Company mergers and acquisitions are expected to increase as the economy improves in many regions and as organizations shift their focus from cost management to top-line revenue growth. Among the key success factors for a corporate transaction is the ability to facilitate the integration of the the merging entities into an organization that makes good on promises to shareholders when the deal was being considered. The willingness of employees to embrace strategies and goals that may be very different from those of their legacy organizations contributes to how difficult or smooth this integration will be.
Any major change in the workplace can lead to employee distraction, greater turnover and a decrease in productivity. In the course of corporate transactions, some employees, especially top talent, may leave before they understand the opportunities the new organization will offer. Corporate change generates as much worry and anxiety as it does enthusiasm and hope and, initially, the negative emotions almost always overwhelm the positive.
Yet one of the most potent influences in a successful change management process is often overlooked: the frontline manager. Towers Watson's 2010 Global Workforce Study confirms that effective leadership, and support and counsel from the immediate supervisor, are essential to employee engagement and high performance. Yet according to the findings of our recent M&A Manager Survey, with more than 700 respondents across a number of countries, managers' roles are not sufficiently well defined and focused to meet employees' needs.
The survey's key findings include:
• Successful change management demands increased differentiation in the roles of senior managers, middle managers and frontline supervisors, and the nature of their interaction with employees — i.e., determining what each management level needs to do, how to do it and at what point during the transition.
• Companies often overemphasize senior management's role, and therefore focus insufficient time and attention on equipping supervisors.
• A noticeable gap exists between the well-received range of tools provided to managers and the perceived effectiveness of these tools.
Change Management Tools: Mismatches in Timing and Effectiveness
Our survey shows that senior managers have the most direct and visible roles in a corporate transaction. Their prominence, especially in the early phases, is driven by strategic, confidentiality and regulatory considerations. However, these practical concerns do not fully explain why, for example, the only activity in which supervisors took the lead was informal employee coaching — and that was true for only 25% of respondents. In addition, fully 39% of supervisors reported having no involvement in any of the core areas we tested.
While, over time, both mid-level managers and supervisors increase their involvement in the process, sometimes it is too late to effectively influence negative attitudes:
• Nearly one-fifth (18%) of supervisors did not start formal dialogues with employees until three to six months into the change management process.
• 15% did not get involved for six to 12 months after the deal had closed.
Although managers at all levels agreed that the tools supplied by their company helped them deal with employee issues throughout integration, supervisors received the least access to these tools, and 18% had no access to tools. Notably, the top-rated tools all involved direct interaction between employees and managers. Websites, FAQs and surveys, although useful, were seen as less effective, perhaps because their greatest value comes when combined with high-touch activities.
About one-quarter of the respondents indicated their organization did nothing to address staff retention. For the majority that cited a focus on retention, the most common approaches featured job enrichment in the form of new roles, different work locations or involvement with an integration team or task.
Because Corporate Change Isn't Business as Usual
While companies recognize the importance of managerial involvement in the change process, the survey findings suggest they overestimate managers' skills and preparedness for the role, as well as the extent and effectiveness of their own efforts to give managers the help they need. Without adequate coaching, many managers focus on what they're best at — their technical abilities — and spend little time developing people management skills. In addition, the managerial role itself is changing in response to globalization, the virtual workplace, increased employee autonomy, greater focus on teams and shifting demographics. Being a manager has never been harder, and a major change event intensifies an already tough challenge.
A Change Management Mantra: Stabilize, Secure and Sustain
Three core goals define the role of managers during corporate change:
1. Stabilize the organization. During the early stages of a transaction, these actions lay the groundwork for a more steady state:
* Senior management paints a very clear picture of what the new organization will look like over the next few years.
* Middle management clarifies changes in the division's goals or roles.
* Supervisors help direct reports understand where to go for information or get information for them.
2. Secure people's engagement in the new culture. The process of helping employees feel confident and part of the new organization includes informing, communicating and paying attention to signs of problematic behavior. Tactics include:
* Offering change management workshops
* Identifying key managers and influencers to help maintain employee engagement and encourage retention
* Taking the pulse of the current organization with surveys, focus groups and one-on-one interviews
3. Sustain performance and energy over the long term. As the focus begins to shift to culture, communication and rewards, companies need to consider the types of communication most appropriate for each management level. The most important step is to determine the tasks (e.g., communication, reductions in the workforce and conversations with key talent at risk of leaving) and the management level best suited to handle them. Throughout at least the first year, employees will need frequent updates and assurances that the merger or acquisition is going well, and a place to get their questions answered.
Change Management Strategy: Partnership With HR
The most successful transitions are marked by an HR organization that plays a key role in program redesign, rollout and communication, and has early involvement at a strategic level. In ensuring that managers are equipped to provide necessary support, the HR team can be instrumental in a range of ways, including:
• Developing and conducting engagement surveys
• Defining criteria for identifying key managers and influencers
• Working with the business to define top talent and develop assessment criteria
• Working with leadership to develop and implement change management courses for managers
• Helping define the new role for managers in the merged organization
• Establishing appropriate retention tools, such as bonuses, and determining competitive bonus levels
• Acting as a catalyst for various management groups within the organization to facilitate communication, develop a decision matrix and troubleshoot integration problems
• Determining the future strategy for HR in the new organization
The Bottom Line for Corporate Transactions
Whether it's an acquisition, merger or other kind of deal, a corporate transaction weakens employee ties to the new organization. At the same time, the demands of the manager's job and the skills needed increase. Without a clear understanding of what people need from management during the change process, companies risk putting money, time and energy into activities with less than optimal results. For ultimate deal success, a tiered and targeted approach to managerial intervention is the right recipe to help stabilize, secure and sustain workforce performance and engagemen