3 Steps to Better Change Management in 2021

Leaders often talk about people and cultural changes being the top priorities when a deal is imminent. However, once the practical realities of M&A due diligence, valuation, negotiation and post-merger integration of financial, legal, HR, IT, and sales and marketing disciplines take hold, the focus on people and culture is often blurred with these areas feeling less relevant and less immediately critical. As a result, they get deprioritized or ignored to the significant detriment of a project’s return.

It is within the human workforce where integration, adoption and execution around deal priorities and new initiatives take place. Although organizations once enjoyed the luxury of time to test and roll out new initiatives, they must now do so in compressed periods with tens or hundreds of new existing projects competing for their resources and time.

McKinsey advises it is in this fast-paced dynamic where competitive advantage accrues to companies with the ability to set priorities and implement their processes quicker than their rivals. This critical ability is primarily people-driven. 

There is no argument around the data: the better change management principles are applied, the higher likelihood that project objectives will be achieved. Now, given the current world climate, change management and culture are perhaps more important than ever.

What is Change Management: 

M&A change management focuses on the people and processes of a company in an effort to prepare for change. Specifically, it arms the buy-side with critical information about the target, while also providing the target's employees with knowledge of the acquirer’s intentions, processes, values, and key players in an effort to ease the stress and anxiety around the merger or acquisition, as well as to improve its overall outcome. 

Why Change Management Is Especially Important Now:

The benefits of change management are numerous, ranging from critical employee retention to the capture of synergies. In 2021, we predict HR and change management teams will play an increasingly important role in mergers and acquisitions as employees are more likely to be spread across numerous geographic locations due to the pandemic and shift to work from home. This spotlight on the importance of people is enhanced by the unique cultural characteristics of our modern world, from the COVID pandemic and its effects on the world economy to the continued fight for both racial and gender equality, and to the increased political divide evidenced not only in the United States, but also around the world.

Three Key Steps to Successful People and Culture Integration: 

Danish human resource consulting company Proacteur offers a helpful post-merger integration framework for thinking about the basics of change management practices. This framework supports the basis of Midaxo’s view around simplifying the organization of change management around three key steps for integration success.

Step 1: Preparing for Change – Providing clarity to set a proper stage

From the outset, before creating a post-merger integration checklist or anything of the sort, companies need to set an effective stage for supporting cultural change. A clear definition is critical; this includes defining desired behaviors, propping up role models or examples and providing meaningful incentives.

Actions:

  1. Ask questions to clearly define culture change, who it impacts and implementation guidelines.
  2. Perform a situational awareness inventory. An example target output during this step would be an organization attributes profile – a profile of teams impacted and any attributes that may cause issues during implementation.

Step 2: Managing Change – Organizing efforts and creating plans

In this step, organizational change management efforts take shape and custom plans tailored to the targeted groups and activities – and integrated with the overarching deal plan – are built and rolled out.

Actions:

  1. Start a communication plan
  2. Map the sponsor roadmap
  3. Analyze system changes and process updates
  4. Assign integration owners
  5. Develop a training and coaching plan

Step 3: Reinforcing the ‘Change’ in Change Management – Create lasting change

This third phase of change management is about reinforcing the change initiatives. Here is where the target synergies and value-creation opportunities identified early in the deal making actually materialize.  

Actions:

  1. Measure changes and take corrective actions
  2. Reinforce with recognition
  3. Perform the post-mortem

Additional Best Practices of Change Management:

  • Utilize impact analyses to identify potential problem areas early on - Impact analyses ensure small problems do not become big problems and allow for early, thoughtful planning and communication. The information extracted should be shared with all deal stakeholders. 
  • Visit the target early and often (when possible) - These visits will yield critical information regarding culture, leadership, and work style. While in 2021 on-site visits might be less frequent than in the past, conversations (ideally one-on-one) with individuals from varying workstreams can help paint a picture of these areas - if you are willing to truly listen and observe during these conversations. 
  • Leverage surveys - Especially in a more virtual work world, surveys can provide meaningful feedback that no longer can casually take place in the office. However, employees will put into the survey what past experience has shown them to expect, meaning don’t survey employees for input and never respond to it or act on it. 
  • Keep creating lasting change with retrospectives and long-term follow ups - Continuing to keep the pulse on how employees are responding to change post integration is vital. At the six or twelve month mark, survey and interview them again and compile a report of what went well and what needs to be improved for the next deal. 

Takeaways:

Ultimately, you can achieve fuller project potential through people-centricity. Moreover, the scorecard for change management success isn’t how quickly or fully the implementation plan was executed, but how sustained the change actually is. People revert to old norms and customs unless there are mechanisms in place to ensure the new prescribed way of doing business is being done.

Companies that build value over the long term from their deal making have built a critical differentiating competency: effective change management. These companies recognize the outsized role of people in delivering deal returns and ensure culture, fit, and human-centered transition issues are prioritized and executed repeatedly and effectively.

For more detailed information on how to implement effective change management, read “Fight M&A Failure with The Three Building Blocks Of Great Change Management.”

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