- How do mergers and acquisitions affect change management
- How to support culture change during mergers and acquisitions
- Can a merger and acquisition feed into company culture development
- Benefits of a change management plan during M&A
- The role of employee listening and 2-way dialogue
Mergers and acquisitions (M&A) are some of, if not the most significant forms of organisational change, and they present plenty of challenges - day-to-day, overarching, short-term and long-term. What’s absolutely crucial, then, is change management for the biggest of changes. With the right communication and planning, you can lessen the burden on your people and ensure that any merger or acquisition process runs smoothly.
In this article, we’ll cover some of the main challenges of change management during mergers and acquisitions and how you can manage them effectively to ensure a smoother process for your people and your organisation as a whole.
How do mergers and acquisitions affect change management?
Mergers and acquisitions will fundamentally change various aspects of life for one or all of the organisations involved. From daily operations to company culture, the impact can be significant, and one of the main challenges for management is to effectively communicate with their people throughout the entire process.
The impact on day-to-day operations is one that will likely elicit uncertainty and anxiety from employees. One key reason for change resistance is fear of the unknown, and mergers and acquisitions are always going to bring out this fear. Communication underpins all effective change, and the pressure on management to provide effective communication is enhanced when it comes to mergers and acquisitions.
Changes to a company culture, whether small or large, can have a huge impact on someone’s experience at work. M&A brings together two company cultures that might differ significantly, and it’s up to management to find a way to ensure these cultures can be combined to avoid losing key talent or hindering individual performance. It requires collaboration between the merging senior teams, which can be difficult with all the moving parts and red tape involved in an M&A.
Mergers or acquisitions also means an increase in workforce, at least in the initial stages, which means internal communication can be put under increased strain if plans are not made to adapt. According to ALM Benefits Pro, while 86% of leaders say they’re sending meaningful communications, only 59% of employees agree. Communications must be tailored to the M&A process to ensure that all employees receive relevant information as soon as it becomes available.
Lack of alignment
No matter the size of the businesses involved, a merger or acquisition means bringing together two organisational cultures that will have their own unique characteristics, which will likely result in differences in approach and adaptation. According to McKinsey, 95% of executives deem cultural fit to be a crucial factor in a successful M&A, but 25% identified a lack of cultural alignment as a reason for failure.
Without a proper plan in place, M&A can lead to a lack of alignment between merging organisations, which will hamper the unified organisation’s ability to adapt to the new operation.
Here’s how Rungway helped one of our client’s identify and solve issues they were facing:
During integration after an acquisition, leadership were aware of a lack of alignment between the two original companies, but were working to create one unified company and culture. Through Rungway, the nuanced cultural differences were highlighted to leadership:
- The style of avatars on their communication platform emphasised differences - one used a corporate style, and the others were more jokey and cartoonish.
- There was different etiquette when it came to meetings. For the original company, the meeting would start right on time, and one or two minutes past would be considered late. For the integrated employees, they were used to meetings starting at five-past or a little later.
Because Rungway offers psychological safety through optional anonymity, employees were able to voice what was really going on, leadership were then aware, and able to set some guidelines in place to help merge the two groups of employees and create a more aligned culture and expectations.
In this example, leadership was able to resolve the lack of alignment through continual listening and two-way dialogue. It's a very helpful example of how alignment can be impacted by something that management may perceive as inconsequential, but has a significant impact on their people and performance.
How to support culture change during mergers and acquisitions
While there is a real and obvious impact on company culture during a merger or acquisition, there is plenty that management can and should do to support culture change and ensure that the process is as smooth as possible for employees. Let’s take a look at some of them.
Assess the cultural differences
Leadership and management from both sides of the merger or acquisition should collaborate at the earliest possible opportunity to clearly define the cultural differences between their organisations and work out a plan to integrate and eliminate parts of their respective cultures as necessary.
Which parts of the respective cultures work well together? Which ones simply do not work? Is there a middle ground that can be found for the benefit of these soon-to-be-merged organisations? By coming together to assess the differences, you’ll be able to come up with a clear plan that can be communicated to employees and implemented in a way that would not be possible without this collaboration.
This assessment must be unflinching and honest, but it’s important that all decisions are made with employees in mind. 82% of workers surveyed by Gartner said it’s important for their organisations to see them as people, not just employees. Think about the people when making these decisions - changing company culture for the worse will likely negatively impact their receptiveness to further changes.
Create a shared vision strategy
Although combining two leadership teams is a complex operation, there are benefits to be enjoyed from the process, one of which will be the combined knowledge of the two teams. By utilising your experiences, you can create a shared vision strategy which will help to ease the newly merged staff into any cultural change.
Analysis of 124 organisations by MIT Sloan revealed that only 28% of executives and middle managers responsible for executing strategy could list three of their company’s strategic priorities. If you’ve not developed a clear strategy that leadership is aligned on, how can you expect your employees to support the change?
