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Change Management in Merger Integration

How to overcome people issues and culture clashes in mergers to build a better company.

By Tobias Umbeck and Adrien Bron

• June 14, 2017

The value in mergers and acquisitions is undisputed. Bain & Company analysis of deals over an 11-year period has shown that as a group, companies that engaged in M&A activity averaged higher shareholder returns than inactive companies. But while they may have the best of intentions to use M&A to supplement their organic efforts, many executives get derailed in merger integration. Business leaders put people, culture, change management and communication as the top reasons for integration failure, yet few companies completely understand how to tackle those issues head-on.

That is one of the reasons why analysts often ask hard-nosed questions following a merger announcement. They know that executives still struggle with proactively managing the change that comes with an acquisition, and they want assurance that the company has a solid plan in place. In our experience, executives share a host of questions, too: What do I actually do to get started? What approaches and tools do I apply, and when? What matters most?

In many cases, there’s much talk about making people and change the top priority. Then reality kicks in, and the topic of change is no longer a priority or somehow feels less relevant. After all, management must deliver on the base business, align the strategies, put a new organization in place, and realize synergies—right away and all at once.

Fortunately, there’s a systematic approach that can help guide the change. We’ve taken this approach with hundreds of clients across a number of industries but the experience of one industrial goods company serves as a strong example. Following a major acquisition, the newly appointed CEO summed up the issue at hand when he told us: “I have no doubts about the strategic rationale and the synergies. However, I need to build a new company now. How do I engage thousands of people globally and align them behind our ambition, while keeping our customer focus and delivering on our budgets?”

The CEO laid out a plan that followed three general principles we see as critical for successfully managing change in merger integration: embedding change management into the integration, co-creating the foundation with the top team, and systematically cascading the change throughout the organization. We’ll look at them one by one.

Tobias Umbeck, a partner with Bain's Results Delivery practice, shares three ways that companies can manage change, deliver better results and build a better company.

Embed change management into integration

Managing change during an integration must be tailored to the specific situation. This may sound basic, but too many executives make the mistake of treating all mergers and all employees the same. The approach should vary, for example, according to the sources of synergies, the time available, the cultures, the geographic footprint or the integration’s magnitude of impact on different employee groups.

However, experience from hundreds of integrations provides general change-management guidelines that companies can apply in almost all situations. These guidelines are particularly critical in transformational integrations that significantly affect both companies, which was the situation facing the industrial goods company.

First, resist the urge to make change management a separate work stream or a standalone activity. It is not just a collection of tools and techniques or an HR-led exercise. In fact, when it’s not a broad effort personally owned by top executives, change management can quickly become a matter of empty concepts or useless slogans. The reality is that change must be part of the executive agenda.

The key is to embed change management deeply into the design and execution of a merger integration. Consider it an underlying force that helps to spur business results, first by building a strong foundation together with a small team, then enabling the change to flow throughout the broader organization. We refer to this mobilization as “cascading.” The industrial company took this view, focusing on managing five critical dimensions at the direction of a newly appointed chief integration officer and his team: aligning the top team, building the new culture, creating a joint ambition, developing the new operating model and delivering the synergies (see Figure 1).

Second, don’t wait to start managing the change. We see that the most experienced companies start identifying key change risks during the due diligence phase, based on interactions with the target’s team. In most cases, the heavy lifting should start as soon as possible after signing and well in advance of closing. Consider the time between signing and closing as a gift that can be used to build the foundation of the integration. The length of time between signing and closing will vary based on the nature of the transaction and the required regulatory government approvals. Regardless of the timing, we’ve found that management often underestimates what it can accomplish before closing.

Co-create the foundation with the top team

Change management always starts at the top. Each member of the executive team should be personally involved in defining the main aspects of the new company, jointly with their peers at the acquired company.

Shortly after signing, the industrial company CEO scheduled four multiday workshops over a period of three months with his newly appointed management team (see Figure 2). The objective: co-create the foundation of the new company. It is worth pointing out that three of the workshops took place prior to closing. That means that strict adherence to antitrust law was required. For example, certain information could not be shared as both companies still needed to act as competitors. Despite these limitations, in our experience much ground can be covered prior to closing. In almost all integrations, the time can be used to establish the foundation of the joint company.

Each of these workshops was designed to jointly work on solutions in a truly interactive way. There’s a fundamental reason why such collaboration is critical for building trust and alignment among leadership teams from both companies: What people hate most about change is the potential loss of control. As most merger integrations involve a significant amount of change, it is invaluable to give control back to people wherever possible.

The first workshop carried the theme of understanding. Sessions included activities designed to help participants examine each other’s business, organization and strategy—and start to understand each other as individuals. Participants reviewed facts, figures and organizational charts, while also discussing the respective cultures and how they support different processes and decision making. Anyone can read an org chart. But in order to build deep mutual understanding, it is more relevant to discuss why the organization looks the way it does, and how it has evolved over time. Based on our experience working with clients on hundreds of merger integrations, we find that most companies underestimate the effort required to build a joint vocabulary. Senior leadership must invest considerable time to learn one another ’s language as a first step toward building a common language.

The second workshop was designed to foster alignment. Leaders defined the combined company in terms of shared costs, customers and capabilities. This provided the basis for thinking deeply about the best operating model for the joint company, one that would support the needs and characteristics of the different businesses. In addition, the team developed a five-year ambition, a shared mission, and a set of core values for the joint company and its aspiration for synergies.

As the executive team worked to become 100% aligned on all these matters, it took the process a step further by adding a personal and team dimension to the discussions. The CEO often referred to this as complementing the “it” (subject matter) with the “we” (team dimension) and the “I” (personal dimension). For example, participants deliberated how to deal with disagreement and how to provide feedback to each other, thus accelerating the team-building process. Most important, this early alignment prevented lengthy disagreements down the road and contributed to accelerated synergies and other positive business results. (See the sidebar “ Three techniques to build the foundation for high-performance teams .”)

In the third workshop, the executive team developed a master plan for the integration. The team focused on rapidly mobilizing the broader organization by creating a cascade—systematically engaging and enrolling all employees in the change plan, level by level and country by country.

The fourth workshop took place after closing, meaning that anti-trust restrictions no longer were an issue. Among other agenda items, the executive team discussed a plan for engaging the broader organization and laid out details for a joint senior management offsite with the top 100 leadership team.

Overall, the workshops covered a lot of territory. The goal was to build the foundation for a better company, starting with the establishment of a strong executive team. Participants got to know each other better, worked to develop a unique style for decisions and, in the words of one participant, pledged to “ have a good fight once in a while. ”

How to Manage Change During a Merger Integration

Companies that build a strong foundation after a merger are best positioned to succeed.

