A global manufacturing company out of London was merging with another company in the same sector located in Kitakyushu, Japan, and the change will mesh two very different corporate and national cultures. The company established change leaders and managers and was determined to maintain and improve the customer experience throughout the merger. What they didn’t anticipate, however, was how many contradictory messages front-line employees would receive during the global change initiative. The change initiative met with significant internal resistance from confused employees, failed to meet key milestones and fell far short of its first-year objectives for technology transfer and joint cost savings.
As companies implement change initiatives, they often fail to focus on the most critical areas. In this example, the manufacturing company failed to plan for the significant uptick in messages front-line employees would receive each day from the change leaders. The time and resources allocated were insufficient to handle the conflicting and high-priority messages. Front-line employees weren’t prepared to handle the excess volume, and they didn’t know how to prioritize and order their responsibilities each day.
The acquiring company in London didn’t fully consider the country and regional characteristics of the acquired entity, including its competitive environment. They also didn’t take into account the challenges related to meshing the two national and organizational team cultures. Failure to provide clear directions to front-line employees during a change initiative is a clear recipe for business disaster.
The most recent data on global change management initiatives demonstrate that nearly 75% of all change initiatives fail to produce long-term sustainable gains, and almost half of them do not produce any measurable results at all. What is the reason for such a staggering failure rate?
Drivers of global organizational change know that organizations fail to embrace the notion that change management initiatives cannot be conceived through mere number crunching and analysis of processes and systems. International change initiatives should be viewed from a people management perspective as well.
Ruda Seiden, a leading change management consultant and a Northwestern University professor, explains: organizational leaders tend to focus on financial figures and processes because “things that are not tangible [essentially the human factor] are more difficult to conceive of, and therefore, their impact is often underestimated.”
In other words, organizations discount the simple, yet profound truth: organizations do not change, people do. As a result, change strategies are often misguided and fail to produce the desired results.
The “human factor challenge” for global organizations is even greater than for organizations that are only locally focused. Global companies employ a diverse workforce that varies greatly in terms of employee mindsets and capabilities. In order to understand these differences, it is first of all important to note the role of the national culture and how it shapes people’s mindsets.
The Relationship Between National and Organizational Cultures
Research on the relationship between national and organizational cultures demonstrates that national values and norms normally prevail over organizational practices and have a heavy impact on how people tend to engage at work (Dickson et al., 2014). Individuals are exposed to their national cultures during their developmental years, so fundamental societal assumptions about what is fair and just, what is respectful, and what builds trust become internalized.
Early experiences with family, friends, teachers and other local community members shape each person’s worldview. And unless the person moves to another social setting at a young age, these assumptions seldom shift. Conversely, people join companies in adulthood, and even though they adapt to their employer’s processes and systems, their deeply held beliefs and attitudes, shaped by their home environment, remain intact.
This means work-style and communication preferences are generally more reflective of the norms instilled by the local environment than by corporate practices, with the occasional exception of companies with very strong cultures and employees who stay with them for very long periods of time.
International Change Initiatives
In spite of deep and substantial differences between national cultures, global change initiatives are commonly designed at an organization’s headquarters, with limited local input. More often than not, the headquarters leadership brushes aside local capabilities and engagement practices in order to stick to their own carefully crafted plan.
As a result, corporate executives fail to rally local buy-in for the initiative, and instead, are confronted with resistance and non-compliance. In Working GlobeSmart, Ernest Gundling calls this negative cycle of misunderstandings and resistance the “Foreign Capital Company Syndrome,” and asserts that ultimately such an approach leads to poor business results (Gundling, 2003).
A well-designed human integration strategy is vital not only during mergers & acquisitions, but also in design and implementation of other large-scale global transformations and change initiatives, such as downsizing, outsourcing, digitization, global IT implementation, and the launch of a new product. An appropriately planned global change management process is also crucial for smaller-scale alterations such as departmental reorganizations, opening a new branch and IT integrations.
If you are a leader in charge of implementing a change initiative that impacts the organization across different regions, markets and cultures or involves a globally dispersed team, how will you build your approach?
Here are five principles to guide you through your next international change initiative.
1. Localize Your Strategy and Plan
Consider the context of the location that is being affected by the change and adapt your strategy to fit the local reality. Be cognizant of the differences in communication and leadership style and management preferences of the people in the country/region where the change is to be rolled out. Learn what practices typically increase work engagement in this area. Become aware of the differences and leverage the similarities and convergences.
In addition, learn about the local market conditions and the capabilities it affords. Engage the local leadership early on. They “should have a role in shaping the original content and direction”, notes Ernest Gundling (Gundling, 2003). In this way, you will ensure that your strategy is localized and you will foster a sense of accountability from the very start. Continue to leverage local formal and informal leaders as your champions of change throughout the change process.
