Yasril SyafUniversity of IndonesiaQuestion 2I have already posted it on http://yasril.posterous.com/BackgroundABC Group is the fifth largest financial services provider in Southeast Asia by total assets, with a vision tobe "Southeast Asias most valued universal bank". It offers consumer banking, investment banking,Islamic banking, asset management and insurance products and services. Its key regional offices arelocated in Malaysia, Singapore, Indonesia and Thailand.ABC Group acquired two banks in Indonesia: Bank X and Bank Y. In term of assets, Bank X was the sixthlargest bank in Indonesia whereas Bank Y was the tenth. To comply with the Indonesia Central Banks"single presence policy", ABC embarked on a plan to merge these two banks. The merger would createthe fifth largest bank (ABC XY Bank) by total assets of more than USD 10 billion and also among the topfive in terms of distribution network in Indonesia.ChallengesDue to the nature of the banking business, two of the most important aspects of a bank merger ismanaging its people and the IT and operations merger integration.The speed of completing the merger depends on the speed of the IT & Operations integration, whereastrue "one-bank" service happens only upon completion of the IT & operations integration. The IT &Operations integration timeline will also drive the timeline for most other activities.The two legacy banks posed several unique challenges that had to be addressed: The two legacy banks have similar size customers and transactions that would make the combined banks operate with double the volume. Bank X and Y are strong players in their respective market segments. Bank X is a strong corporate market player whereas Bank Y tends to focus more on the consumer and commercial markets. The two banks have huge customers base, 3.3 Million customers in total. Geographic spread (more than 650 branches, 1267 Automated Teller Machines (ATM), 237 Self Service Terminals (SST) located in across country) Distributed and decentralized systems in the two banks (more than 100 applications need to be aligned and integrated or rationalized) Need to retain and integrate two different legacy systems for credit card business alignment - Bank Ys merchant acquiring system and Bank Xs card issuing system Different network architectures (hub & spoke vs. star topology) Selection of talented employees to continue the management and operations and how employees would work in a new environmentABC needed to quickly integrate its new acquisition to realize merger synergies (both cost and revenue)and carry out the merger integration exercise without destroying any value or losing key customers. Thisprocess involved the integration of business units, operations and IT of both banks.
Question 2You are asked to lead a team that would help ABC XY Bank prepare for changes by managing complexorganizational and workforce transitions once the business and IT solution is in place. One of thechallenges is to help ABC XY leadership and the integration teams in carrying out an effective transitionto a new way of working. How would your team go about doing it?To help you in making the transition, here is Accentures Transformational Change ManagementFramework.
Other Framework Mieloo & Alexander Project implementation change management Framework ANSWER:PREFACE Bank M&A (Merger and Acquisition) in global is always complex because each party has uniquebehavioral cultural and working style. Mitigating the negative impact of working culture changes andaccelerating the development or changes of the culture is important. Before Bank ABC XY merger isconcluded, it is important to assess the cultural compatibility of the merging firms (Bank X, Bank Y, andBank ABC). We have to realize that such formal cultural assessment is usually not possible because thenegotiations leading up to the merger have to be kept secret. To acquire true cultural insight, requiresboth parties to take part in each other’s cultures. For example, if Bank Xs strength is corporate marketand they are absorbing Bank Y in part because of Ys market capabilities in consumer product, make sureXs people know to listen to Ys people and Ys sales force understands the opportunity to learn from X.We also have to asses the context and the desired outcomes, identifying the right plan and method ofchanging, pulling the right levers to drive those behaviors, choose and encourage the right “change-champion” and actors, and managing the culture change required.