Cascade the change through the organization

Once an aligned top team has jointly built the foundation, it is in a perfect position to execute its plans by engaging the broader organization. After all, real change happens only if the entire organization has a chance to digest the new normal, work on it and make it theirs. Too often, companies fall short by relying simply on polished presentations attached to an email and sent to all global leaders of the company or broadcast in town hall meetings. In the best case, this type of communication is adequately informative. More often than not, though, it triggers negative reactions. People experience loss of control. Among the responses we hear: “ I should have been involved in this earlier! ” “ This does not work here. ” “ They should have asked for my opinion. ” In some cases, employees simply do not understand or are left with dozens of questions that remain unanswered. ( “What does this mean for my department?” )

At the industrial company, the CEO acknowledged that buy-in and commitment are created in personal interactions, not through one-way communication. Thus, he committed to a full cascade and enrollment process for his organization. The cascading process is so engaging and personal that a senior leader in a merger integration appropriately described it as a “contact sport.”

The same approach to managing change that leaders from both companies take in their foundation workshops can be used by divisions, geographies or functions during the cascading process—the same principles apply. That’s why, a few weeks after closing, the industrial company brought together the top 100 leadership team from both companies for a three-day program that featured similar themes to those experienced by the executive team: understanding, alignment and action. (See the sidebar “ Selected tips for designing engaging workshops .”)

On the first day, the teams spent time getting to understand one another’s cultures through an interactive exercise, and getting to know one another’s businesses and products through a guided marketplace tour.

The second day focused on their goals, starting with a collaborative exercise to define and bring to life a combined ambition and mission for the new company. This mattered because of the two firms’ different heritages and cultures. The new mission was not simply presented to the broader team. Instead, to give control to the top 100, they were asked to vote interactively on two options. The option with the higher number of votes won. One choice that triggered many discussions: whether the firm’s mission would primarily target end customers or equally important channel partners. This exercise gave the team a sense of control—they could see their input shaping important strategic decisions.

Top 100 participants also reviewed and critiqued the new operating model, and finished the day by providing input into the values and leadership behavior required to succeed in the new combined business. One example: In an industry whose go-to-market model was shifting from channel partners to direct sales, it would be critical to foster an environment that encouraged leaders to ask questions and inquire about customer-specific challenges.

On the final day, the top 100 prepared for action. The objective was to determine whether the newly established financial targets were achievable. The agenda included live voting, working in small groups to define specific governance aspects, or identifying and planning mitigating actions for the three biggest implementation risks. One key risk was the lack of executive sponsorship in locations with new reporting lines. In response, the management team created the role of “site head,” assigning the responsibility to an executive member for each location.

For the industrial company, the next challenge was to support not only an executive team of 10, but a leadership group of 100 or more to cascade the change further. The company reached the next wave of business leaders via a series of smaller enrollment workshops on local or business-specific integration priorities. People could discuss the emerging policies, provide their input, work on topics and ask questions: What does the new financial calendar mean for me as country head? Who is in charge of product launch packages in the new model? The executive team also established a routine for town hall meetings. Every month, these meetings provided an opportunity for selected groups of employees to ask questions and engage in a dialogue. Regular communications (including an intranet and a social media tool) underpinned these efforts.

For all these interactions, the company encouraged robust discussion and healthy conflict. In our experience, this was a wise approach. In integrations, differences of opinion are best handled face-to-face. Otherwise they either get buried or, worse, become difficult to resolve.

It’s critical to keep up the momentum throughout the process and track results. To that end, the best companies select a chief integration officer to orchestrate and execute an integration. He or she oversees the integration management office (IMO), a team charged with planning the cascading and enrollment, providing objectives and targets—such as determining synergy ambition by function, geography and over time—and supporting the progress.

At the industrial company the IMO played the roles of both referee and coach, providing three types of support. First, support of the synergy initiatives such as procurement. Second, support of functional integration—building the joint processes, systems and infrastructure for finance, IT, HR and other functions, for example. Finally, the IMO supported change management jointly with the executive team and HR. The IMO’s time was spread about equally across all three dimensions.

The IMO typically also provides support through a disciplined drumbeat—a regular cadence of meetings and deadlines to ensure fast and efficient decision making. It may sound counterintuitive, but this tight process doesn’t consume excessive amounts of resources. Instead, it creates clarity and avoids waste, allowing the overwhelming majority of the organization to focus on the base business. It’s a critical step, especially during an intense change such as an integration.

This cascading process must be monitored closely. One battle-tested method: conducting a monthly risk assessment, where a handpicked group of change agents routinely interviews people who are close to the front line and critical functions. The risk assessors bring key risks to the surface before they become major issues and help to focus executive attention and support when they encounter critical roadblocks. The underlying mindset is to quickly identify and mitigate implementation risks. To emphasize this point, the industrial company’s chief integration officer told his team: “Let’s maintain a healthy sense of paranoia. If you show me a red traffic light, I will ask what I can do to help you. If you show me only green traffic lights, I will get suspicious and challenge your ability to evaluate the situation.”

The industrial company found that applying three principles—embedding change management into the integration, co-creating the foundation with the top team, and systematically cascading the change—was critical to delivering a successful integration.

Ultimately, the CEO aligned his top team and built in a few months what normally takes years. Indeed, the upfront investment of time delivered a huge payoff. Employees were measurably more supportive, with the company achieving top-quartile engagement scores, something rarely seen in the aftermath of large mergers. Synergies were realized ahead of plan. Growth accelerated during the merger process, and the stock price increased. In essence, time to results was shorter than usual. And most important, the industrial company used the process to build a new and even better company.

Three techniques to build the foundation for high-performance teams

Introductions.

Ask participants to go beyond their positions and résumés. Who are the participants, what are they proud of, what matters most to them and why? Keep in mind that you don’t have to limit introductions to the first few minutes, and you can go deeper over time.

Work in pairs.

Split up group workshops into subgroups. For example, form pairs in which participants will explain to each other their legacy businesses, and swap roles when debriefing to the group. Or design short one-on-one feedback sessions to foster an open culture, and create bridges between individuals early.

Have the courage to accelerate getting to know each other and go beyond the trivial. “Lifeline” is an exercise where people share the two most formative events of their life that have made them who they are. Others listen and do not comment. Results are never the same, but always have a profound impact on executive teams.

Selected tips for designing engaging workshops

Check in/check out.

Offer a short platform for participants to have the first and the last word. The workshop is for them, not for you.

Interactive.

Limit presentation time to approximately one-fifth of the agenda. For the remainder, vary the formats: change groups, use a pin wall or flip charts, propose outside walks, and build in enough breaks.

The “how” as important as the “what.”

Design how to share content and how to collect input and feedback.

Focus equally on content and people.

Workshops are about work (the “it”). But don’t forget that people must get to know each other (the “I”), and build connections and trust as a team (the “we”). People aspects should be part of the workshop design.

High-velocity feedback.

Ask for evaluation and comments in an anonymous survey right after the workshop; share the feedback and reflect it in the next workshop.

Tobias Umbeck is a Bain & Company partner based in Munich, and Adrien Bron is a principal based in Zurich.

