Yasril SyafUniversity of IndonesiaQuestion 2I have already posted it on http://yasril.posterous.com/Background ABC Group is the fifth largest financial services provider in Southeast Asia by total assets, with a vision to be "Southeast Asia's most valued universal bank". It offers consumer banking, investment banking, Islamic banking, asset management and insurance products and services. Its key regional offices are located 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 sixth largest bank in Indonesia whereas Bank Y was the tenth. To comply with the Indonesia Central Bank's "single presence policy", ABC embarked on a plan to merge these two banks. The merger would create the fifth largest bank (ABC XY Bank) by total assets of more than USD 10 billion and also among the top five 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 is managing its people and the IT and operations merger integration.The speed of completing the merger depends on the speed of the IT & Operations integration, whereas true "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 Y's merchant acquiring system and Bank X's 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 environment

ABC 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. This process 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 complex organizational and workforce transitions once the business and IT solution is in place. One of the challenges is to help ABC XY leadership and the integration teams in carrying out an effective transition to a new way of working. How would your team go about doing it?To help you in making the transition, here is Accenture's Transformational Change Management Framework.

Other Framework

Mieloo & Alexander Project implementation change management FrameworkANSWER:

PREFACE

Bank M&A (Merger and Acquisition) in global is always complex because each party has unique behavioral cultural and working style. Mitigating the negative impact of working culture changes and accelerating the development or changes of the culture is important. Before Bank ABC XY merger is concluded, it is important to assess the cultural compatibility of the merging firms (Bank X, Bank Y, and Bank ABC). We have to realize that such formal cultural assessment is usually not possible because the negotiations leading up to the merger have to be kept secret. To acquire true cultural insight, requires both parties to take part in each other’s cultures. For example, if Bank X's strength is corporate market and they are absorbing Bank Y in part because of Y's market capabilities in consumer product, make sure X's people know to listen to Y's people and Y's 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 of changing, 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 serious problems for the companies involved. An IT merger implementation particularly for Financial Services Industry is a massive change, sometimes the knowledge from employees is not included in the project thus the quality of the new processes and of the changes will be fail. Change which is initiated from outside, is less likely to be accepted. If employee don’t have an involvement in changes project, changes will be understood poorly and not be accepted well. Both risks seem from internal sources, it’s important 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 create stress for all the people involved. When the changes are on a larger scale and involve many individuals and subunits such as the ones encountered by Bank ABC XY, it is a challenge to manage change simultaneously across functional and managerial levels. One important implication is to understand and ensure that various change programmes and efforts exist at different parts of an organization that we have to define in Change-Plan. All workforce and functional departments from ABC, X, Y that related to bank’s business processes and IT are encouraged to cooperate and analyze the change plan in order to create both vertical and horizontal integration of change efforts. We also have to analyze the business and financial impacts if the workforces are changed or retired from the company. Thus, we have to define the right strategy for workforce changes in order to make alignment with merged-company’s business-critical workforce—those especially important to achieving high performance.

HRD from all companies may make strategies and communications method to manage organizational changes, ensuring a smooth transition during the merger process including training and communication methods. We probably need to cut the number of employees because of the cost savings through combining redundant tasks is a common goal. The rest survivors from all companies will have to deal with new combined people, new combined procedures, or possibly handle more work, and the loss of previous opportunities and partners. Thus the change management may focus on minimizing employee retirement during transitional periods. Therefore, top-management leaders must communicate the new value and vision of the change and its impact as widely and effectively as possible and give careful attention to each activity when planning and implementing organizational change. They should analyze the risks related to workforce changes. They can uses Accenture Human Capital Development Framework for assessing human capital capabilities and the processes that drive them, and then linking human capital assets and approaches to business performance outcomes. All parts in ABC, X, Y must ensure that the organization captures the experience and expertise (both tacit and explicit with internalization and externalization) of retiring workers and transfers this knowledge to the 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 anticipated purpose 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

Concerns

What will happen to me?

What’s going onaround me?

Am I ready toperform?

How do I cope? Who’s looking

out for me? How do I

succeed here?

Who are they? Who’s in control? Is the new

betterthan 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