Managing Change after Mergers and Acquisitions

Managing Change Post-Merger

Microsoft’s bid to acquire Yahoo! has been in the headlines for quite a while now. Mergers and acquisitions of such magnitude are always a subject of debate. It is true that mergers make headlines; yet, the deals that do not work out due to culture clashes and other financial ups and downs only make it to the third or fourth page.

Managers invest 90% of their time in planning how the merger would work out. After the merger, they are quite stressed in trying to deal with post-merger implications. Many examples are cited of mergers that did not work out well. I had no idea that the famous toy company Mattel had acquired The Learning Co. (a very successful education and entertainment software firm) in 1999 for $3.5 billion. The merger did not work wonders for the two companies and they had to part ways as their corporate cultures did not match, the business ideology was very different, and there were a lot of gaps in the work ethos as well.

Some common symptoms which suggest such problems are:
• The corporate cultures of the merged companies do not match,
• The operating environment remains sliced in ‘us’ and ‘they’ which never leads to employees of the merged companies to unite for a common goal,
• There is a sense of insecurity over a long period of time,
• Low morale and poor overall productivity.

It is a gigantic task to manage large scale changes such as mergers and integrations. At such times, the role of Change Agents (CEOs, managers, key leaders, enthusiasts, etc.) can play a crucial role in determining the fate of the merger.

1. Address soft skills: People fear the risk of being laid off at the time of mergers and acquisitions. They look at the top management for support and re-assurance. The top management is so preoccupied with the legal issues arising at the time of integration that they ignore the aspect of addressing people working in both the companies. Diligent leadership calls for respecting the human element of the organizations and establishing clear lines of communication to deal with ambiguity. The financial statements and the balance sheets have little or no reference to the most important assets of an organization: Human Assets. There are no ‘hard’ facts to describe the contribution of the ‘soft’ skills in an organization. Yet, the importance of the human machinery cannot be ignored and it should be given due priority.

2. Identify change leaders across hierarchies: The theory of Group Dynamics suggests that people have a very high impact on each other in group settings. It is a good idea to identify people in the organization who are enthusiastic about the mergers and are likely to convey a very good picture to their peers and subordinates. The figures may work out as follows in a large sized company. About 20-40 people decide that the merger is a great strategic option. They advice 60-100 managers to devise the plan and to work out strength-weakness slideshows. These will in turn identify 600-650 people in the organization who are enthusiastic about the changes and are likely to bring about a positive reaction among the masses. This waterfall effect is likely to create an environment of a smooth merger. People will not be taken by surprise and they will be ready for changes. Another important aspect when identifying change agents or change leaders is that they should be across various functional areas and hierarchies. Change Agents should remember that they are contributing to a very large cause..

3. Avoid cookbook style of problem solving: The problem with managing changes is that we often expect quick changes across linear and vertical lines of the organizational structure. There is no success formula/cookbook style for managing changes because of a number of uncertain elements that one has to deal with during a merger/integration. The most uncertain element is dealing with human behavior. You never know what people will like and what will they reject outright. They may have an issue with the new strategies, expansion policies, their new manager, their new office, their new training schedule or just the fact that the name of their company changed. They may fear layoffs or welcome the hope of a fat paycheck and a promotion. Mergers typically have a number of uncertainties. The legalities are complex and need a lot of effort from the top management. People across the realms of the organization may have concerns about issues faced by them, their co-workers and their teams. These need to be addressed carefully and not in a procedural manner.

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