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Successful Integration Change Management Strategies for M&A

"> successful integration change management strategies for m&a.

In mergers and acquisitions (M&A), where two companies combine or one company purchases another, navigating change can be an incredible challenge. This is especially true in blending organizational cultures and ensuring seamless operational integration. M&A change management plays a crucial role in this context, offering strategies to overcome these hurdles.

Between 70–90% of acquisitions fail , highlighting the importance of effective change management for any large organization. Organizations often struggle with merging different corporate cultures during M&A, leading to resistance and inefficiency. Prosci offers targeted solutions to this common challenge, emphasizing the need for a tailored approach to cultural integration.

Based on the renowned Prosci ADKAR ® Model, our strategies provide a structured pathway that focuses on uniting different corporate cultures and streamlining operations, making the transition to the future state smoother for everyone involved while improving ROI for the initiative.

By adopting the Prosci Methodology, organizations not only overcome the challenges of M&A but also harness these opportunities for growth and enhanced performance. 

Subscribe to our bi-weekly blog to receive articles that help you, your team and your organization grow stronger from change.

Understanding the m&a change landscape .

Mergers and acquisitions (M&As) are pivotal for any organization and are filled with many challenges. Successfully managing change during these times is key to unlocking the full potential of the merger or acquisition.

Here, we delve into the essential focus areas and actionable strategies to ensure a smooth transition.

Combining company cultures

• Acknowledge diversity – Recognize and celebrate the unique aspects of each company's culture. This recognition serves as the foundation for a cohesive, shared culture.
• Create common goals – Establish shared objectives to unify efforts and provide a common direction.
• Facilitate open communication – Encourage dialogue between networks from both companies to foster understanding and collaboration.
• Action step – Conduct workshops and team-building activities focused on change management during mergers and acquisitions, promoting a unified culture.

Reducing employee worries and resistance

• Transparent communication – Keep employees informed about the merger's progress and how it impacts them directly. Clarity reduces uncertainty.
• Change ambassador networks – Establish support systems like mentors or peer groups to address concerns and questions.
• Acknowledge and reward – Recognize contributions and reassure employees about their value to the organization.
• Action step – Implement regular Q&A sessions and feedback mechanisms to gauge employee sentiment and address concerns proactively.

Aligning strategic directions

• Merge operational aspects – Seamlessly integrate systems, processes and policies to avoid operational costs.
• Clarify objectives and priorities – Ensure that all networks understand the newly merged entity's goals and their roles to help boost revenue and ROI.
• Continuous monitoring and adjustment – Regularly review strategic alignment and adjust as necessary to stay on course.
• Action step – Use frameworks for change management in mergers and acquisitions, like the Prosci Methodology, to guide the integration of business strategies and operational aspects.

Organizations can mitigate common challenges and harness the full potential of the merger or acquisition by addressing cultural integration, employee concerns and strategic alignment with a structured and strategic approach to change management.

The key takeaways? Engage stakeholders to foster buy-in and support. You also want to leverage change management expertise to facilitate smoother transitions, capitalize on growth opportunities, and increase ROI.

Successfully managing change in mergers and acquisitions requires a thoughtful and comprehensive approach. Organizations can transform challenges into stepping stones for success by focusing on these key areas.

The Prosci ADKAR Model in M&A Change Management 

The Prosci ADKAR Model is instrumental in M&A change management, providing a structured framework to address the human side of change. It helps engage employees, align different cultures and smoothen integration, making it a valuable tool for successful M&A transitions.

M&A Change Management ADKAR

The ADKAR Model explained 

The Prosci ADKAR Model , a cornerstone of effective change management, structures the transition process into five essential stages:

• Awareness of the need for change
• Desire to participate and support the change
• Knowledge on how to change
• Ability to implement required skills and behaviors
• Reinforcement to sustain the change

By covering these critical aspects, the Prosci ADKAR Model offers a comprehensive guide for managing change, from inception to full integration, ensuring each step is thoughtfully addressed and executed.

Applying ADKAR in M&A scenarios

In the context of mergers and acquisitions (M&A), the Prosci ADKAR Model proves particularly effective in managing the complex dynamics of aligning different organizational cultures and streamlining processes.

• Awareness in M&A is about creating a shared vision for the future, emphasizing the strategic reasons behind the merger and its benefits, such as access to new markets or innovation opportunities, and laying the groundwork for understanding and openness.
• Desire transforms this foundation into active support by directly linking the awareness stage to individual and organizational benefits, fostering a positive attitude toward the change.
• Knowledge moves the focus to ensure employees are well-informed about their new roles and the operational dynamics of the merged entities, leveraging examples from targeted training and communications strategies.
• Ability provides practical training and resources, focusing on adopting new systems, processes or technologies, demonstrating how theoretical knowledge is applied practically.
• Reinforcement celebrates achievements and integrates new practices into the organizational culture, illustrating the importance of continuous evaluation and adaptation to ensure the merger's success.

By applying the Prosci ADKAR Model to M&A scenarios, organizations can navigate integration challenges more smoothly, ensuring a successful merger and laying the groundwork for a flexible, resilient corporate culture.

Building Skills With Change Management Certification  

The Prosci Change Management Certification Program is designed to equip professionals with the essential skills to manage change effectively in mergers and acquisitions (M&A) scenarios.

This program offers:

• Understanding of the Prosci ADKAR Model – Participants gain insights into applying this model for successful change management.
• Effective communication strategies – The course teaches how to craft messages that resonate and ensure network alignment.
• Resistance management techniques – Learn how to identify and mitigate resistance to change, a critical aspect of any M&A project.

Through interactive sessions, real-world examples, and practical exercises, participants are equipped with the tools to:

• Adopt successful change management practices – Encouraging adoption and implementation of effective change management approaches.
• Develop leadership skills – Enhancing the ability to guide networks through the complexities of M&A, focusing on maintaining morale and productivity.
• Align cultures and integrate processes – A key focus is on merging different organizational cultures and processes smoothly and efficiently.
• Maintain employee engagement – Ensuring employees remain engaged and motivated during transitions.

The certification is not just for immediate benefits in M&A scenarios but also for building long-term internal capabilities. It emphasizes the importance of developing in-house expertise in change management, reducing reliance on external consultants.

It is crucial as organizations often engage in multiple acquisitions over time. Skills and knowledge acquired through this program enhance organizational readiness for future changes, highlighting the Prosci Change Management Certification Program as a tool for equipping staff with the necessary skills.

Methodology for Success in M&A

The structured Prosci Methodology is a proven approach for managing changes in M&A. It combines practical tools and strategies with real-world applications, demonstrating its effectiveness in guiding successful M&A integrations.

Overview of Prosci Methodology

The Prosci Methodology is a comprehensive framework that comprises the Prosci ADKAR Model, PCT Model, and Prosci 3-Phase Process.

