Study The role of Leadership during Post Merger Integration (PMI) - Evaluation Report -

Transcription

1 Study The role of Leadership during Post Merger Integration (PMI) - Evaluation Report - Münster, April 2013

2 Agenda Status Quo and Study Overview Evaluation Overview Detailed Results of Online Survey Leadership as a Success Factor in the Post Merger Integration Sample Composition 1

3 Leaders in a Post Merger Integration are between their Leadership role and Integration Activities Leadership Requirements in the Post Merger Integration (PMI) Leadership Function towards Employees PMI leads to a high degree of emotional and workrelated stress for employees Integration-related tasks have to be handled besides the day-to-day business High risk that high performers leave the company during the PMI-phase Leadership Complexity in the PMI Integration Activities Time and cost compliant execution of integration tasks Consolidation of different ways of working and different corporate values (Culture Integration) Achievement of integration objectives (e.g. revenue and cost synergies) Task level (PMI-Goals) Competency and behavior of managers as key success factor of every Post Merger Integration 2

4 Study Overview: The role of Leadership during Post Merger Integration (PMI) Study Objectives Analysis of leadership as success factor in the post merger integration, considering M&A-active companies from Germany, Austria, and Switzerland ( DACH-Region ) Strong focus on Manager-Employee-Relationship Deduction of success factors and recommended procedures regarding the leadership/ management in the post merger integration Study Format Online survey with 98 participants + 10 personal interviews Study was conducted between May and end of year 2012 Cooperation with the University of Münster, Germany (WWU Münster) Study Sample 1 27% of participants work in the HR field, 20% work cross functionally 10% are part of IT and 43% work in other functions (e.g. Sales, Controlling, Production) 42% of participants are allocated to the manufacturing sector, 13% to the finance and insurance industry, 7% to the information and communication industry and 38% to other industries In 37% of described PMI cases up to 1,000 employees were affected, in 63% of the cases even more than 1,000 employees 19% of the companies interviewed yielded a revenue of up to 150 M EUR, 9% between 150 and 500 M EUR and 72% a revenue of more than 500 M EUR 1) Numbers based on year 2011, for more details see page 18 3

5 Agenda Status Quo and Study Overview Evaluation Overview Detailed Results of Online Survey Leadership as a Success Factor in the Post Merger Integration Sample Composition 4

6 Summary Study Results The Role of Leadership during Post Merger Integration (PMI) Assessment by Integration Experts Study s Key Results Management/ Leadership Employee Motivation Management Behavior Integration Instruments Post Merger Syndrome 1 Management has a significant influence on integration success, but frequently they neglect their leadership function Employee motivation has a strong influence on integration success motivation by management, however, is often poor Often the quality of management behavior in the PMI is evaluated only as moderate Especially communication activities and establishment of integration teams have a positive influence on employee satisfaction in the PMI The Post Merger Syndrom has been confirmend by PMIs in many cases the management themselves showed resistance to the integration - + Negative Impact on Integration Positive Impact on Integration Success Factors of the Management for Success in the Post Merger Integration Employees perceive themselves in many times faced with no or insufficient communication during the integration Qualification of management often is evaluated as inadequate concerning the integration expertise In many cases resistance of the management to the integration was demonstrated Confrontation between managers hinder the integration Frequent and personal communication from Management to employees Qualification of managers based on the need for increasing leadership skills Acting as role model when establishing a new and common company culture In many cases the necessary leadership function is lacking integration expertise and capabilities to make the PMI successful 1) The Post Merger Syndrome is characterized by shock, anxiety, fury and anger of employees because of the merger. Typically motivation and productivity in the PMI phase are thereby influenced in a negative way. 5

7 Agenda Status Quo and Study Overview Evaluation Overview Detailed Results of Online Survey Leadership as a Success Factor in the Post Merger Integration Sample Composition 6

8 Relevance of Employee Motivation in the Post Merger Integration approx. 95% approx. 30% 71.4% (70) 0% (0) 1.0% (1) 3.1% (3) 24.5% (24) 1.0% (1) 11.2% (11) 19.4% (19) 29.6% (29) 38.8% (38) ( 1 = not relevant at all to "5" = very relevant) Question: From your point of view, what relevance for the success of a merger does the motivation of employees have? (n=98) ( 1 = unimportant role to "5" = very important role) Question: In your opinion, what role does the management play, regarding the employee motivation in the post merger integration phase? (n=98) Although employee motivation has a high relevance for success, the management doesn t play an important role for employee satisfaction, according to experience for one third of companies 7

