Mergers and acquisitions (M&As) are major milestones for any organization, bringing with them the promise of growth, expanded capabilities and new opportunities. However, they also introduce significant changes that can deeply impact employees across both the acquiring and acquired companies. From shifts in leadership and team structures to alterations in daily workflows and tools, M&As can be a period of uncertainty for many.
Without a well-thought-out change management strategy, this uncertainty can breed resistance, impact morale, retention and ultimately hinder the success of the merger. Understanding and managing this change effectively is crucial to ensure that the integration process is smooth, employees remain engaged, and the organization achieves its strategic goals.
Understanding the Change Involved in M&As
To appreciate the importance of change management in M&As, it’s essential first to understand the types of changes that typically occur during these transitions and how they affect employees.
- Combining company cultures
Every organization has its unique culture—a set of shared values, beliefs and practices that shape how work gets done. When two companies merge, so do their cultures. This cultural integration can be challenging, as employees may struggle to adapt to new norms and expectations.
A clash of cultures is possible and can cause problems with the workforce. Let’s say the acquiring organization has a highly open culture, where employees can freely speak their opinions, leadership is accessible and engaged in conversations across the whole organizational hierarchy, and managers are expected to conduct and act upon regular feedback from their team.
On the other hand, the acquired company has a hierarchical, top-down culture, where decisions are made by leadership at the top, the rest of the employees are expected to follow, and leaders are generally only accessible to their direct reports.
Combining these two cultures into one organization is tricky, with employees not knowing how to conduct themselves and interact with their coworkers and managers, and with new ways of working being particularly difficult for the employees who are impacted the most.
Ensuring smooth cultural integration is key to maintaining employee morale and productivity.
- Team restructuring
M&As often lead to changes in team structures. Departments may be combined, roles may shift and some positions might even be redundant. Employees might be reassigned to new supervisors or into teams with acquired workers from the other company, which may cause feelings of anxiety and instability.
These changes are never fast either, with multiple rounds of consultation often required with teams, HR representatives and even union involvement.
Such restructuring can create feelings of insecurity and being stuck “in limbo” among employees, making it vital to manage these changes with transparency and empathy.
- Change in leadership
Leadership changes are common in M&As, with new leaders bringing in different management styles and priorities. This can lead to uncertainty and anxiety among employees, particularly if they are unsure of how these changes will affect their roles and responsibilities.
Employees who have had excellent relationships with outgoing leaders, forged through many years of hard work and commitment may wonder if it was worth it and be anxious about going through that process again. Alternatively, employees who struggled to identify with the strategy and engagement style of previous leaders may see a change as a positive opportunity.
- Change in processes, workflows and tools
Integrating different processes, workflows and tools from both organizations is a significant challenge. Employees may need to learn new systems or adapt to different ways of working, which can be disruptive if not managed properly.
Administrators of said tools and processes may even feel this personally. When someone has worked on a system for a number of years at work and they have had significant impact on its use and best practices, it’s normal for their working identity to be heavily connected with that system. A change that seems purely practical and quite impersonal can actually have significant impacts on a deeply personal level.
- Realigning company goals and directions
Post-merger, the unified organization may have new goals and strategic directions. Aligning all employees with these new objectives requires clear communication and ongoing support to ensure everyone is working towards the same vision.
Additional communication will be required in the first few goal setting cycles to help employees understand how their team and goals now fit into the new strategic direction of the organization as a whole. Teams may need help in understanding how what they do has remained relevant, even as the wider strategy shifts.
The Role of Change Management in M&As
The success of an M&A hinges not just on the financial and strategic alignment of the companies involved but also on how well the people within these organizations adapt to change. This is where change management plays a critical role.
- Manage employee resistance and anxiety
Resistance to change is a natural human response, especially when it involves major shifts like those seen in M&As. A well-executed change management strategy helps address the psychological aspects of change, provide reassurance and involve employees in the transition process, thereby reducing resistance and anxiety.
- Preserve culture and values
While it’s important to merge the best aspects of each company’s culture, it’s equally crucial to preserve the core values that define each organization. Change management activities should be designed to respect the values that each company deems the most important to their identity. This helps employees maintain their identity and provides much needed continuity.
- Minimise disruptions
Change management helps identify potential disruptions early, such as employee resistance and poor executive management and implement strategies to minimise their impact. By proactively addressing issues, organizations can maintain business continuity and keep operations running smoothly during the transition.
- Facilitate new and efficient workflows
Integrating new workflows and processes is one of the most challenging aspects of an M&A. Change management provides the framework to facilitate this integration from a people-focused perspective, ensuring that employees are adequately trained and supported as they adapt to new ways of working.
Developing an Effective Change Management Strategy
Creating an effective change management strategy for an M&A involves several key components, each designed to address the specific challenges and opportunities of the merger.
- Assessment and planning
The first step in any change management strategy is to assess the scope of the change and plan accordingly. This involves understanding the impact of the M&A on all aspects of the organization, from culture and leadership to processes and technology.
Based on this assessment, a detailed plan can be developed that outlines the steps needed to manage the change effectively and highlights any potential risks from a change management perspective
- Leadership alignment
For a change management strategy to be successful, it must have the full support of the organization’s leadership. This means ensuring that leaders are aligned with the strategy, understand their role in the process and are equipped to lead their teams through the transition.
Effective sponsorship is a key driver in successful change, and an M&A gives a perfect opportunity for an executive sponsor to demonstrate all the behaviors we associate with the role, from building a strong sponsor coalition to extend their reach, to being accessible and visible throughout the process.
- Communication plans
Clear and consistent communication is vital during an M&A. A well-structured communication plan ensures that all employees are informed about the changes, understand the reasons behind them and know what to expect moving forward. This transparency helps to build trust and reduce uncertainty.
We also need to be mindful that, at the beginning of an M&A process, there may be unknowns and decisions yet to be made. Providing timelines wherever possible that confirm when decisions will be made, or when more information will become available, will go a long way towards increasing trust in leadership and helping employees feel secure in their roles.
- Employee engagement initiatives
Engaging employees throughout the M&A process is crucial to its success. This can be achieved through regular updates, feedback sessions and opportunities for employees to voice their concerns and suggestions. By involving employees in the process, organizations can foster a sense of ownership and reduce resistance to change.
These initiatives also provide an excellent opportunity to solidify the key cultural elements of the new organization, ideally based on the core values of the companies involved in the M&A. This is an opportunity to demonstrate the kind of workplace the M&A will create and help mitigate employee fears and associated retention issues.
- Training and development
To help employees adapt to new processes, tools and workflows, comprehensive training and development programs are essential. These programs should be tailored to the specific needs of the organization and delivered in a way that is accessible and effective.
Collecting feedback on training is another great opportunity to help employees feel heard, and consistent branding, tone and messaging is a fantastic way to help team members understand the cultural identity of the new organization.
- Measurement and evaluation
Finally, it’s important to measure the effectiveness of the change management strategy and make adjustments as needed. This involves regularly evaluating the progress of the integration, gathering feedback from employees and refining the approach to ensure the desired outcomes are achieved.
The Secret to Successful M&As
Mergers and acquisitions are complex processes that require careful planning and execution, particularly when it comes to managing the human side of change. By understanding the changes involved, recognizing the role of change management and developing a comprehensive strategy, organizations can navigate the challenges of M&As successfully and set the stage for smooth and productive integration.
If you have any questions about change management, feel free to contact us and one of our experts will be in touch with you. Download our eBook “Driving Seamless Change: The Role of Adoption and Change Management in Digital Transformation” for a more comprehensive look into change management!