The Prosci Methodology includes:

• Assessing change readiness
• Stakeholder engagement
• Communication planning
• Resistance management and more

The methodology also emphasizes the importance of leadership involvement and the need for a structured approach to change.

This systematic approach helps organizations manage the complexities of M&A by providing a clear roadmap for change. It ensures that all aspects of the transition are considered, from the initial planning stages to post-merger integration. The Prosci Methodology also facilitates the alignment of different corporate cultures, which is crucial in M&A scenarios.

By adopting the Prosci Methodology, organizations can navigate the challenges of M&A more effectively, leading to successful integrations and sustained organizational performance.

Methodology in action: Case studies

The Prosci Methodology has been successfully applied in various contexts, as evidenced by numerous case studies .

For example, in 2015, we helped an academic health system in Chicago merge with two other companies, using Prosci change management strategies to help everyone adapt to a new computer system and work together smoothly. Prosci training helped the team manage the merger and adoption process effectively. As a result, more than 90% of employees were actively involved and supportive, making this the smoothest system update and integration they've ever had. This success story shows how Prosci methods make merging companies and updating systems easier and more efficient.

Another notable example is Prospera Credit Union , a merger of regionally based Canadian credit unions, which adopted the Prosci Methodology to equip individuals across the organization to build a culture of change among influential leaders. Eight employees attended the Prosci Change Management Certification Program, and a Prosci Senior Change Advisor helps to apply the knowledge, skills and tools acquired from the program to their organization. These case studies illustrate the real-world effectiveness of Prosci methods, showcasing their capacity to enable successful transitions and foster significant change capabilities within your organization.

A Structured Approach to Post-Merger Reorganization  

Post-merger reorganization is a critical phase in M&A, requiring a structured approach to ensure successful integration. The Prosci Methodology provides a framework for this, emphasizing the need for effective communication, alignment of cultures, and employee engagement.

Set clear goals

The journey starts by clearly outlining what we want to achieve. It means:

• Sketching out the new company structure
• Detailing everyone's roles and what's expected of them

Communicating these goals is vital. It helps everyone understand their place in the new organization and reduces worries about what's to come.

Blend cultures

Merging companies isn't just about structures; it's about people. We need to:

• Respect and learn from each company's culture
• Find shared values to create a united culture

This step is about celebrating differences and building on commonalities, strengthening the combined company.

Engage employees

For a smooth transition, keeping everyone involved and heard is key. It involves:

• Including employees in planning and decision-making
• Listening to and addressing their concerns

This approach minimizes pushback and builds a supportive atmosphere for the changes.

Track and adjust

Keeping an eye on how things are going lets us fine-tune our approach. It means:

• Monitoring performance against our goals
• Seeking out feedback and acting on it
• Fixing any issues that pop up

Regular check-ins ensure we're on the right path and make necessary real-time adjustments.    

By breaking down the process into these digestible steps and leaning on the Prosci ADKAR Model, we navigate the change management during mergers and acquisitions with clarity and purpose, aiming for a seamless post-merger reorganization and successful integration.    

M&A Change Management Strategies for Long-Term Success

Discover how Prosci's enterprise solutions can strategically guide your M&A integration, elevating your organization's change capability.

Change in the Context of Mergers & Acquisitions

Case Studies of Business Mergers and What They Teach Us!

• First Online: 09 February 2023

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The following chapter presents a series of current case studies on change management in the context of mergers and acquisitions (M&A), which were researched on the basis of guided interviews. The aim of the case studies is to make the challenges of change transparent by means of practical examples and to show practical solutions for these challenges in accordance with the success factors of change management.

In the context of mergers and acquisitions (M&A), this primarily concerns the following challenges:

Overcoming different corporate cultures

Power imbalances due to enormous size differences

Cultural differences in international M&A

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Lauer, T. (2023). Change in the Context of Mergers & Acquisitions. In: Quick Guide Change Management for all Cases . Springer Gabler, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-66625-8_3

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M&A Change Management Strategy: High-Growth Approach (2024)

Kison Patel is the Founder and CEO of DealRoom, a Chicago-based diligence management software that uses Agile principles to innovate and modernize the finance industry. As a former M&A advisor with over a decade of experience, Kison developed DealRoom after seeing first hand a number of deep-seated, industry-wide structural issues and inefficiencies.

Transformation. Evolution. Revolution.

Whatever world you choose, there is no denying that M&A at its core is about change - for the acquirer and the target.

Even growth, the most commonly cited motive for undertaking M&A given by managers is just a different word for change.

It’s a mystery, then, why the M&A community has largely overlooked the value of change management. This is a potentially costly oversight.

Where a business stands at the other side of change is ultimately a measure of how well it was managed.

The Change Manager Role

The easiest way to think of the change manager role is as a project manager, where the project is fundamental change for your organization.

The bigger the acquisition, the more processes, technology, job roles, structures and culture can (and indeed, should) change.

Traditional manager have neither the time nor the experience to oversee this transition, which is where change managers come in.

What is Change Management?

Change management is the process through which a company creates value from change. It takes an analytical approach and considers all of the areas which traditional M&A overlooks in the M&A process from people and values to processes and technologies.

Underestimating the Power of Change

A well-trodden maxim goes that the biggest investment anybody will make over the course of their lifetimes is their house.

And for a company?

If we’re talking about one-time investments, invariably the biggest investment that a company will ever make involves some element of M&A. That is as true for tech firms as it is for the thousands of medium-sized firms whose deals fill Capital IQ every year.

And yet, despite the transformative impact that M&A has on businesses of all sizes, change management is almost never mentioned. Perhaps managers equate the acquisition of companies with that of capital expenditure - a balance sheet addition.

Whatever the reason, it’s a potentially disastrous mistake to make. Having had privileged access to the inner workings of thousands of deals, we believe that change management deserves a role all on its own in the M&A process.

As competent as you believe your office manager or HR director to be, you can’t put them in charge of change management. Nor is it good enough to say that it’s a ‘collective responsibility.’ Being serious about M&A involves creating a dedicated change management role.

This could be a hired hand brought on board for an extended period, or someone who will fulfill the role over a series of acquisitions that your company is planning. Bringing someone of this nature onto your M&A team has several benefits:

Within your business, having a dedicated role for change creates a culture prepared for M&A. It moves from being a process based on ad hoc procedures to one where the goal is to maximize value at every stage of the process (particularly after the deal has closed).

Outside the business, the presence of a change management officer creates a smoother relationship between the buyer and its targets, before, during and after any transaction has taken place.

Perhaps this is best captured by renowned change management expert Dawn White, who says that when it comes to change management: “Methodology is the driver.”

Methodology is the driver

Putting Dawn White’s advice into practice, we recommend that companies implement some variant of the methodology that DealRoom has constructed (see below), which is based on findings from thousands of deals.

