Integration strategy vs Change Management
Chris Evans: Change management is vital with an acquisition since an acquisition is essentially the most significant change a company will experience. It unfolds quickly, so active change management is crucial to assist people during this phase.
While deals might encompass various aspects, whether supply chains or customers, they all boil down to the people and employees. Thus, ensuring they have the best experience is crucial for every transaction.
Even simpler deals involve many individuals navigating significant change, which can be challenging and distracting. Proactive change management is essential to support employees and other stakeholders through this transition.
Scott Boyd: Yes, I agree. They're linked throughout the M&A lifecycle, especially during integration. It's widely understood how communication plays a role in change management, emphasizing transparency and proactivity to employees.
However, what's often underappreciated is the intentionality that change management demands in your integration plan. Given the sometimes fragmented nature of cross-functional integration efforts, change management necessitates a comprehensive approach across various work streams and functions.
This ensures that employees and customers experience the change in a well-considered manner, rather than being overwhelmed by what we referred to at Amazon as the 'Amazon bear hug'. This feeling can particularly impact back office functions and the executive C-suite without the necessary forethought and sequencing that change management provides.
Chris Evans: If you don't have a proper system in place, an integration team typically starts by working with the company's leaders, hoping those leaders will relay information to their teams. However, sometimes this information isn't passed down effectively.
As a result, employees might hear about changes informally, leading to distractions and misconceptions. Employees can feel left in the dark, which fosters uncertainty and concern. It's crucial to have proactive change management that clearly communicates what will change and what will remain the same.
An acquisition can challenge every aspect of a company. Clearly stating what won't change can be reassuring. Without this clarity, there's often just a top-down approach with the hope that information filters down.
Scott Boyd: Absolutely agree. One lesson I learned during my time at Amazon is the importance of supporting not only the newly acquired teams but also managing change within the parent organization. This often relates to the acquisition rationale.
If you've made several attempts at a market segment or developing a product internally without success, M&A becomes a logical next step. However, it's crucial to consider the implications for the internal team. Will they collaborate with the new team, face layoffs, or require other changes? Ensuring that your existing employees are well-supported through an acquisition is vital.
When acquisitions don't go as planned, the issues often originate within the parent company, not just the target. The level of support needed depends on the extent of change happening within the parent company.
Definition of Change Management
Scott Boyd: Well, it's a term that can mean various things to different people, often used synonymously with communications. The primary value I see in change management, as I mentioned before, is the intentionality and scrutiny applied to every plan. Whether it's a business plan, a customer migration strategy, or coordinating back-office operations, it's crucial to proceed in a coordinated and intentional manner. Ensuring thoughtful sequencing is essential to manage unintended consequences. This deliberate approach then allows for thorough and meaningful communication about upcoming changes
Chris Evans: Intentional communication is essential. Change management can start off simple. For example, we once discussed the limited engagement we had with employees compared to leaders. On one occasion, we decided to introduce a newsletter. Though we weren't sure of its content initially, we committed to sending it every two weeks.
This approach was simple, but employees appreciated it. On-site, they often mentioned it, noting the lack of information in previous acquisitions they'd experienced. Even a basic newsletter can make a difference.
For instance, when corporate IT wanted to announce they'd be sending out laptops to everyone, a change manager would probe deeper: 'What does an employee do upon receiving the laptop? Can they access the necessary website if it's behind our firewall? When will they get access?'
Often, assumptions are made about what acquired employees know or can do compared to hired employees. It's vital for change managers to focus on the exact experience an employee will encounter. By addressing potential issues internally, we can then present a polished communication to the acquired company.
Dedicated person for change management
Chris Evans: Hiring a dedicated person truly kick-started change management for us. We'd discuss transactions and always touch upon the importance of change management and cultural due diligence. Yet, during the thick of the transaction, many would revert to familiar tasks, sidelining the crucial aspects of cultural integration. Hiring someone to spearhead that department was transformative, especially someone with such a broad and versatile skill set.
Change management isn't just a simple task anyone can pick up. It has a significant underlying theory, and the benefit of having someone who genuinely comprehends it is immeasurable. Having someone with experiences across consulting firms and real-life scenarios is a game-changer.
