Momentum & Metropolitan Merger: Transformational Leadership

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 succeeded, and as a result it serves as a valuable case study for how to implement transformational leadership on a large scale.

The Situation, Key Players, and Main Problem

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

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 explore what could be done about bringing the two companies together. The central question they faced was this: both companies operated on different ends of the market spectrum, and the nature of the partnership needed to be clarified while the business model for the combined entity had 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 carefully. Mergers were booming in South Africa at this time, where nearly a third of all global mergers were taking place (Scheepers & Swart, 2015). The companies also had to maintain strict confidentiality, because if word got out, other market players could respond and derail the merger. At the same time, the CEOs worked to develop a bottom-up restructuring of their portfolios to help focus the merger's direction.

Trust, integrity, and purity of intention were required 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 at length, and held in-depth conversations with one another to identify the best possible path forward. The two CEOs also had to make significant personal sacrifices in order to guide this process. Once merged, there could only be one CEO — but throughout the brainstorming and integration phases, neither leader allowed his ego to stand 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 organization, and to lead with a vision and discipline that would inspire others to commit to the process. It required conviction, devotion, and communication on a tremendous scale, as these were two very large, very established, and very successful businesses.

The goal of the merger was to create value and guard against destroying value, while retaining the very best of both corporations. This required a steering committee to guide the process and articulate a shared vision. Decision-making power had to be clearly allocated, integration managed carefully, and a bottom-up strategic development process established. No duplication of effort could be tolerated. Difficult decisions would have to be made, but for the merger to succeed the company needed leaders who were not afraid to make such decisions in service of the vision. The management styles of the two companies differed considerably as well, and bridging that gap — and preventing organizational silos from forming — would be a significant challenge.

The situation was important because it illustrated what transformational leadership should look like in practice. One of the most significant things the leadership team did during the merger was to survey all 15,000 employees to find out what values the new company should promote. The feedback from this survey led the leaders to recognize that their employees wanted to be part of a company committed to accountability, innovation, integrity, teamwork, diversity, and excellence (Scheepers & Swart, 2015).

Why the Situation Matters

Feedback is crucial to guiding change in a change management situation, and this group of leaders understood that from the outset. In Kohler's change management model, obtaining the trust of followers and incorporating their voice and feedback into the change process is among the recommended steps for effective leadership. Company leaders should listen to what workers have to say if they want to avoid obstacles and prevent resistance to change. It is when workers feel ignored or marginalized that resistance builds and change risks becoming a catastrophe. For two companies with 15,000 combined employees to overcome that resistance, it took great care and consideration on the part of the leaders — and it meant ensuring that workers felt valued and believed they had a voice throughout the process.

Had the two companies been unable to unite their cultures under one vision, the merger would have failed, investors would have lost money, and business would have been lost to competitors. Employee attitudes played a significant role in this process. On the Momentum side, workers were accustomed to feeling empowered; on the Metropolitan side, workers were used to a more formal management style. Momentum employees had to adapt just as much as Metropolitan employees did as the companies came together.

Another issue involved redundancy. The leaders decided that eliminating all redundancy would be harmful to stakeholders and the public interest. They therefore chose their battles strategically, placing redundant workers in a safe-haven pool where they could be deployed elsewhere later.

Communication was another key to a successful merger. In a transformational leadership and change management context, communication must be clear, constant, and two-way. It was in the so-called "soft issue" areas that pockets of resistance developed, precisely because communication there was not as clear or intensive. This was understandable, but it signaled that communication in those areas would need to improve over time. In sum, the merger of Momentum and Metropolitan demonstrated what is required in a transformational leadership situation.

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

Conclusion

Scheepers, C. B., & Swart, S. (2015). Momentum and Metropolitan merger: Authentic transformational leadership.