'Change' is at the heart of our work: organizations need to constantly adapt and transform so they can improve, compete, grow and often also survive. One of the specifically challenging areas of transition is that of Merger & Acquisitions. In this article, we share some guidelines of our Post-Merger-Integration (PMI) approach as well as some principles of systems thinking. In part 2, we will show you how exactly we use systems thinking in the PMI process.
Merger & Acquisitions (M&A) in practice
Typically, a small group of people from two organizations is concerned with the early explorations, the intense negotiations, the detailed financial analysis, highly confidential strategic conversations and often complex decision-making processes.
All these 'behind the scenes' activities lead up to the final moment of signing the official agreement often followed by a festive, big exposure announcement during which the top management shares its excitement and positive future views. The road to great adventures and immense opportunities has opened and they invite all on board the train that will navigate towards a great future. Top management so far has had a seat at the front of the train and obviously expects the compartments attached to be filled with mutually excited employees.
However, in most of the M&A processes the reality is they find only a handful of people on the train and most of their people still standing on the platform.
Above and below surface
The biggest risk in a M&A process is to end up with a large pool of demotivated, unproductive employees, unsatisfied complaining customers, confused suppliers, inefficient processes and declining results. A well-thought-transition process or Post Merger Integration (PMI) process deserves a chair at the pre-merger table to minimize these unwanted effects.
Most of the time and energy goes into preparing new structures, processes alignments, product reviews and system decisions – elements above the surface. Not arguing with the importance of these visible change-elements, we believe an equally critical area is often overlooked as it is less visible and less tangible: We are talking about below the surface dynamics that hold emotions, change-readiness, organizations dynamics, culture, and habitual patterns ('the way we do things around here').
HBR reports that 70% of all the change projects in organizations fail because below the surface is not managed. Single focus on above the surface areas for change will not impact the sought-after change in how people work, collaborate, innovate or perform. Without the psychological below the surface transition, integration will never more than the ‘rearrangements of chairs’.
fgi has designed a PMI process for below the surface transitions so people can maximize their contribution to the new (integrated) company or department. This PMI process consists of workshops, team coaching (optional) and leadership support and it is based on the principles of systems thinking. We will further elaborate on the specifics of the fgi PMI process in part 2, but first we will make a brief digression into the approach of systems thinking.
Systems thinking: a new way of looking at organizations
Instead of the more commonly known and accepted analytical way of looking at organizations, systems thinking views the organization as a living organism that operates according to certain principles. Understanding the systems principles as well as having knowledge of certain behavior gives us a tremendous advantage as we can predict responses – and thus manage them. We can manage the invisible.
One of the principles of systems is that they have a natural drive for keeping the status quo. In other words: Systems don’t like change. Symptoms of a resisting system are e.g.: people complaining or gossiping, high absent rate, customer loss, declining results, unsuccessful introduction of new products, failing managers and people leaving. This doesn’t sound good, does it – especially when you need to change your organization after the M&A. The good news is that with the right interventions and leadership practices systems can be changed in a way that the whole of the system becomes stronger and it parts can thrive.
Another systems thinking principle is that each system consists of interdependent parts and each part contributes to the whole. Organizational results as well as problems stem from interaction between the parts and not so much from competent individuals operating within the system.
In part 2 we will take you along in one of the PMI projects to get a sense of how we applied systems thinking to the successful integration of two organizations.
More details can be found on the following two pages:
POST-MERGER-INTEGRATION
HBR