Improper handling of the impact of changes in the IT systems and business would create seriousproblems for the companies involved. An IT merger implementation particularly for Financial ServicesIndustry is a massive change, sometimes the knowledge from employees is not included in the projectthus the quality of the new processes and of the changes will be fail. Change which is initiated fromoutside, is less likely to be accepted. If employee don’t have an involvement in changes project, changeswill be understood poorly and not be accepted well. Both risks seem from internal sources, it’simportant to understand that these risks could potentially lead to a negative impact on performance,customer satisfaction, and market position. Merging three banks (ABC XY) with their different policies, procedures, and culture will createstress for all the people involved. When the changes are on a larger scale and involve many individualsand subunits such as the ones encountered by Bank ABC XY, it is a challenge to manage changesimultaneously across functional and managerial levels. One important implication is to understand andensure that various change programmes and efforts exist at different parts of an organization that wehave to define in Change-Plan. All workforce and functional departments from ABC, X, Y that related tobank’s business processes and IT are encouraged to cooperate and analyze the change plan in order tocreate both vertical and horizontal integration of change efforts. We also have to analyze the businessand financial impacts if the workforces are changed or retired from the company. Thus, we have todefine the right strategy for workforce changes in order to make alignment with merged-company’sbusiness-critical workforce—those especially important to achieving high performance. HRD from all companies may make strategies and communications method to manageorganizational changes, ensuring a smooth transition during the merger process including training andcommunication methods. We probably need to cut the number of employees because of the costsavings through combining redundant tasks is a common goal. The rest survivors from all companies willhave to deal with new combined people, new combined procedures, or possibly handle more work, andthe loss of previous opportunities and partners. Thus the change management may focus on minimizingemployee retirement during transitional periods. Therefore, top-management leaders mustcommunicate the new value and vision of the change and its impact as widely and effectively aspossible and give careful attention to each activity when planning and implementing organizationalchange. They should analyze the risks related to workforce changes. They can uses Accenture HumanCapital Development Framework for assessing human capital capabilities and the processes that drivethem, and then linking human capital assets and approaches to business performance outcomes. Allparts in ABC, X, Y must ensure that the organization captures the experience and expertise (both tacitand explicit with internalization and externalization) of retiring workers and transfers this knowledge tothe retirees’ successors. If the people side of M&A and the integration of different cultures are ignored,the merging companies could face many difficulties, including, ultimately not meeting the anticipatedpurpose of the transaction. Some of the other difficulties include: Loss of skilled and talented employees other than employees in leadership positions. Decrease motivation, morale, performance which could in turn also lead to a loss of productivity and a reduction in revenues.
Increased employee turnover. Increase in costs could result if the proper management of change and the implementation of the M&A transaction are delayed or failed. Unhappy customers and the eventual loss of customers and in the end will impacts the financial aspects. ASSUMPTIONS: Both Bank’s Business Process is complex Dynamics of integration are stressful and huge Bank ABC XY have different respective market segments All parties that have an interest, financial or otherwise, in a firm-stockholders, creditors, bondholders, employees, customers, management, the community, and the government. of the bank, a large number of the employees will display their dissatisfaction and resistance towards the failed change programmes Organization change requires new value and vision. Organization change requires commitment from top management as a change-champion and brings new directions. Encourage and remunerate your staff to be change-champion also. Organization change requires extensive communication with all stakeholders. Selection of best, talented & critical-knowledgeable employees to continue the management and operations and how employees would working in a new environment Differences in organizational working culture will bring us to failed change management People’s feeling of insecurity and uncertainty are such serious problem. Reference: People’s Concerns Matter, Marks, Mitchel & Mervis, Phillip (1998). Joining Forces. Planning Combination Execution Issue Insecurity Uncertainty Adaptation What will happen What’s going on Am I ready to to me? around me? perform? Who’s looking How do I How do I cope? Concerns out for me? succeed here? Is the new Who are they? Who’s in control? better than the old?
BASE STEPS THINGS TO DOAn effective change management process is planned and executed. (MERCER) Analyze business and financial impacts of the workforce change. Mitigate the risks! Measurable outcomes are well-defined and understood in the context of the deal. Focus on synergies and conduct thorough due diligence & detailed planning Employee involvement in the execution of the change has the most impact on employee commitment and participation. Employees must be empowered and educated so they can exploit their new power. Fair is a key! New Reward and incentive system would give benefits.
Assess the culture gap. Examine the existing culture to find out some parts of the culture may be fine and strong, or certain subcultures within the organization maybe bad Build change teams from different parts of the three banks, because the new ABC XY needs to produce the desired changes and outcomes. Do intensive education, training, meetings, forums, etc. Important to measure and evaluate progress and results!Reference: Making Mergers & Acquisitions Successful Presentation, 2005, OD Network Annual Conference, Bob Barnett. Accenture Research Report, The Ambidextrous Senior-Leadership Team, Meredith A. Vey, Margaret G. Stergios, Robert J. Thomas February 2005 CTO Accenture Effective Human Capital Measurement, It’s time to get a handle on controlling your intangibles, Neil Roden Accenture Journal, Cross-border M&A Handle with care, Caroline Firstbrook, 2008 Change Management Merger and Acquisition, 2007, Marilise Smit, www.changewright.com Accenture Human Capital Analytics: Generating insights to meet complex workforce, HR and business challenges, 2010, Yaarit Silverstone and Marc Sotkiewicz Accenture: The Case for IT Simplification in Banking, 2010, - MERCER: The impact of culture on M&A: Doing something about it, 2009, Bob Bundy and Elisa Hukins Accenture Outlook: Managing the risks of a changing workforce, 2006, David Smith