9 Management Contribution to the Implementation of the Post Merger Integration Question: Please evaluate the general contribution of the management to a succesful Post Merger Integration. (n=98) approx. 90% 43.9% (43) 46.9% (46) Management as key success factor for integration 0% (0) 1.0% (1) 8.2% (8) (1= very low (Management has no influence in the integration s success) 5= very high (Management has a strong influence on the integration s success)) 8

10 Correlation between Perceived Integration Success and Employee Satisfaction Detail Strong correlation (r=0,783) 1 between employee satisfaction and the perception of integration success 22.4% (22) 2.0% 14.3% (2) (14) % (38) 1% (1) % (42) % (32) 4 5 ( 1 = not satisfied at all to "5" = very satisfied) Question: How would you evaluate the satisfaction with the overall situation after the merger? (n=98) 33.7% (33) 7.1% (7) 4 5 ( 1 = not successful at all to "5" = very successful) Question: As how successful do you perceive the Post Merger Integration your prior answers were based on? (n=98) 5.1% (5) Approx. 40% of participants state that they are satisfied and that they perceive the integration as a success, respectively Strong Correlation: A great integration success is frequently attended by a high degree of satisfaction 9 1) Correlation is significant on a 0.01 level 9

11 Perception of the Management by the Employee Question: To what degree do these statements apply to the managers, you experienced during the Post Merger Integration? Please evaluate these statements by means of the following scale. (n=98)* Scale: 1= not at all to 5= frequently The management Means (rounded) is resilient Ø 3.88 talks optimistically Ø 3.5 is available for personal conversations Ø 3.47 acts foresightfully Ø 3.36 motivates her/ his employees Ø 3.31 trusts in her/ his employees Ø 3.29 forwards information to employees Ø 3.28 is enthusiastic Ø 3.07 talks about values Ø 3.04 The abilities of the management during the PMI are perceived as rather moderate in all dimensions by the employees, despite the understanding of the management as critical success factor of the PMI acts beyond the own interests Ø 3.02 lives ethical standards Ø 3.01 makes employees proud to be assigned to her/ him Ø 2.90 Not al all Frequently * Note: The participants were asked to refer to the manager, she/ he interacted with most. 10

12 Motivational Measures in the Post Merger Integration Question: Which measures were implemented to keep employees motivated or to increase motivation in the Post Merger Integration? (Multiple responses allowed, n=98) Team building measures to integrate employees into new teams Establishment of integration teams, consisting of employees of both previous companies Conducting of workshops with employees concerning integration topics Frequent mailing of letters by the Top Management Publishing of a frequent newsletter addressing integration topics Conducting leadership workshops addressing the management s role in the integration process 70.4% (69) 63.3% (62) 57.1% (56) 55.1% (54) 52.0% (51) 28.6% (28) Team building measures as well as the implementation of mixed integration teams are established frequently as motivational measures Implementation of an employee hotline 10.2% (10) I have not heard of any measures 2.0% (2) 11

13 Utilization of Feedback Instruments in the Post Merger Integration Question: Which feedback instruments have been in use during the post merger integration? (Multiple responses allowed, n=98) Request for feedback from the respective manager 61.2% (60) Employee survey 58.2% (57) Moderated feedback groups with selected employees Account 32.7% (32) 30.6% (30) 360 Feedback 17.3% (17) The personal request for feedback from the manager in particular, as well as employee surveys are common practice Feedback Mailbox 15.3% (15) No feedback instruments 9.2% (9) 12