This constitutes change management best practice and should include:

Change Management Best Practices

• Set up one-to-one interviews and focus group sessions
• Use surveys to find the big picture
• Produce a comprehensive report of your findings and present it to stakeholders
• Be sure the comprehensive report includes personalized calls to action
• Consider conducting a potential resistance analysis

Let’s now take a detailed look at these points in order.

1. One-to-one interviews and focus group sessions with the target company

Nothing sends shockwaves through a group of employees like telling them that their company is being acquired.  

The mere mention of another firm on the horizon can create a siege mentality among target company employees, who all start to look around wondering whose job is first to go.

Facetime between these employees and the change manager serves to reduce this anxiety, bringing a more human aspect to the process. Employees who may have become hostile, or even left the target company, can be won over to the new vision being proposed.

Furthermore, by interviewing a broad swathe of employees within the firm - from top to bottom - the change manager can learn about the company’s internal workings, its culture and possibly even some problems that wouldn’t have been encountered without the face-to-face interaction.

2. Use surveys to flesh out the big picture

What people may be reluctant to put across in a face-to-face meeting, they should be more willing to express in a confidential survey that allows them to vent their emotions. A well-designed survey should draw out insightful answers.

For example, suppose one of the employee concerns that came up again and again during your interviews was the lack of opportunities for promotion within the firm. Fantastic - it could be that you’re going to inherit an ambitious workload. Structure the survey around this. Ask questions like “how can you contribute more to the company?” and “How could we value your contribution more than it is being valued now?”

Thus, well thought-through surveys will build on the findings from the interviews to paint a clearer picture of what’s going on.

3. Produce a comprehensive report of your findings and present it to stakeholders

By now, you should have some insightful findings which can be presented to stakeholders within the acquiring firm.

There could be a number of issues which the findings show up. For example - a lack of knowledge in a certain area, cultural problems that exist within the workforce or any number of so-called ‘soft’ (human) issues which, left unchecked, have the potential to bring down deals.

The positives and negatives drawn from the findings should be laid out in the clearest terms possible: “The positives we see in acquiring this firm are _____________ while we are somewhat concerned about _________________.”

4. Be sure the above report includes personalized calls to action

This is possibly the area in which the change management expert adds most value to the acquisition process.

By adding personalized calls to action, they assign responsibility (and by extension, accountability) to important tasks which could become sidelined otherwise. If drawn up - and of course, implemented - well, this report should be the basis for the company to drive value generating changes from this point on.

5. Consider conducting a potential resistance analysis

Similar to the face-to-face sessions with employees, a potential resistance analysis allows both sides of the acquisition to see what potential resistance (i.e. value destroyers) are within the organizations.

At this step, don’t fall into the same trap that employees may have fallen into at an earlier stage - i.e. a ‘them and us’ mentality. The idea here is to drive this forward, not to drive people out. Uncover what employees on each side are anxious about, what they see as being the negative points about the deal for them and for others, and - where they see their roles in the company’s future.

Create a mood of transparency and this will almost certainly yield some valuable insights.

Six months after the transaction, conduct a climate survey and present findings to executives

This is a repeat of the previous steps with a change in perspective: You’re now asking the questions after the fact. Some of the initial concerns expressed by employees six to nine months before could now be shown to have had real foresight. Other concerns - hopefully - will have been unfounded.

The purpose of the climate survey is to work out one from the other, how everyone is adapting to the new changes and what concerns still remain (or, more worryingly, have arisen) since the companies merged. This should all be presented to management, as before, to be dealt with as soon as possible.

Why change management is often forgotten in M&A

Because it is not tangible .

We cannot always see what is being done like we can with traditional project management - change management is often overlooked or inadvertently forgotten. Unfortunately, it is when you start seeing what is not happening (people are not embracing new culture, work is not getting done properly, and synergies are not being met) that you realize change management is not being implemented.

‍ To combat this, M&A change management needs to be brought to the forefront and differentiated from project management .

Specifically, change management cannot be thought of in terms of tasks and checkmarks, rather it needs to be seen as an approach to make sure the people on both the acquiring side and target side are being “taken care” of across all functions.

Using change management to identify and prioritize roadblocks

One of the areas in which change management can garner the largest impact is identifying deal and synergy killers.

Using an impact analysis, change management team members can look at areas such as foreseen debt, differences in operational styles, and benefits and bring them to the forefront early on. Once these issues are identified, mitigation can begin, which ultimately gives these roadblocks less destructive power.

When early identification of issues  is not wielded as a weapon against roadblocks, small issues can wreak havoc on a deal later on. We have witnessed something as seemingly simple as payroll moving from weekly to biweekly lead to problems and lack of employee retention.

Here are some strategies for prioritizing and addressing issues related to culture and change management

• Look at what is high priority to employees and ensure they are dealt with quickly - again, people are key.
• Examine and gravitate towards roadblocks that line up with the key objectives of your integration.
• Another approach is to identify low hanging fruit - simple issues that can be quickly and easily rectified - this will allow you to gain some momentum.

Overall, consider  impact and effort when deciding where to start. Once you believe you have fixed an issue, change management teams should check in with both sides to see if employees truly feel/see a difference.

Where and Why You Might Face Resistance?

It is essential to remember employees from the target company might be resistant.

Remember, they did not ask to come to the purchasing company.

Some common feelings and signs of resistance are members of the target company may feel as though the purchasing company is of less value than them, or they are not interested in being a part of a new organization.

Finally, resistance may come about because the purchasing company has not put in the extra effort to truly teach the acquired company about its organization's structure and core practices or how to be successful in the new work environment.

These feelings often result in acquired employees not bringing all their energy and talent to the table.

Conclusions

Just reading through this article, you can probably get a feel for just some of the issues that tend to arise during the integration phase.

But imagine trying to conduct a deal without going through the steps we’ve just outlined.

Change management is an ongoing process.

Coming to terms with this and taking the necessary steps within your organization to accommodate for change is the first step to ensuring a successful M&A process.

Get your M&A process in order. Use DealRoom as a single source of truth and align your team.

Publications Effective Management Of Change During Merger And Acquisition

• Publications

Effective Management Of Change During Merger And Acquisition

• July 14, 2014
• Christopher Kummer

• Tags: Change Management , HR , Human Capital , M&A , Mergers and Acquisitions

Symbiosis Institute of Management Studies Annual Research Conference (SIMSARC13)

The on-going dance of merger and acquisition happening every week is hard to miss. But it has been found that most mergers and acquisition fail because of poor handling of change management. Change is the only thing that will never change so let’s learn to adopt by change management. This paper will analyse all the factors that lead to change. The major reasons that lead to change are system dynamics, structure-focused changed, person-focused change, and profitability issues. The resistance to change can be attributed to the lack of communication, no clear vision, no proper reward system, confusion and frustration, force of habit, fear of unknown, fear of insecurity, loss of competency and lack of support.

