Wednesday, December 10, 2014

OCM: Two Keys to Doing It Right

Organizational Change Management is a very challenging undertaking. Most people are not comfortable with change, so this can be a frightening and uncertain experience for them, especially during and after a merger or acquisition, which is what typically engenders an organization-wide change. It is even more scary when they are not kept in the loop or changes are filtered down from upper management outlining all the organizational levers that need to be pulled to implement the desired change. This is referred to as the "organization in" approach. This method breeds resistance, resentment and fear. I am a believer in the "individual out" approach. Like anything else, from project management to field marketing, if you want supportive and excited participants, you need to get buy-in. This brings me to my two keys to successful change management: Communication and Integration.


As most people know, communication is the transference of meaning. What many people forget is that for communication to be effective, the meaning must also be understood. Without that, the process is meaningless. Communication serves four basic functions that have the potential to be lost if the process is broken: control, motivation, emotional expression and information.
  1. Control - It serves to control behavior through both formal and informal processes and policies.
  2. Motivation - It provides team members with clarification on how well they are doing, and what can be done to improve performance. The formulation of goals and feedback are prime examples of this.
  3. Emotional Expression - For many people, their work team is where they get their social interaction. Communication provides an avenue for venting of frustration or peer validation.
  4. Information - It provides individuals with the information they need to move forward, evaluating possibilities and making decisions.
There are three methods of organizational communication that are common: formal networks, the grapevine and electronic methods. The grapevine is noteworthy in that 75% of employees hear about matters through the grapevine first and that the grapevine is more active when situations are important to team members, where there is ambiguity and where there is anxiety. It is also important to note that while most people find the grapevine more reliable and believable, less than 10% of team leaders act as a liaison and pass down information to their teams. Most managers do not leverage the grapevine and that is a mistake. Managers can use it to convey information quickly, test out decisions prior to the oimplementation, and get valuable feedback. Of course, managers should also use formal channels to provide relevant accurate information, but the grapevine should be a tool in any manager's toolbox.
Managers should be aware of where kinks will arise in the communication process, as well. Distortion of meaning can occur when the originator intentionally filters information so it appears more favorable. The receiver of the information may have a preconceived idea around it which will result in selective perception. Too much information can result in poor communication just like to little - people will weed out or ignore information when they are getting too much. Finally, gender plays a role. Men and women often share information for different reasons. For instance, a woman may speak to an issue she is having. She wants empathy, confirmation or support while the man sees her asking for a solution.
In the end, clarity is key. Have a clear vision of where the organization is headed and provide clear communication around that. The communication should consistently reinforce the vision and be consistent in the messaging. Limit ambiguity and provide a timeline for when future communications will be coming out or big changes taking place. This will help minimize speculation and keep employees focused on the business.


In many cases the first thing that happens during a merger or acquisition is the replacement of top management by the more powerful or acquiring company. According to The Wharton School's Creating Value in Post-Acquisition Integration Processes the replacement of leadership has a negative impact on performance. Any improvements they may offer is offset by the disruptions in processes, routines and personal motivation that a change in leadership inevitably causes.

Integration of teams, on the other hand, improves or maintains productivity, usually offsetting any hidden costs and disruptions that may result from this more complete integration. Experience also plays a part in the success of an organizational change.

The higher the degree of experience is, the more likely it is to play a part in a successful integration of teams or efforts resulting in lower costs, few replicated mistakes and a better employee experience. Experience comes in two types: having done an acquisition or merger before and in the similarity of homogenous acquisitions.

This allows for leveraging learning from previous acquisitions and the codification of that learning for use in future acquisitions through the use of already-created support systems, manuals, and tools. Wharton shows the selection of convergence strategy by the average bank will improve the bank’s net earnings by $145.4MM over a three-year period, post-acquisition.

Implementation of a combination of high integration and high codification of another acquirer, which had ten in-market acquisitions resulted in a competitive value of $129.6MM over a three-year period, post acquisition.


What does all this tell us? It tells us that post-acquisition strategies determine the value creation. Simply coming in and taking over a company, as opposed to effectively integrating it, is likely to cost more and have a higher failure rate. Failure can be defined as everything from loss of customer satisfaction to the more concrete measurement of negative balance sheet impacts.

Experience is wonderful to have, but not effective on its own. Only when it is combined with codification of learnings which are applied to the current acquisition or merger will it be cost-effective and create a strong system of integration, which will result in higher overall employee satisfaction and buy-in.

In the end, it’s not what you buy – it’s what you do with it after you buy it that determines success and failure.


Post a Comment