Introduction
This topic feels incredibly current. As I’m writing this, I’ve just finished reading the headlines around HSBC’s plans to cut jobs and delay net-zero targets as part of a £1.2bn cost-cutting drive, the UK head office will be restructured, consolidating two of the banks three main divisions. This sort of headline feels like a weekly occurrence these days, not to mention the conversations I’m having across my network around similar topics. Linked to this, it’s widely expected that the M&A market will see a significant rebound in 2025 after a difficult few years. Ignoring a slight increase in deal volume in H1 of 2023, global deal volumes have been falling every six months since the latter half of 2021 (Source: PwC).
The Public Sector is not exempt here, we’ve already seen a fair amount of machinery of government (MoG) changes here in the UK since Labour came into Downing Street and we’re now witnessing an even more extreme set of changes across the Atlantic. Put simply, all of this means major change is afoot for organisations in terms of the way they’re structured and the way they operate which can be pretty disruptive for the average employee. This is where Change Management comes in…
Everybody’s changing and I don’t feel the same
“Over 80% of industry experts expect volume of restructurings to continue rising” (Source: The CFO).
You could write a book about the reasons for this. One of the main ones that I’m sure we all can’t go a day without discussing at the moment is AI. Then we have other rapidly advancing technologies and the pace of innovation (I’ve written an article on that). Not to mention inflationary pressures, an increasingly fragile geopolitical landscape, climate disasters, volatile markets, it really is all fun and games, the news has seldom provided such joyful viewing. A lot of the conversations I’m having early this year revolve around similar themes: exploiting AI; driving wider productivity and efficiency gains; cutting costs; innovating faster and driving sustainability initiatives (although these particular conversations will no doubt get quieter with our US friends). Whether it’s a perceivably negative ‘reactive’ action (cost-cutting drives) or more ‘proactive’ restructuring to adapt to an everchanging world and increasingly competitive markets, organisations are changing.
These processes are extremely stressful for the average person. Am I going to keep my job? If I am, how is my job going to change? What kind of organisation are we going to be? Why is this change happening? How do I add value to the ‘new’ organisation, and can I see clear progression and a future? All valid questions and concerns and addressing these requires an approach beyond a quick ‘town hall’ announcement and internal email. The future of an organisation, in this case, can be determined by how seriously the leadership takes this change and whether they decide to invest in Change Management or not. ‘Change Fatigue’ is real and can be overcome, I’m already seeing organisations that appear to be suffering from ‘restructure fatigue’, that too can be overcome with similar interventions.
M&A rebound
“For corporate M&A, deal volume rose 92% in 2021 and fell a cumulative 49% in 2022 and 2023. For PE deals, the increase in 2021 was 88%, and the subsequent two-year decline was 64%.” (Source: EY).
Despite the geopolitical uncertainties and the guessing game that is Trump’s next move (particularly on tariffs), the M&A market should continue to turn a corner in 2025 after more positive signs in 2024. Change Management, as with non-M&A related restructuring and cost-cutting drives, plays a pivotal role in the M&A process.
“M&A deals often do not go smoothly at all. Many are delayed, terminated, or fundamentally harmed during the deal-making process, whereas the failure rate for completed and implemented deals is between 70% and 90%. (Source: Sanchez, Carol M.; Joshi, Mahendra; and Mudde, Paul).
Effective Change Management throughout an M&A process ensures cultures are integrated, synergies are achieved, stakeholders are bought in and there’s the minimum amount of disruption to everyday operations. Seems like a no brainer then that most M&As would prioritise Change Management, but it’s not always the case. We’ve had conversations with numerous organisations in recent months where there has been little to no Change Management to date.
Change Management, more BAU than Transformation
Something this series is highlighting (I hope) is that Change Management is no longer ad-hoc. Change is the new constant and the pace of change will continue to increase for years to come. Whether you’re going through an M&A, internal restructuring or wider cost-cutting programmes, Change Management plays a crucial role for the individual and therefore the organisation. Every week we’re highlighting the importance of Change to customers and potential customers and more often than not they’re coming to us having already arrived at that conclusion. A key message here is that Change Management should no longer be seen as a specialism that we deploy or procure when we’re going through a major transformation, but as a core part of BAU and a core skillset for every manager and leader. Organisations need to be ready, people need to be equipped, capabilities developed, and ‘Change Agents’ trained (shameless plug to our recently launched Change Right Academy and Change Maker Capability Development Upskilling Programme…we should really shorten that name, I know).
Conclusion
“…initiatives with excellent change management are seven times more likely to meet objectives than those with poor change management.” (Source: Prosci). “…companies that consider cultural aspects…tend to realise 30% higher levels of innovation.” (Source: Deloitte).
The data is crystal clear. Navigating the current landscape is proving to be increasingly difficult, disruption is here to stay, for better or worse. Those that value the impact of Change Management throughout this period will no doubt reap the rewards. Those that do not, well, as I said, the data is crystal clear…
Next in the CR series we’ll be looking at the impact of ever-increasing competition and the focus on customer centricity.
Author:
Harry Rawson