Article: Managing Change is Critical For Deal Success


Managing Change is Critical For Deal Success

What is it that makes acquisition integration successful? Is it leadership alignment or culture alignment or employee transition management? Tushar Khosla and Vishala V.Thiagarajan, Strategy and Transformation, GBS, IBM, share critical areas that make acquisition integration successful

Experience demonstrates that acquired leaders can spearhead success, but only if managed well


The consent and buy-in of the leadership team in the acquired entity is important


What is it that makes acquisition integration successful? Is it leadership alignment or culture alignment or employee transition management? Tushar Khosla and Vishala V. Thiagarajan, Strategy and Transformation, GBS, IBM, share critical areas that make acquisition integration successful

The inorganic route to achieving growth aspirations has always been an attractive proposition in the corporate world. However, not all acquisitions deliver the value they set out to.
In several cases, wherein the acquisition fails to deliver value despite a good strategic fit, the causes are often identified as pertaining to people matters – for instance, leadership conflicts, cultural differences or employee disengagement, especially in the acquired firm. At the same time, acquisitions that are supported by effective change management throughout the deal lifecycle tend to mitigate these concerns and stay on track. This article examines the three critical areas - leadership alignment, cultural alignment, and employee transition management - that are vital to successful acquisition integration.

Leadership alignment
“Committed Leadership is the single most critical factor to ensure the success of acquisition integration. Explicit, supportive, visible leadership, that is aligned around the change can greatly facilitate getting the rest of the organization to support the transformation.” - Christopher Fitch, IBM-Global Lead for Acquisition Integration Leadership & Change.
It would be easy to assume that the completion of the acquisition is a natural consequence of the consent and buy-in of the leadership team in the acquired entity. But, there couldn’t be anything farther from the truth. Acknowledging that the leadership team needs a significant and deliberate focus and acclimatization is an important initial step.
Experience demonstrates that acquired leaders can spearhead success, but only if managed well. In a majority of cases, the erstwhile acquired CEO and senior leadership are instrumental to a smooth transition, retention of acquired teams, and deep relationships with key customers. However, if not integrated and managed well, the acquired leadership team can be the greatest impediment to the integration.
Hence, a clear focus on acquired leaders must be a part of the Organizational Risk Assessment exercise during the due diligence phase itself. Key questions such as how critical is the retention of each leader, what is the probability of a leader leaving, etc., are analyzed in detail at this stage.
Individual interviews with acquired leaders during the due diligence phase are instrumental. A certain degree of expertise is required to conduct these interviews in order to get an insight into the leaders’ commitment and ability to contribute in the post-acquisition scenario. Apart from interviews, a study of organizational history, key organization initiatives/projects and cross referencing often add valuable information about the leaders, helping us to reach the right conclusions. Risk mitigation plans rely heavily on the leadership gaps and concerns revealed during this process.
Further, it helps one to be prepared with a plan while conducting face-to-face leadership alignment sessions soon after the ‘close’ to ensure clarity around the case for acquisition and what it means for both the parties, shared vision of the acquired entity, revised performance expectations, reporting relationships, and revised mandate or priorities for projects that leaders were sponsoring in their earlier roles. Another often neglected but critical area is the communication protocol. Acquired leaders must be familiarized with what to communicate, how and when, as the ones who earlier ‘reported’ to them, continue to reach out to them for clarity and validation during and after the transition.
A study to identify actions that would improve the integration experience and retention of CEOs from acquired companies revealed three main imperatives – meaningful roles that substantially impact the combined organization, an early start to career development with specific targets, and the availability of a senior mentor and a ‘go to’ person who can provide the clarity and understanding on ‘how things are done here’, besides helping leaders integrate into larger communities and grow their influence and eminence.
Leadership alignment also requires sensitizing the leaders from the acquiring company to the value addition and strengths that acquired leaders bring in. Any leadership behavior or conduct that undermines the importance of acquired talent must be severely curbed to avoid disproportionately high reactions during sensitive times.

