Why is change management so important?
Change management is central to achieving operational effectiveness throughout the M&A process.
2015 is set to be the best year for mergers and acquisitions (M&A) since the financial crisis.
More than half (54 per cent) of CEOs in the US plan to complete an acquisition in 2015, according to PwC, while data from Thomson Reuters shows that $2.9 trillion (£1.86 trillion) worth of deals have been completed globally so far this year.
While this is a good sign, as it demonstrates the optimism returning to the global economy, all of the companies going through the M&A process are obviously keen to maintain organisational stability, and this is where change management comes in.
According to Prosci, change management is the "application of a structured process and set of tools for leading the people side of change to achieve a desired outcome". Research by the organisation has found that projects with excellent change management effectiveness are six times more likely to meet or exceed their objectives.
Moreover, people will feel more engaged in the whole process if change management is used, as it gets them to work collectively towards a common objective and deliver impressive results.
What are the benefits of change management?
The beauty of change management is that it provides instructional scaffolding for an organisation and its staff. This can help to promote a deeper level of understanding, as people are forced to carry out their functions within this framework.
Among the other benefits are:
- It lets organisations respond to customer demands much quicker, as businesses will have a proper system in place for doing so.
- Day-to-day business is not affected, as the change management process can run concurrently.
- The actual costs associated with carrying out changes can be much better controlled throughout this process.
- It creates the opportunity for best practices to be established for both workflow processes and leadership development.
- A well thought-out change management plan reduces stress and anxiety, while also bolstering loyalty in the organisation.
Implementing change management
Long-term structural transformation features four key components; scale, magnitude, duration and strategic importance. But if organisations want to be truly successful with their projects, they have to make sure that changes manifest at an individual employee level. If you fail to get buy-in from the workforce, the company's identity will be damaged.
So what are the guiding principles of change management? John Jones, DeAnne Aguirre and Matthew Calderone, writing in Strategy+Business magazine, have identified some of the most important aspects:
- Make sure the process is top down - The leadership team will be expected to provide direction, which means they have to actively show a willingness to embrace the new approaches first. "Executive teams that work well together are best positioned for success. They are aligned and committed to the direction of change, understand the culture and behaviours the changes intend to introduce, and can model those changes themselves," they stated.
- Deal with people issues - Don't lose sight of the fact new skills and responsibilities will be created as a result of the changes. Adopting a proactive, unilateral approach means that you can stay in control of the process and limit the chances for risks to develop.
- Create ownership - Staff need to be willing to accept responsibility for making change happen. By getting them involved in the process, they can also play a big role in creating solutions to any of the problems they encounter. Offering either tangible or psychological rewards also gets people to be active participants in change management.
- Communication - People need to understand the message if they are going to be able to accept and implement it. No one should assume the staff will recognise the reasons behind a decision. Rather, leadership teams need to actively engage with staff to answer any questions or concerns they may have.
Research by Prosci shows that the effective application of change management can raise the success rate of organisational changes to as high as 96 per cent. This underlines why is it so useful for companies going through an M&A or a major restructuring.
By using resources efficiently, and making sure there is an increased understanding of the impact of change, organisations can set themselves on the path to success. While changes will provide challenges, management of the whole process is key.