Larger consulting firms indeed have change management functions. While Amazon didn't initially have a vertical function dedicated to change management, we became one of the pioneers in establishing one. Many companies have centralized change management teams of experts. By the time we hired our dedicated change manager, we were completing roughly 10 acquisitions a year. I only wish we had made that decision sooner.
Regarding staffing, it is undoubtedly intense. We had dedicated integration managers for each transaction, with change managers typically handling multiple transactions simultaneously.
Scott Boyd: One common misconception I've frequently observed is the assumption that change management is solely the responsibility of the HR team or that it's simply an aspect of HR. While a change management team might be housed within an HR organization, it's not a task that should be inherently expected of a standard HR team.
An HR business partner or an HR M&A leader, if one is in place, will be rightly focused on HR-specific tasks like integrating with the HR system, compensation changes, benefits harmonization, and contractor characterization. These tasks are distinct from change management. By its very nature, change management is cross-functional in a way that transcends a single function.
Chris Evans: It's essential to view change management as a business function, given the transformative impact an acquisition can have. I always perceived the corp dev team as fulfilling such a role. Individuals assigned to transactions temporarily become leaders of that specific business segment, navigating the numerous shifts. While a significant portion of the changes during acquisitions may revolve around HR, that's only a part of the bigger picture.
Although I understand why some might place change management within HR due to the HR-centric nature of many acquisition changes, there's so much more to consider. It encompasses areas like corporate IT, real estate implications, business process shifts, operating model adjustments, and new reporting structures, just to name a few.
Considering solely the employee experience, a comprehensive change management function also needs to address shifts with vendors, suppliers, customers, and other stakeholders. The changes related to HR are undeniably crucial, but they represent just one segment of a holistic and evolved change management strategy.
Change Management Planning
Chris Evans: During the due diligence process, I always had a change manager join the due diligence trips, particularly for in-person evaluations. Their main role was to focus on cultural due diligence and leadership assessment.
Having them actively participate allowed them to immerse themselves in various due diligence sectors, ensuring they could understand the culture of the prospective acquisition. Additionally, they would engage one-on-one with leaders, gauging their perspectives on the transaction and gauging their openness to the impending changes.
Our adept change management team would also provide every on-site member with a questionnaire. It contained fundamental questions about how they'd rank Amazon on aspects such as decision-making or communication.
They would then rank the company under consideration on the same criteria. This approach, which involved everyone meeting diverse personnel, allowed us to collectively gather insights on culture. The findings were illuminating, highlighting cultural similarities and disparities, and shedding light on whether the organization had multiple distinct cultures or a unified one.
Embedding a change manager in this manner, giving them a significant role during the due diligence phase, proved invaluable.
Scott Boyd: In addition to understanding the risks and assessing the culture, it's essential for a successful day one. When you stand in front of the newly acquired employee base, there should be excitement, and you should be prepared to answer questions. Without adequate consideration for change management and understanding how things will progress, it becomes challenging to provide satisfactory and meaningful answers. Therefore, for genuine transaction due diligence and preparation for day one and subsequent integration, it's best practice to start during the due diligence phase.
Most effective approach to change management
Chris Evans: The approach that works best is having the change manager deeply ingrained in the significant meetings and discussions that occur throughout the transaction. When I hired our first change manager and we tackled a transaction together, she asked me which meetings she should attend. I told her she could attend every meeting I was in because her skills complemented mine so well.
As an integration manager, you think differently from a change manager. Being deeply embedded in the business, understanding its goals, and building relationships with leaders from both the acquiring and acquired companies is crucial. This is when someone can be most impactful. Driving change from the top is vital.
Having leaders on both sides align their messaging and being mindful of the implications of our actions, then cascading that down, is critical. The challenging approach is viewing it merely as communications. While communication is a part of their function, if it's limited to just that, it won't be as impactful as it could be if it begins with influential leaders and discussions.
Scott Boyd: I totally agree. It's essential to have a dedicated person working on change management. In my experience as an integration leader who has worked on dozens of deals, without a change management partner, it's easy to lose focus and get consumed by daily issues, changes in the operating model, or how business metrics are unfolding. It quickly becomes too much for one person to handle.