It presents different model that can be used for change management and different theories that can be used to handle change during M&A. It also highlights the strategies this can be followed by the leaders of the organization: Integration plan, Employee Involvement, Clear Vision, Customer Focus, HR structuring and Downsizing. The factors discussed are based on the empirical findings, case study and earlier papers. To, support that the change can be managed effectively and efficiently, the paper shows as to how change was managed in the merger of ICICI bank and Bank of Madura.

1. Introduction

In mergers, two or more companies engage in some negotiation which ultimately leads to transaction. Acquisition also involves two or more companies but in acquisition the bigger company swallows the smaller company. So merger and acquisition is the process of integrating two or more companies with different values, cultures and forces into one cohesive unit. From an economic point of view, there are 2 types of mergers: Horizontal mergers and Vertical mergers. Horizontal mergers involve companies with similar area of work e.g., Chevron and Texaco. Vertical mergers involve companies with diverse area of work e.g. AOL and Time Warner.

The merger is not only seen from the financial perspectives but it is the union of two different companies and two different cultures which is bound to bring some anomalies. It is very important that the concern departments should be actively involved in the process so that they under these difference and plan in an orderly manner for the smooth transition During M&A, the leaders of both the companies face many challenges: cultural management, stress management, redundancies, HR restructuring, resistance to change, job insecurity, talent drainage, low motivation etc. All the aforementioned factors are responsible for change. KPMG has found that 80% of the mergers and acquisitions fail because of improper handling of change management. Below is the list of few companies which failed miserably because of poor handling of the aforementioned reasons.

Asia Pacific

Indian respondents (59% increases) are mainly focussing on overseas opportunities for acquisition. While Japanese (91% increase) are more interested in growing through domestic acquisition. At the same time Singapore and UAE are two of the countries which believe in growing through cross border acquisitions. Australian is focussing on domestic market only as part of their acquisition strategy.

So the role of managers plays a significant role in this era of globalization. In order to handle the paradigm shift, managers’ are required to understand the nuances of change in an organization as a whole.

2. Objective

• To study the factors which lead to resistance to change
• To suggest ways in to overcome their resistance during merger and acquisition.

3. Factors affecting the equilibrium of merged unit

Each organisation which is merging brings a culture with itself, when merged with another, is bound to affect each other. There is a plethora of factors that can disturb the equilibrium of the organisation in a major way during M&A.

• System Dynamics:  Each organization consists of systems which constantly exchange ideas with each other. Factors such as internal politics, technology, legal system, IT system and accounting system often affect the alignment and relationships thereby demanding change in related business units and employees of that unit.
• Structure-focused change:  When two organizations decide to marry each other, changes like downsizing and decentralizing are bound to happen to reduce costs and increase the productivity and efficiency. Companies involved needs to be sensitive to the laws/policies of the acquired company and be proactive rather than reactive.
• Person-focused change:  This change is concerned with the human resource planning and enhancing employee competence and performance. In order to induce such change human resource management needs to tackle issues of redefining organization goals and strategy, recruitment and selection policies, stress management, employee training and development, benefits etc.
• Profitability issues:  It includes issues such as loss of revenue, market share, low productivity, engagement with processes of restructuring and reengineering lead to major changes in the organizational setup.
• Government Policies:  This factor is very crucial when the M&A takes place between two cross border acquisition. The companies involved needs to be sensitive to the laws/policies of the acquired company and be proactive rather than reactive.

So change is inevitable. So as a manager how you interact with the employees and how you handle the aforementioned issues mean a lot for the success and failure of M&A.

3.1. Resistance to Change

During merger and acquisition, organisation faces the most abstruse and recalcitrant problem: resistance to change.

3.2. Lack of Communication

The manager has not communicated well the detailed aspects of the change. People may only understand the change in broad terms and not in practical terms. Employee does not know how they should go about for change and are not convinced about the purpose of change.

3.3. Confusion and Frustration

Too many parties involved in the change without a clear definition of their roles will bring confusion and frustration.

3.4. Force of habit

Feeling of comfort in the existing routines and not interested in changing the existing ways of doing things

3.5. Lack of confident in the management

It is also a predominant reason for the people to accept change. They are not sure that once change has taken place, things will become better for them.

3.6. Fear of insecurity

People are worried about the potential role he/she will be offered.

3.7. Fear of unknown

It is because of uncertainty about the nature of change. They are not sure what is happening and what future holds for them.

3.8. Loss of Competency

Existing skills and the competencies the person possess will no longer be of any use after the M&A has taken place.

3.9. Lack of support

Direct supervisors not implementing the change in a proper channelized way. Change programs fail not because of lack of skills but because of courage to implement them. If change is effectively managed

• Employees will know why change is happening.
• Employees will feel part of solution and change.
• Motivation will remain same as people become more consumed with the change being introduced and thus productivity.
• Early detection of resistance and dealt early.
• Leaders will be able to channelize all the resources in a proper way.
• There will not be unrest between the employees and senior leaders.
• Training can be used to build skills and knowledge of employees

A clear and outright declaration on how people are going to be rewarded if they achieve successful results from change would go a long way.

4. Overcoming resistance to change

Kurt Lewin has suggested model which encompasses 3 stages: The first stage is unfreezing the organization’s existing culture by discontinuing current practises, attitudes and behaviours. The second stage is transition which basically involves teaching the work force new concept. And the final stage is refreezing the culture by reinforcing new practises, attitudes and behaviours once the change was implemented. Similarly there are different approaches to change. Theory E main goal is to maximize shareholder value. It manages change from the top down. Its main focus is to build structure and systems. It first plan and then establish program. It motivates employee through financial incentives. Consultants analyze and shape problem. GE under J. Welsh; IBM under L. Gerstner has adopted this theory during merger and acquisition. Theory O on the other hand develop organizational capabilities, encourages participation from the bottom up, build up corporate culture employees’ behaviour and attitudes. It motivates employee through commitment. In this theory, consultant support management in shaping their own solutions. Microsoft, Intel, 3 M, Merck, Schwab has adopted this theory in many of the acquisitions.

5. Strategies to manage change during M & A

Companies should follow the below mentioned strategies during merger and acquisition:-

5.1. Integration Plan

First step should be setting up of project team comprising of senior executives from both the organization. Instead of focussing on daily routine activities, they should be responsible for carrying post M&A activities smoothly. It is advisable they communicate employees early, immediately. They can do it using webcast, intranet or group meetings. Informing all the employees at the same time will minimize the potential for gossip and spread of misinformation. They should make employees realize the benefits of this marriage. After the announcement of merger, Cisco always has its executive owner present and involved.

5.2. Clear Vision

Senior executive in both the organization should create goals, values, vision and policies of the new company. It should be clearly communicated to the organization. Mary Hiland, CEO of Alliance for Community Care was responsible for carrying out the merger of three agencies in 1997. She received the award of excellence in Non profit Leadership Award on 10 th  May, 2001 and in the interview she said that her mantra of success was clear vision and the communication of this vision to the employees.