Cultural and business practices alignment
Cultural misalignment is often cited as the reason why employees from different organizations are unable to team-up effectively or deliver jointly on programs. Most organizations incorporate specific initiatives towards cultural alignment as part of the integration, albeit with varied degrees of success. In the absence of a tangible, prioritized and structured approach to addressing cultural gaps, reactions may be in the form of too ambitious a plan focused on totally reforming the culture of the acquired company to reflect that of the acquiring company, or a passive approach of relying on slow osmosis leading to cultural harmonization. Clearly, both approaches fail to deliver.
Let us sample a case of organizational acquisition wherein the leaders from both entities, while discussing shared values and principles, were convinced of alignment as both entities historically pledged for “customer focus” and “measured risk taking”. Hence, they assumed there would be no conflicts in the post-acquisition scenario. But, as it turned out, there were several differences in the practices that both followed to serve similar values. In line with its customer orientation focus, Company B encourages employees to do whatever it takes, including agreeing to develop customized solutions, while the employees of Company A believe that the best way to serve the customer is to help them select from a menu of existing options with minimum customization, as it provides standard, risk free and cost effective solutions to the customer. For Company B, measured risk-taking means employees can intuitively take the right steps without checking with their supervisor, but within limits, while for Company A, any risk-taking needs prior approval although the approval may be forthcoming if the manager believes it falls in a measured risk category. Both approaches are right, but creating a right vs. a right situation needs to be reconciled if the entities are to work effectively post-acquisition.
Of course, it is important to carry out cultural gap assessments using standard dimensions like customer focus, innovation and risk taking, teaming, conflict resolution, process orientation and work/life balance, but it is rarely sufficient. It is business practices, the tangible representation of culture, which reveal conflicts and hence need to be reconciled, and the accepted practices socialized. The best way to showcase this is to leverage the power of stories. IBM has effectively used the concept of ’Outcome Narratives’ wherein typical work situations, say customer making a deviation request, are considered, and the desired outcome, role of decision makers, expected behaviors and supporting reference material available are presented. These outcome narratives become easy reference guides and help employees understand the expected behavior and desired outcomes as they encounter situations in a new business environment, without falling into the trap of leveraging the preferred way from their earlier organization.
The status of cultural alignment and uniform adoption of business practices requires monitoring on a periodic basis and the development of new or modified versions of ’Outcome Narratives‘and revised communication strategies to ensure rightful interpretation and effective reflection in the desired conduct.

Employee transition management
Organizations are well-versed in the process of integrating acquired employees as far as HR information systems, compensation alignments or managing on-boarding (including welcome events) on ‘day one’ of their service commencement with the combined entity, are concerned. Employees are familiarized with the new company rules, policies, processes, etc., through initial orientation sessions and provisions are made to ensure protracted support by including reference websites and help desks, and most importantly, associating a ‘buddy’ or a mentor to each of the transitioning employees. Despite all these preparations and efforts by functional departments, there are often variations in employees’ experiences during transition and this is attributable to change management interventions associated with transition.
As Chris says, “The goal should be to not only retain key talent to deliver on the deal-specific accountabilities, but also to integrate those individuals into the combined entity in a way that helps them feel comfortable and motivated about the whole acquisition process.” It falls upon the change management team to manage employees’ perception about the change during the whole transition, by keeping them informed, helping them manage uncertainty and make informed decisions, and enabling them to perform well in redefined roles and new operating environments.
Communication is the key to keeping employees engaged. Communicating in the right way needs some deliberation around the content, messenger, media, frequency, and feedback mechanisms. Not everything is final or known upfront, but nothing rankles more than silence. It helps to let people know when the information will be available and then let them live through the uncertainty. Hence, there must be an emphasis on socializing the overall event calendar and keeping it live and relevant. Other pitfalls to avoid include differences in messages received from different sources, discrepancy in timings of the receipt of messages by different groups, or leaders failing to send the right non-verbal signals through their actions. Web 2.0 based options, such as blogs, wikis, etc., have added to the reach and power to connect, and can compliment face-to-face meetings and town-halls that still rank in effectiveness.
As far as people-related activities are concerned, the responsibility of keeping a pulse on the effectiveness of such measures and providing feedback falls upon the Change Manager. In this respect, periodic roundtables and surveys with the acquired employees help immensely. In the absence of feedback on employee experience and sentiments, we may not know the effectiveness of the measures that we undertake, often in a supply-oriented, compliance-driven manner. Effective change management is driven by real insights and that means Ask, and not Assume.

Change Management Prerequisites
Change Management activities and interventions throughout the deal life cycle have to be planned and delivered in an integrated manner. For this to happen, the change management program should be embedded in the overall program plan. This also means that the change management team is a part of the overall integration team, and change management activities and achievements are tracked at the program level as part of the deal value realization scorecard.
Clearly, change management requires commitment of the right investments, selection of appropriate resources, powerful positioning, and integration with the overall plan, to enable integration success. This is one investment in people matters that will pay for itself several times over. Finally, given the stakes at hand, the inherent complexities of people issues in acquisition integration, and the requirement to influence senior leadership teams from both the organizations, it is imperative that the Change Manager is a senior practitioner with sufficient experience, expertise and skills in managing change associated with integration processes. With optimal resources and a focused strategy driving it, change management can steer the integration process to enable acquisitions deliver promised value.



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Topics: C-Suite, Strategic HR, #MergersAndAcquisitions

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