes and redundancies, the personalization of a company’s vision, strategy, direction and execution also goes with them. Thus, creating a temporary leadership void.
Capabilities (Process, Technology and Key Skills):
Usually, organizations have different levels of capability at the time of a merger. On top of that, shareholders and the leadership team expect the combined organization to have new set of capabilities whether consolidated IT systems, new go-to- market capability, product design or optimized back-office.
Governance and Structure:
Depending on the level of maturity, different levels of operational governance exist. Depth of delegation of authority, decision- making dispersion across the company, geographic spread, product variations and others, contribute to variation in governance and the structure for an organization.
Depending on the segment-product-geography combination, each organization has their own approaches on customer alignment. Some companies are product-centric, some technology centric and others, maybe, market-centric.
Alliances and Partners:
Many companies these days have alliances, JVs and partners that provide them a competitive advantage. When these companies integrate, alliances and partnerships may get re-aligned.
People and culture:
Role changes, new organization cultures, performance measurement changes, bonus and salary changes, changes of bosses, locations and many other changes for people.
M&A Integration Changes
M&A integration changes tend to be one of the most complex change management projects amongst different kinds of projects including ERP implementation, new product introduction, new geography expansion.
However, organizations struggle with change management of an integration. In fact, a number of failures happen due to poor change management. Many of these structural and strategic changes get addressed by integration management, organizational management, changing and adopting new policies and procedures.
Behavioral Change of Employees
One type of change that often is not addressed is behavioral change of employees. Companies believe that just by changing processes or by changing bosses, employees would start working in a new way.
Let’s take some examples from real life related to behavioral change.
- Everybody knows that regular physical exercise is good for health and yet so many of us, are unable to break our habit and start exercising regularly.
- Many of us have been annoyed when asked to change our seating places in our organizations in the past.
- Many of us have been frustrated when the street that we use on a regular basis is shut-down for repair work and the diversion is a longer route.
If you notice the underlying common factor is HABIT.
We get tuned to doing a certain thing in a certain way. We get hardwired to follow the same process again and again. In order to change habit, one must go through a structured and often painful process of transition from old habit to a new one. In fact, William Bridges, one of the leading thinkers of change management describes this process of transition in his Bridges Transition model.
In an integration, many employees whether leadership, departmental leads, line management or individual contributors have to go through these behavioral changes as two companies merge. Whether due to change of bosses, new IT system, new HR process of performance management or simply change of work location, individuals must go through this process. They need to structurally end their old ways of doing things and adopt new ways.
However, if the transition is not managed well and if the old ways are not stopped and ended properly, individuals often will resort to circumventing new ways and resort to doing things the old way. After all, old habits die hard!!
Change management is a significantly important program of an M&A journey. It is not just structural, strategic or organizational changes that the integration teams need to address, they must put a focused effort to address the behavioral and the human side of change.
Integrations are hard and complex and highly emotional. The least we, as integration and change practitioners can address is the human side of change, the habits, the behavioral changes so that we can make a successful integration and more importantly, be human about it. We must not forget that the greatest asset of a company is its employees.