5.3. Understanding Cultural differences

Culture plays an important part on the success and failure of new structure especially in the case of cross broader M&A. Culture difference was largely responsible for the downfall of merger between Chrysler and Daimler. Daimler and Chrysler employees have different views on important things like travel expenses and pay scale; even they have a different approach towards life; Daimler favoured a more formal and structured style while Chrysler favoured a more relaxed and freewheeling style. This cultural conflict played a big role in the failure of merger of Daimler and Chrysler. So Leaders should be able to inspire people to come out from their comfort zone and accustomed norms and accept the new ones. And to achieve this, leader must be in constant touch of the employees. Spending time with them, knowing more about them, what irritates them, what excites them will help leader in making people accept the new culture.

5.4. Employees Involvement

This gives an opportunity to both sides of employee to build their knowledge of other’s organization. When they interact, they share knowledge about their respective process, systems, budget, headcounts and operations. Building trust is integral to building knowledge. Until the two sides trust each other, they will not reveal details.

5.5. Customer Focus

In today’s competitive world, it is very important that company share future roadmap with the existing customer and promise to the customer they will continue providing service, personnel support and sales people will continue to serve as they were doing earlier. This will make customer safe about its purchase order. And if required, the merged unit can create helpdesk also. This will reduce the number of unsatisfied customers and thus increases customer base and profitability. Cisco does that. Whenever Cisco acquires company, it immediately shares the product roadmap which keeps the customer goal in align.

5.6. HR Restructuring

Again important part in M&A. M&A have the potential of changing the below things:

• Change of geographical location
• Change in perks
• Change in salaries and compensation packages
• Change in Career paths
• Changes in job – new roles and assignment

Employees are always concerned about the carrier opportunities, new roles they will be assigned or will they be transferred to new location post merger. It is very important that HR discuss the aforementioned issues with the employees properly. This might involve HR conducting management training, individual counselling, and providing other professional help to employees. They need to clearly communicate for what reasons these changes are taking place and why these changes are vital. Retaining good employees from both the companies is always crucial. A team can be build with human resource representative from both the organizations, whose main task is to identify valuable resources only. This will create loyalty and commitment to the new company and it will also give employees of the acquired company a feeling of equality.

5.7. Downsizing

It should be considered the last option. In downsizing, severe stress can be prevented by developing the proper plan. We can use any of the below mentioned technique depending on case:

• Severance package  will motivate low commitment employees to leave.

• Outplacement:  Helping employees to get job in some other company through the help of consultancy or personal contacts.

• Redeployment:  Transfer employees to sister company or other business unit.

6. Case Study: ICICI Bank merger with Bank of Madura (January 2001)

In January 2001, ICICI decided to expand their business by acquiring Bank of Madura. Even BoM was also looking for private bank which can increase shareholder value, growth opportunities for its employees, and provide latest technology based services to its customers. Let us see how the leaders of the organization manage change during this merger.

ICICI was established by the government of India in 1955. ICICI’s size was three times to that of BOM. It has a staff strength of 14, 00 employees whereas BoM had a staff strength of 2500 employees. ICIC concentrated on individual unit as profit centres. While BoM concentrated on the profitability of the overall bank as a whole. There were large differences in profiles, grades, designations and salaries of personnel. Because of these differences, BoM employees feared that their positions would come in for a closer scrutiny. They were sceptical about the rural branches as ICICI business was urban based.

As mentioned earlier, ICICI took the same steps:

• Establishing clear communication channels throughout.
• Training programs were conducted which emphasized on knowledge skills, attitude and technology to upgrade the skills of the employees.
• Direct dialogue with the employee unions of the BoM to maintain good employee relations.
• ICICI transferred 450 BoM employees to ICICI Bank, while 300 ICICI employees were shifted to BoM branches.

And by the end of the year, ICICI seemed to have successfully handled the HR aspects of the merger.

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Case Study: Merger & Acquisitions

The increased trend of more frequent merger & acquisitions has pushed companies to develop repeatable models for successful integration and to ensure the primary value of the transaction is not missed. Well-conceived and properly executed integration models can deliver greater value and reduce the common pitfalls of post-merger integration such as missed targets, loss of key people and poor performance of the base business. Often the “soft” issues such as culture integration are forgotten, with focus being more on the financial aspects of the acquisition itself rather than the successful integration of the two companies. This can lead to loss of key people, conflict and ineffective integration. Change management can assist organisations in improving the transition process, post-merger integration and culture alignment during merger & acquisitions.

• Target Company: 3,200 employees
• Acquiring Company: 40,000 employees
• Roll-out Duration: 1 year
• Change Management Duration: 4 months
• Size of Change: Medium scale
• Change Management Resourcing: Executive Change Consultant, Change Consultant., Graphic Designer

The Results

• Information sharing: 100%
• Satisfaction with information provided: 85%
• Satisfaction with issues addressed: 92%
• Alignment to the vision
• New structure & roles filled
• Integrated decision framework & internal employee brand established
• Structure & systems stabilised
• Management reporting integrated
• Accounting standards aligned & training completed
• Processes streamlined
• Training need analysis done
• IT infrastructure & policies Processes standardised &training completed
• Revenue protection plan defined & measurable tracking system implemented

The Approach

The Triple A model was used to create awareness, acceptance and adoption of the change. This was achieved through:

• Executive engagement
• Building awareness
• Equipping leaders as leaders of change
• Integrated structure and roles
• Finance system and processes
• Changes to the payroll system
• Changes to operational processes
• Change of the corporate brand
• Retention of key talent
• Customer and supplier satisfaction
• Revised performance contracts

Lessons from the Frontline

• Move to one brand early on
• Work closely with target co. Executives to ensure alignment
• Have a structured approach to creating awareness and getting buy-in from target co. clients
• Have a structured approach for monitoring and measuring targets to ensure the primary value of the acquisition is realised

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We employed CF to assist with the Change Management component of the integration of a business acquired by ourselves. It was particularly challenging because it involved integrating a Family business with a Corporate business. ChangeFolio is very competent in: Understanding our needs and defining the required scope of their involvement; Executing their role in the project according to a well-structured methodology which made use of appropriate tools and techniques; Highlighting risk areas and recommending and implementing the associated mitigation actions; Providing regular feedback on progress & issues; Managing project costs within the agreed values ChangeFolio is a very professionally run and capable consulting firm.

– CEO

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IBM Change Management Case Study

Change is a constant in the business world, and organizations that can effectively manage change are more likely to succeed. 

Change management is the process of planning, implementing, and controlling change within an organization to minimize negative impacts and maximize benefits. 

One company that has successfully implemented change management is IBM.

With a history spanning over a century, IBM has undergone significant changes over the years, including the implementation of change management to ensure a smooth transition. 

In this blog post, we will take a closer look at IBM’s change management case study, examining its background, change management strategy, and results. 

