Change Management and Authentic Leadership

Momentum Case Analysis

Introduction

Change management situations call for transformational leadership. In the merger of Momentum and Metropolitan, two long-standing, large firms in the financial-insurance industries, there was a need for clear vision, commitment, communication, and supportive guidance. The merger worked and as a result it serves as a great case study for how to implement transformational leadership on a large stage.

What?—The Situation, Key Players and Main Problem

The merger of Metropolitan and Momentum seemed a good idea for the banking-insurance-health companies. The operated in different target markets and could benefit from the merger in terms of reducing costs. However, some reservations existed—such as the idea of whether this was a soft takeover and, if so, which company would be running the operations? Another issue was whether the cultures of the two corporations were complementary to one another or whether the differences might represent a problem.

At the start of 2009, Wilhelm van Zyl, CEO of Metropolitan, began thinking about how to spearhead a new future for the corporation. He met with Kruger, CEO of Momentum, to see what could be done about bringing the companies together. The question they had for one another was this: both companies operated on different ends of the spectrum of the market, and the nature of the partnership had to be clarified while the business model they would have needed to be defined.

Additionally, the two CEOs had to convince their respective boards that the merger made sense. Risks and rewards had to be weighed. Mergers were booming in South Africa at this time, where nearly a third of all global mergers were happening at the time (Scheepers & Swart, 2015). The companies also had to maintain strict confidentiality, because if word got out, other players could respond and derail the merger hopes. At the same time, the CEOs helped to develop a bottom-up restructuring of their portfolios to help focus the merger.

Trust, integrity and purity of intention were needed at the top levels, as there was no initial clarity on how the two companies could come together. The two CEOs and their executive teams developed scenarios and visions, discussed them, and had long, in-depth conversations with one another to see where the best possible direction was. Additionally, the two CEOs had to make deep, personal sacrifices in order to guide this process. It was a merger that required intense transformational leadership and master of the ego. Once merged, there could only be one CEO—but during the process of brainstorming and integrating the two CEOs never allowed their egos to get in the way of the vision and the drive needed to achieve the plan (Scheepers & Swart, 2015).

The main problem was for these two leaders to work together to bring two different companies with different cultures into one company, and to lead with a vision and a discipline that would inspire others to want to commit to the process. It required conviction, devotion, and communication on a tremendous scale, as these were two very large, very old, and very successful businesses.

The idea of the merger was to create value and to guard against destroying value, while retaining the very best of both corporations in the process. It required having a steering committee to guide the process. The steering committee had to enunciate the vision that would serve the process. Decision-making power and integration, along with creating a bottom-up strategic development process was then needed. No duplication of effort could be tolerated. Difficult decisions would have to be made, but for the merger to succeed the company would need leaders who were not afraid to make such decisions for the good of the vision. The management styles of the two companies differed considerably, too, and this would be a challenge in bringing the two firms together and preventing silos from forming.

So What?—Why the Situation is Important

The situation was important because it showed what transformational leadership should look like. For instance, one of the most important things the leadership team did during the merger was to survey the 15,000 employees to find out what values the new company should promote. The feedback from this survey led the leaders to realize that their followers wanted to be part of a company that was concerned about accountability, innovation, integrity, teamwork, diversity and excellence (Scheepers & Swart, 2015).

Feedback is crucial to guiding a change in a change management situation—and this group of leaders understood that from the beginning. In Kohler’s change management model, obtaining the trust of followers and incorporating their voice and feedback into the change is part of the recommended steps to lead well. The company’s leaders should listen to what workers have to say if they want to avoid obstacles and prevent resistance to change from occurring. It is when workers feel ignored or marginalized that resistance builds up and change can become a great catastrophe. For these two gigantic companies of 15,000 workers to overcome resistance, it took great care and consideration on the part of the leaders, and it meant making sure that workers felt valued and that they had a voice during the process.

If the two companies had been unable to bring the two cultures together under one vision, the merger would have failed, investors would have lost money on their investment in the stock market, and business would have been lost to competitors. Employee attitudes played a big part in this process. On the Momentum side of the merger, workers were used to feeling empowered; on the Metropolitan side, workers were used to a formal management style. The Momentum employees had to adapt just as much as the Metropolitan employees did as the companies came together.

Another issue was in dealing with redundancy. The leaders decided that if they eliminated all redundancy, it would be bad for stakeholders, i.e., the public interest. So they settled on choosing their battles and putting redundant workers in a safe haven pool where they could be used later elsewhere.

Another key to successful merger was the use of communication. In a transformational leadership and change management situation, communication is vital and has to be clear, constant, and two-way. It was in the soft issue areas that pockets of resistance developed because hear communication was not as clear or as intensive. That was understandable, however, and it just meant that in time communication would have to improve in these areas as well. In short, the merger of Momentum and Metropolitan showed what is needed in a transformational leadership situation.

What Now?—Analysis of Decisions Made and What I Would Have Done

The company now needs to create more value and engage in more reorganization, which means there will likely be more trimming and more elimination of redundant positions. Essentially, when two companies merge and the new firm wants to create value it looks for ways to eliminate costs. The new firm has to do this in order to achieve the vision that the leaders had when the merger began.

This will not be easy on morale. Reorganization and change is always difficult, but when there is a desired endpoint or a sense of finality, employees can manage it and feel satisfied with it. It is when they perceive that change will never end or that they are not being told the whole truth about reorganization that morale begins to suffer. That is when job satisfaction tumbles and turnover begins to climb. Turnover can be very costly for a company and it is not something transformational leaders want to see happen: they want their followers to commit to the vision. The problem with Momentum is that the vision has not really been told in full to the followers—but rather in part.

Thus, Kruger is worried about breaking the news to staffers that more reorganization is going to be needed. He does not want to have to do this because he knows how hard it is making so many demanding changes after such a big one as a merger has already been achieved. Likewise, it introduces an aspect of uncertainty into the workplace. People want to feel secure and that they have job security—and when they no longer have that because they are concerned their position might be eliminated as a result of reorganization they can become upset, disgruntled or ineffective workers. Resistance mounts and then change is harder to achieve.

I would have been upfront with employees from the beginning letting them know that this would be a big vision and that it would be completed in stages, so that they would not have a false sense of security about how much of the company would be transforming. I would want them to be comfortable and to feel secure but at the same time I would want to be honest and open about what was in store for them in the future. I would tell them that decisions would have to be made about reorganization that the firm would take step by step, so that it was impossible to say as of now what changes would be made exactly but that everyone should know that their job could be affected in some way down the line.