Dealing with strong resistance to change during Mergers

Dealing with strong resistance to change during Mergers

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Ten years of data from an annual McKinsey survey of M&A executives shows that organizational issues like cultural differences and changed operating models account, on an average, to almost 50 percent of failures of mergers to meet expectations

Mergers cause significant organizational uncertainty about the future: in most situations, one or both merged organizations’ strategic strategy and structure shift significantly. These reforms go beyond a new name and senior leadership; they make people question an organization’s core identity, purpose, and day-to-day operations. Even minor tactical shifts, such as new expense policies or even cafeteria alternatives, can infuriate employees. Anticipating and addressing these “organizational emotions” will lay the foundation for seamless and efficient integration. Inability to anticipate and address them will result in a poor business performance, loss of key expertise, and the lack of synergies. To maintain a deal’s value sources, both financial and operational, merging firms must adjust their workers’ day-to-day behavior and mindsets to make improvements permanent.

According to McKinsey‘s analysis, only one-third of 3,199 leaders regarded the change programs at their own companies to be successful. Not only this, ten years of data from an annual McKinsey survey of M&A executives show that organizational issues like cultural differences and changed operating models account, on average, to almost 50 percent of failures of mergers to meet expectations.

One fundamental issue that arises in such cases is management’s proclivity to prioritize improvements that would specifically help capture a deal’s value goals while effectively avoiding other adjustments needed to retain and improve the company’s well-being. Organizational architecture, for example, often becomes supremely important during the early stages of acquisition negotiation, but businesses often overlook cultural gaps until complex issues arise. And by the time complex issues occur, the core market might have already suffered, top talent might have found external opportunities, and extracting synergies might be a little more complicated.

Many merger/acquisition events are likely to be unpopular, at least with those groups of employees who are negatively affected.  People don’t like it, they would most likely oppose it, and it’s difficult for the management to satisfy everybody. However, many steps can be taken to resolve some of these obstacles, and we will try to cover some of the crucial steps for you below :

Identify Skill Gaps and Overlaps

When you join hands with another company, the first thing that comes to mind for workers is their job security. It becomes imperative to fix employee issues far ahead of time to avoid panic in such a situation. Before you start communicating with staff, you can spend some time determining how the company will look after the merger to help you identify skill gaps and overlaps.  It would be easier to handle the change or the transition if you explain the merger situation to your employees as efficiently as possible. It would build a sense of confidence among the employees, and they would gradually return to their task at hand, less worried about their job security or their future.

Arrange for participation and involvement 

Participation is crucial to achieving any change effort, but indiscriminate participation creates its array of challenges. Conventional wisdom has held that participation brings ownership of ideas and that ownership generates commitment. This statement contends that rather than throwing change down people’s throats, it is essential to include them in creating the change and preparing how that will be implemented.

This is not to say that people should be automatically sourced for their ideas and opinions. If they don’t know about the topic at hand, there is enough reason to doubt how constructive their suggestions could be. When they do not have a vested interest in the result, their contribution could be questioned. When the individuals involved are worthy of contributing worthwhile ideas, only then is the participation valuable. When members can identify better and solve main challenges, it can be a fruitful exercise. In a way, we can say that involving the right people is essential for successful involvement. When this happens, people have a greater sense of how complex the situation is.

Making communication smooth and easy

Rumors can prove to be one of your worst enemies during times of change. In such a situation, the last thing you want is employees starting to speculate things happening in the post-merger case. This keeps employees away from jobs and decreases staff productivity, which can have a detrimental effect on the company’s well-being. Therefore, it is vital to preserve transparent and secure communication lines and interaction with employees throughout the acquisition process. Consider creating an organizational change management strategy and hosting weekly meetings to review the current merger developments and address any concerns people might have. This simple step ensures that everyone is on the same page and refutes rumors while keeping everyone relaxed and focused on a common goal.

Providing a clear sense of direction

Employees want a leading point in the chaotic world of mergers and acquisitions, where changes are continuously evolving. There must be very short-term goals that are clear, well-structured, and actively encouraged. Around the same time, there must be an overarching target that people will orient themselves toward in the future. Apart from that, the leader itself must articulate a visionary objective, which would explain all of the upheaval, uncertainty, tension, and destabilization that the organizational change entails. After all, a solid and purposeful vision drives everyone to feel that all the work and headaches involved with the change are worthwhile.

Expedite the change process

A critical step in managing past resistance to change is to expedite the change process. This is not to advocate for irresponsibility or a haphazard approach. However, several leaders conclude that they do not want to burden their workers with transformation. So, in the spirit of compassion or misguided sensitivity, they put together what seems to be a very rational case for staging improvements in a comparatively slow-paced or deliberate manner. So, while those in control may want to take steps slowly to avoid overwhelming their people with change, they are more likely to confuse them with uncertainty.

In such a situation, the most promising strategy is to make the necessary changes rapidly and keep them out of the way.

Providing appropriate training and creating a safe environment

People are often opposed to change not because they are opposed to it in and of itself but because they lack the expertise, talent, or simply the understanding required to deal with it effectively. Resistance to change will be reduced if they have the requisite training and advice on dealing with it successfully. Also, people welcome change more readily in a nurturing and supportive atmosphere and are more likely to take chances and play with new ways of doing things while this kind of environment exists. Therefore, it becomes imperative for employees to have a supportive environment where they can also be trained about things that they are not aware of without any restrictions. As the saying goes, there is a need to “catch people doing something right,” the atmosphere needs to be encouraging and supportive.

Managing change in mergers can feel daunting because the results are relatively hard to measure. Yet mergers can create greater value and have a lasting impact when effective change management helps the merging organizations to move in the same direction.

Our team at MergerWare believes that successful deals are about capturing value and mitigating early risks. By employing a sophisticated M&A platform where executives can automate and systematize their processes across the firm, we ensure greater transparency and control to the system.

MergerWare is a SaaS-based, secure enterprise digital platform dedicated to creating the most efficient M&A deal management and execution process from discovery to due diligence to post-merger integration activities.

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Author

Muskaan