14 Employee Perception: Balance between Employee Needs and the Conduction of Integration Tasks Only approx. 35% have experienced an intensive relationship between manager and employee in the PMI Question: Please evaluate the general Relationship Orientation between manager and employees, you mostly experienced during the Post Merger Integration phase. (n=98) For more than 70% of participants the completion of PMI tasks had highest priority Question: Please evaluate the Task Orientation between manager and employees, you mostly experienced during the Post Merger Integration phase. (n=98) 4.1% (4) 22.4% (22) % (37) % (26) 9.2% (9) 4 5 ( 1 = low (A good and healthy relationship between employee and manager is not important) to 5 = high (A good Manager-Employee-Relationship has highest priority)) 1% (1) 6.1% (1) % (22) % (46) ( 1 = low (The company focuses not on the performancerelated completion of tasks) to 5 = high (The performancerelation completion of tasks has highest priority, whereas the employee is not considered or only considered to a certain extend)) % (23) 5 Risk of the Post Merger Syndrome 1 : Focus on integration tasks too strong and disregard of manager-employeerelationship in the integration phase 13 1) See also slide 14 Existence of the Post Merger Syndrome 13

15 Integration-Related Influence on Employee Productivity caused by the Merger-Syndrome Detail Question: Based on your experience, are you able to confirm the existence of the Post Merger Syndrome 1? (n=98) 52% (51) 39.8% (39) Approx. 90% of the respondents either completely or at least partially confirm the existence of the Post Merger Syndrome Yes Partially 8.2% (8) No 1) The Post Merger Syndrome is characterized by shock, anxiety, fury and anger of employees because of the merger. Typically motivation and productivity in the PMI phase are thereby influenced negatively. 14

16 Management Behavior in the Post Merger Integration hindering the Integration Question: What of the following circumstances did you increasingly notice during the company integration? (Multiple responses allowed, n=98) Resistance of managers against the integration 73.5% (72) Missing or insufficient communication regarding the integration 71.4% (70) Insufficient or low qualification of management regarding the integration 63.3% (62) Confrontation between members of the management 59.2% (58) Low motivation of management 39.8% (39) None of these circumstances was noticed 1.0% (1) In many cases the Managers themselves show resistance against the integration 15 15

17 Success Factors of a Company Integration Question: In your opinion, which of the following aspects are the most important success factors for a company integration? (min. one, max. up to four answers, n=98) Frequent and personal communication by the management 82.7% (81) Management as role model when establishing a new, common corporate culture 79.6% (78) Enablement of management in regard to their role in the integration process (e.g. by management workshops or trainings) Management Style (Degree of employee participation in the decision process)) Implementation of feedback instruments 24.5% (24) 68.4% (67) 52.0% (51) The personal communication and role model function of the manager are perceived as significantly more important than incentive systems or feedback instruments Incentive systems 17.3% (17) None of these measures are relevant for the integration success 0% (0) 16

18 Agenda Status Quo and Study Overview Evaluation Overview Detailed Results of Online Survey Leadership as a Success Factor in the Post Merger Integration Sample Composition 17

19 Classification of Study Participants Question: In which area is your company s main business? (n=98) Question: What is your functional area? (n=98) Manufacturing 41.8% (41) HR 26.5% (26) Financial and Insurance Services 13.3% (13) Cross-Functional 20.4% (20) Information and Communication 7.1% (7) Logistics 6.1% (6) Professional, Academic or Technical Services 6.1% (6) Health and Welfare 6.1% (6) Other Economic Services 5.1% (5) Public Services, Defense, Social Security 4.1% (4) Electrical Power Supply 4.1% (4) Other Areas 6.1% (6) Question: What was your company s revenue in 2011? ( ) (n=98) More than 5 Bn 46.9% (46) 1 Bn to 5 Bn 18.4% (18) 501 M To 1 Bn 6.1% (6) 151 M to 500 M 9.2% (9) 51 M to 150 M 7.1% (7) Up to 50 M 12.2% (12) Question: How many employees in total were effected by the merger (that is, both companies together)? (n=98) More than 30,000 10,001 to 30,000 5,001 to 10,000 1,001 to 5, to 1,000 Marketing Finance/ Controlling 13.3% (13) 13.3% (13) 11.2% (11) 51 to % (10) Up to % (4) IT 10.2% (10) 7.1% (7) 7.1% (7) Sales 6.1% (6) Production 6.1% (6) Research/ Development 4.1% (4) Legal Department 3.1% (3) Procurement 1.0% (1) Other 8.2% (8) 25.5% (25) 22.4% (22) 18