2. Cultivate Self-Awareness
Understand your own preferences in communication and leadership style. Employ a preference indicator such as the GlobeSmart® Profile to learn about your work-style tendencies. Gauge the gap between your preferences and the local norms.
Tools like the GlobeSmart Profile can help you compare your own preferred work-style to other countries, individuals and teams. The tool then provides dynamically generated advice and strategies for you to consider when working with those who may have differing styles.
GlobeSmart Profile Comparison and Advice
Be prepared to style-shift to bridge the gap and be more effective in the new environment. For example, in Russia avoid the “delegate and disappear” practice. Instead, provide detailed directions, coupled with frequent feedback sessions that would signal comprehensive support. Be direct, straightforward and tactical in your approach. Do not shy away from being firm, but be intentional about coming across as fair and caring. Such a leadership approach will help you increase engagement.
Moreover, dive deep and explore your hidden assumptions and attitudes. McKinsey research indicates that leaders who deeply understand their own inner dynamics make far more compelling change leaders. Greater self-awareness allows for more self-regulation and greater personal agility, an important skill during the change rollout when emotions tend to fly high and you are expected to hold it all together. An executive coach can guide you through this journey of elevating your level of self-awareness.
3. Create Psychological Safety
People should feel free to voice their concerns, feelings, and interpretations of the initiative. Understand locals’ general comfort level with ambiguity and uncertainty. Brazilians tend to have a higher tolerance for ambiguity and thus might be more comfortable with the shifting agendas and uncertainty. But do not expect the same attitude in Japan, for example, where it is important to make your objectives and commitments clear as soon as possible.
Elicit feedback in accordance with the cultural norms and create ongoing dialogue with local stakeholders to build trust and early buy-in for this change initiative. Engaging people in such discussions will help you uncover important patterns in perception, pinpoint blind spots, and identify strong resisters. This information will help you re-strategize and re-energize your implementation plan.
Have a robust mechanism and rhythm of communicating the vision and goals of the change initiative. You must share its process and progress with all your change partners, including key stakeholders and sponsors of the change initiative. Furthermore, use every possible channel to communicate, keeping in mind that certain regions prefer different communication channels. For example, in hierarchical, collective cultures like China, it might be even more necessary to schedule face-to-face time and arrange trips for senior leadership to speak to employees.
There is no such thing as over-communication during a change implementation. In fact, John Kotter (2011), one of the leading change management gurus, names under-communicating the vision to be one of the errors that lead to the failure of change initiatives.
5. Tap Internal Change Factors
The careful inquiry into stakeholder voices may reveal a pent-up desire for change that can be tapped. Employees in a local subsidiary or acquisition, for example, may be fed up with rigid employment conditions or a top-down leadership style, and would happily embrace alternatives. Identifying such internal change factors can help to smooth the way for successful implementation. However, it is also important for change leaders to determine whether proposed alterations are indeed feasible in the local setting, and, if they are, to ensure that employees are also furnished with the knowledge and skills they will need to implement new practices.
There have also been successful change efforts that have drawn upon the dynamic culture of a subsidiary or an acquisition to inject new energy into headquarters. Bringing fresh leadership and ideas into the “mother ship” provides an electric jolt that can either be perceived as welcoming or threatening, and there must be consistent support from the top for such a strategy.
Focus on Cultural Diligence with the Help of Aperian
A small group of top executives typically handle the decision to merge or acquire another company, but the process — especially at the global level — requires effective collaboration between employees at all levels. Mergers and acquisitions demand time and resources allocated toward the immediate strategic and financial issues. It’s often the more subtle issues, however, that are overlooked — such as cultural diligence. Organizational and national cultures collide, and if the statistics prove anything at all, it’s that this is not always a smooth process. The human element is often neglected as leaders assume everyone involved will collaborate effectively, or they overestimate how effortlessly the process will come together.
Global change leaders understand that it’s vital to invest time and resources in understanding the cultural norms of the region during a global change initiative. Our M&A consulting services can help you assess the climate for international change initiatives above and beyond the strategic and financial rationale. We help you hone in on the small details that matter, such as the human element involved in a successful merger or acquisition. We will help ensure you fully consider the following as you implement a global change initiative:
- Planning teams that focus on operational and functional aspects of the new combined entity while also creating a human integration strategy, leveraging both headquarters and local knowledge
- A stakeholder analysis that outlines critical aspects for success
- Merger integration teams that consider and allocate the necessary resources and training for successful human integration
- A comprehensive integration process that fully addresses the possible challenges related to the team, organizational and national cultures