Therefore, having a dedicated change management resource partnered with your integration leader is crucial. As Chris mentioned, it's vital to ensure that a person is empowered to review the entirety of integration plans, influence those plans, and be deliberate about the sequencing of change.
Common challenges during change management
Chris Evans: What a change manager brings is the education that being an acquired team is distinct from being a hired team. There's often a misconception among cross-functional teams about these differences and the timing of integration. It's essential to manage this actively to avoid any miscommunication with the organization. This is a vital role they play.
Scott Boyd: Additionally, I'd emphasize the challenges faced by executive teams, especially CEOs. At Amazon, we frequently saw CEOs struggling with transitioning from a CEO role to a general manager role. While these roles might have similarities in areas like product offerings or engineering teams, they differ significantly in the scope of responsibility and influence.
Assisting CEOs in becoming general managers, if that's the integration approach, requires considerable effort, coaching, awareness from the sponsor, and support from the integration team.
Chris Evans: Some challenges arise when you have a pervasive role. People's perceptions vary—some respect the function more than others. Often, during integrations and change management, when we'd ask questions, individuals would confidently say, "I got this." However, they often don't. Those who scramble or struggle to keep up with an integration can sometimes become defensive. Typically, the more reticent individuals are, the more I believe they're in over their heads.
Change management encounters this reality. Some welcome the assistance and value the function, while others mistakenly believe they have everything under control. Influencing and assisting these people before issues arise is difficult. When things do fall apart, it often results in a rush to fix the problem.
This was especially challenging at Amazon, where change management wasn't an established function. When we started, there were no change managers in the company. It was unfamiliar to many, requiring extensive education. Only after experiencing the benefits of a skilled change manager did many embrace it. Building the reputation of the change management function took time and was indeed challenging.
Scott Boyd: It can also accelerate integration. One of the challenges I've encountered is that change management can make people uncomfortable. Much of change management involves making what was previously implicit or assumed, explicit. For example, simple ways of working and norms at a company can vary significantly.
I recall CEOs mentioning that their team members felt their Amazon counterparts were being rude for simply sending tickets rather than making phone calls. However, the Amazonian would wonder why the ticket wasn't being addressed, believing it to be the most efficient method. This difference in approach doesn't come naturally to everyone.
People come to work every day with set routines. While they are aware of an acquisition and know different companies operate differently, it's an entirely different experience to face those differences daily. It's crucial that both the parent company and the acquired team approach integration with curiosity. They should invest time in understanding each other's working styles.
This awareness is essential for change management. However, finding time for such understanding can be challenging. It's vital to embed change management within the existing business rhythms instead of adding another layer. For instance, while I advocate for sending newsletters as a reference, if a startup has a weekly stand-up meeting, that's where communication about change should occur. Meeting newly acquired teams where they are and communicating in familiar ways, especially in the initial stages, is paramount.
Practical tips for change management
Scott Boyd: We talked about intentionality earlier, and change management, when executed correctly, drives intentionality across an integration program like few other things. It emphasizes the importance of setting expectations.
While it's unrealistic to expect clarity on every detail from day one, it's essential to paint a picture of the anticipated changes and establish a cadence of communication. This provides a level of stability and confidence that newly acquired employees need to continue their roles effectively.
There's often an immediate reaction of concern when an acquisition is announced. Employees wonder about their job security, the implications for their families, potential changes in compensation, or if their work location will shift.
Supporting employees by anticipating these questions and providing clear answers or a genuine timeline for when answers will be available is crucial. Being intentional and focusing on the human experience plays a significant role in determining the success or failure of an acquisition.
Chris Evans: Yeah, it's about taking that approach cross-functionally as well. While I provided some HR examples, consider other areas like real estate or the actual job functions. Take developers, for instance. Amazon acquired numerous remarkable development teams, but these teams had to adapt to Amazon's development tools.
This shift represents significant change for such a pivotal group. How do we guide them through that transition? Having a dedicated team or individual who can consistently help with this transition is invaluable. Business teams could handle it, but it would be their first attempt every time.
Another strength of change management teams is the empathy they offer. As an integration manager, my instinct was always to push forward and execute. I appreciated the balance that a change manager provided, emphasizing not just what we communicate but how we do it. I personally found that perspective very beneficial.