Brief History and Growth of IBM 

IBM, also known as International Business Machines Corporation, is an American multinational technology company that was founded in 1911. 

The company was initially formed as the Computing-Tabulating-Recording Company (CTR) through the merger of four separate companies: the Tabulating Machine Company, the Computing Scale Company, the International Time Recording Company, and the Bundy Manufacturing Company. 

In 1924, the company was renamed International Business Machines Corporation (IBM). IBM’s early products included tabulating machines, time clocks, and punched card equipment, which were used for data processing and information management. 

Over the years, IBM has evolved into a leading provider of enterprise technology solutions, including hardware, software, and services, serving clients in over 170 countries around the world.

IBM experienced significant growth in the mid-20th century, as it became a leading provider of computers and data processing equipment. 

In the 1950s, IBM introduced its first electronic computer, the IBM 701, which was followed by a series of other computer models that became increasingly advanced and sophisticated. 

IBM also played a key role in the development of the personal computer, releasing its first PC in 1981, which quickly became a standard in the industry. 

In the 1990s and early 2000s, IBM shifted its focus to software and services, becoming a leader in areas such as cloud computing, artificial intelligence, and cybersecurity. 

Today, IBM is a major player in the technology industry, with a global workforce of over 350,000 employees and revenue exceeding $70 billion in 2020.

Key drivers of change for IBM  

There were three dominant factors that created a need for IBM to implement effective change management processes to successfully navigate the challenges and opportunities it faced.

1. Technological advancement 

Technological advancements have been a key driver of change in the technology industry, and IBM was no exception. In the 1980s and 1990s, IBM faced significant disruption as the market shifted from mainframe computers to personal computers, which were smaller, cheaper, and more accessible to individuals and small businesses. 

This shift threatened IBM’s dominance in the computer industry, as it had built its reputation on large-scale mainframe computers. To adapt to this changing market, IBM had to shift its focus to services and software, invest in research and development to create new technologies and innovations, and develop new partnerships and alliances to expand its offerings. 

Additionally, the emergence of cloud computing and artificial intelligence in the 2000s and 2010s further pushed IBM to adapt and innovate to stay ahead of the competition. These technological advancements required IBM to adopt a more agile and flexible approach to business, with a greater focus on innovation, speed, and collaboration.

2. Globalization 

As IBM expanded its operations globally, it faced a range of challenges related to cultural and regulatory differences across different countries and regions. In order to effectively navigate these differences, IBM had to develop a more flexible and adaptable approach to business, one that was able to respond to local market conditions and customer needs while also maintaining a consistent global brand and corporate identity. 

This required IBM to invest in building a diverse and multicultural workforce, to establish strong local partnerships and alliances, and to develop a deep understanding of local cultures, languages, and customs. 

Additionally, IBM had to comply with local regulations and laws in each country it operated in, which often required significant resources and expertise to navigate. By embracing globalization and developing a more flexible and adaptable approach to business, IBM was able to successfully expand its operations globally and establish a strong global presence.

3. Market competition 

IBM faced intense competition from emerging tech companies in the 1990s, particularly in the areas of personal computing and software development. 

Companies like Microsoft and Intel were challenging IBM’s dominance in the industry, and IBM had to adapt quickly to remain competitive. 

To address this challenge, IBM shifted its focus to services and software, investing heavily in research and development to create new products and innovations that could compete with emerging technologies. 

IBM also streamlined its operations to improve efficiency and reduce costs, while exploring new markets and opportunities for growth. 

This required IBM to be more agile and responsive to market conditions, and to take calculated risks in pursuing new ventures and partnerships. Ultimately, these efforts enabled IBM to remain a major player in the technology industry and to continue innovating and expanding its offerings.

Change management strategy of IBM 

IBM responded to these three drivers of change in several ways, as explained below:

1. Technological advancements

To adapt to rapid technological advancements, IBM invested heavily in research and development to create new products and innovations. It also embraced emerging technologies such as cloud computing and artificial intelligence and developed new partnerships and alliances to expand its offerings.

IBM also shifted its focus to services and software, which helped it to stay competitive as the market shifted away from mainframe computers. Additionally, IBM adopted a more agile and flexible approach to business to enable it to respond quickly to changing market conditions and customer needs.

2. Globalization

To effectively navigate different cultural and regulatory environments, IBM invested in building a diverse and multicultural workforce, established strong local partnerships and alliances, and developed a deep understanding of local cultures, languages, and customs.

IBM also complied with local regulations and laws in each country it operated in, which required significant resources and expertise to navigate. Additionally, IBM developed a consistent global brand and corporate identity while also maintaining the flexibility to respond to local market conditions and customer needs.

3. Market competition

To remain competitive in the face of intense market competition, IBM explored new markets and product offerings while streamlining its operations to improve efficiency and reduce costs. IBM also invested heavily in research and development to create new products and innovations that could compete with emerging technologies.

IBM adopted a more agile and responsive approach to business, which enabled it to take calculated risks in pursuing new ventures and partnerships. Additionally, IBM developed a culture of innovation and collaboration to foster creativity and agility, which helped it to stay ahead of the competition.

Positive outcomes and results of IBM successful change management implementation

IBM’s successful implementation of change management led to several positive outcomes and results, including:

Increased profitability: IBM’s shift to services and software helped to increase its profitability by creating new revenue streams and reducing costs. By focusing on high-margin businesses such as consulting and software development, IBM was able to improve its financial performance and profitability.

Improved competitiveness: IBM’s investments in research and development, partnerships, and new markets helped it to remain competitive in the face of rapid technological advancements and intense market competition. By adopting an agile and responsive approach to business, IBM was able to adapt quickly to changing market conditions and customer needs, which helped it to stay ahead of the competition.

Enhanced customer satisfaction: IBM’s focus on innovation, collaboration, and customer service helped to enhance customer satisfaction and loyalty. By developing new products and services that met customer needs and expectations, and by providing excellent customer service and support, IBM was able to build strong relationships with its customers and earn their trust and loyalty.

Increased employee engagement and retention: IBM’s culture of innovation, collaboration, and diversity helped to increase employee engagement and retention. By fostering a culture of creativity and agility, and by valuing and supporting its employees, IBM was able to attract and retain top talent, which helped it to drive innovation and growth.

Strong brand reputation: IBM’s successful implementation of change management helped to strengthen its brand reputation and identity. By maintaining a consistent global brand while also remaining flexible and responsive to local market conditions and customer needs, IBM was able to build a strong and respected brand reputation that is recognized around the world.

Final Words 

IBM’s successful implementation of change management serves as a powerful case study for businesses facing rapid technological advancements, intense market competition, and globalization. By adopting an agile and responsive approach to business, investing in research and development, exploring new markets and partnerships, and fostering a culture of innovation and collaboration, IBM was able to remain competitive and relevant in the technology industry. 

About The Author

Tahir Abbas

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• December 2014
• Procedia Economics and Finance 11:208–217
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