With your vision strategy, you can define what it is you want to achieve from the merger in terms of cultural change, and set out a roadmap to achieve it. Identifying potential obstacles ahead of time, and having a tool in place for ongoing 2-way dialogue with your employees, will make navigating them much easier; without a shared vision in place, leadership may be too slow to notice and react to minor or major warning signs. It's crucial leaders are aware of issues as they are emerging, not later down the line. Big-picture planning is essential when it comes to something as important and potentially delicate as cultural change in M&A.
A shared vision strategy should be put into place as early as possible in the process, and once defined, it should be openly communicated to employees. The earlier you do it, the more chances you have to hear from your people and identify areas of resistance and advocacy, which can be used to tweak your strategy and MO.
Communicate frequently and with transparency
Only 15% of employees understand the rationale behind their leaders’ change strategy, according to Leadership IQ. This stat alone shows how important communication is in M&A.
A merger or acquisition is a daunting and uncertain time for staff, particularly ones below management or leadership level, as they won’t have the same oversight of the process. This means that leadership must communicate regularly, clearly and inclusively from start to finish.
According to Capterra’s 2022 Change Fatigue Survey, approximately 71% of respondents expressed that they are overwhelmed by the change that has occurred in their jobs throughout the pandemic. With this in mind, it’s almost certain that you’ll encounter change resistance in your organisation during M&A, but your communication strategy can help to turn that resistance into advocacy.
Begin the communications early and utilise bottom-up communication methods to properly engage with staff about the process. If they’re blindsided by random updates with no chance for feedback or discussion, it’s extremely unlikely they’ll become more enthusiastic about the change. By creating psychological safety with your communications, you’ll encourage and elicit more detailed, honest feedback, which can help you tailor your cultural change plans. Read our guide on how to create psychological safety and facilitate bottom-up communication to help you get started.
Bottom-up communication can also help leadership learn during and after the M&A process. Employees can inform them of what is working and what isn’t, and ways that the ‘sides’ of the M&A are failing to integrate as well as they potentially could be - identifying alignment issues early on is key to resolving them and moving forward.
Training can also help staff and management alike prepare for upcoming cultural change, as well as helping to reduce the aforementioned fear of the unknown that is often associated with M&A and organisational change. Being fully prepared and trained for a new role or a new way of working can help to increase change advocacy amongst your people, and statistics show that change is 30% more likely to stick when people are invested in it (McKinsey & Company).
It also helps to show employees that leaders value them and that they’re involved in your plans moving forward. Even though training may take some time to bed in, it’ll play a key role in ensuring your employees - and therefore your organisation - can adapt quickly to the new circumstances. Without training, you may find that employees struggle to settle into the change, which can reduce productivity, lower morale and wellbeing, and lead to turnover.
Can a merger or acquisition feed into company culture development?
Of course it can. In any merger or acquisition, there is plenty that the two organisations can learn from each other if both sides are willing to collaborate, strategise and compromise. There will be areas where visions differ, but there will be areas where the vision aligns, and you can capitalise on these to develop a healthy culture for your new organisation.
Here’s a short list of some of the ways M&A can provide such opportunities:
Shared values - In the areas where your values match up, you can work together, share your knowledge and work towards a common goal that benefits your employees and your organisation.
New ideas and perspectives - Leadership, management and staff will all have valuable insight for developing company culture. Learning from each other can unearth important ideas that one side may not have thought of before.
Integration of best practices - Both organisations involved in an M&A will have their own best practices, and while they may not all mesh together perfectly, there will be some that can be combined to great effect. For example, one organisation may have an effective internal communication system in place - such as Rungway - which could solve communication issues that the other organisation has suffered from.
Increased diversity and inclusion - mergers or acquisitions can bring people from different backgrounds together, which will improve the diversity of the merged organisation. However, it’s important that leadership work to build on this improved diversity and learn from everyone - this way, they’ll learn more and benefit from a bigger, more detailed picture of life in their organisation.
Benefits of a change management plan during a merger or acquisition
A change management plan can help to make any change process smoother for everyone involved. It can mitigate the risks associated with change; it can reduce staff turnover (therefore saving money on recruitment and training), help to prepare employees, and help to win change advocacy and overcome change resistance. By overcoming resistance and encouraging employee buy-in, a change management plan helps organisational change to stick.Company benefits of a change management plan:
- Increased change advocacy
- Reduced staff turnover
- A positive workplace culture
- A smoother change process
- Quicker adaptation to change
- Increased productivity
- Better alignment
Employee benefits of a change management plan:
- Improved understanding of the change rationale
- Improved readiness for change
- Improved morale and wellbeing
- A positive workplace culture
- Increased confidence
- Improved engagement
The role of employee listening and 2-way dialogue
Rungway is a continuous employee listening platform that enables leaders to continually get ahead of emerging issues and drive organisational change. We enable leaders to deliver effective change at scale by creating a safe space for honest and continuous dialogue around employee’s most pressing issues.
It creates a psychological safe space for employees to raise concerns, ideas and opinions, and gives leadership a chance to respond directly for all users to see. This means leaders can hear from a wider range of people, learn more, win advocacy and improve visibility at the same time.
Real dialogue. Real action. Real change.