Navigating Mergers: Learning Through Simulation Games

DSV’s recent acquisition of DB Schenker highlights the importance of precise timing in the merger process. When companies focus too heavily on either process speed or cultural integration, they risk losing key talent or experiencing operational disruptions. DSV's careful balancing of rapid integration with attention to the cultural fit between the two organizations is a perfect example of how timing plays a critical role in merger success. Similarly, in our simulation, both timing and the balance between process and people management are crucial factors that determine the outcome.

Mergers pose significant challenges that extend beyond financial and operational concerns, especially when it comes to managing people and blending corporate cultures. To address these complexities, we use a game-based learning platform with over 150 simulation games, offering consultants worldwide the ability to create tailored, context-specific scenarios. One such game explores a merger between two IT companies, ITC and Nordit, where participants act as department managers responsible for guiding their teams through the uncertainty and change of the merger. Their primary goal is to ensure a smooth transition, symbolized by keeping employees "on the boat" as part of the newly unified organization.

Lessons from the Simulation

The game offers a crucial takeaway: teams that focus on people—their emotions, identities, and the cultural shift—are far more successful in keeping employees engaged and aligned with the company’s vision. Teams that prioritize processes over people risk leaving employees feeling disconnected, which can jeopardize the long-term success of the merger.

This article explores the lessons learned from this merger simulation and how game-based learning provides practical insights for managing real-life organizational change, particularly in mergers and acquisitions.

Performance Breakdown: Red Team vs. Black Team from the picture above

In the simulation, two groups—the Red Team and the Black Team—took distinct approaches to the merger process, as reflected in their points and the visual charts.

Black Team: Process-Oriented (113 points)

Result: The Black Team scored 113 points, reflecting their strong focus on driving the merger process forward.

Markers: The majority of their markers are closer to the boat, suggesting that their employees are aligned with the merger’s goals and strategies. Many markers are in the inner circles, indicating a smoother transition.

Analysis: The Black Team’s success can be attributed to a top-down, process-driven approach, where they prioritized meeting deadlines and minimizing disruption. While effective in advancing the merger, this approach may overlook the emotional aspects of change, which could affect long-term trust and engagement.

Red Team: People-Centered (67 points)

Result: The Red Team scored 67 points, showing a focus on addressing the human side of the merger.

Markers: Their markers are more dispersed, with some in the outer rings: Ring 1: Employees may need more clarity on new roles. Ring 2: Emotional reactions or discomfort with the merger direction are evident. Ring 3: A few markers are in this outermost ring, indicating significant resistance due to distrust or disagreement with the merger.

Analysis: The Red Team has prioritized addressing emotional needs and building trust. However, their lower score suggests that while they are building relationships, they are slower in pushing the merger process forward.

Key Takeaways:

Process vs. People: The Black Team excels in pushing the merger forward, while the Red Team focuses on building emotional alignment and trust. Each team could benefit from a more balanced approach.

Combining Approaches: A successful merger requires balancing process and people. Rushing the process risks leaving people behind, while over-focusing on emotional concerns may delay necessary progress. The ideal strategy integrates both elements to keep the merger on track while maintaining employee engagement.

Leadership Styles: Goleman's Emotional Intelligence Model

The graph above visualizes the leadership styles used by both teams, providing deeper insight into their approach.

Red Team:

Pacesetting (40%) and Affiliative (20%) styles dominate their leadership approach, emphasizing high performance and harmony. However, their limited use of visionary and democratic styles may have stifled creativity and collaboration.

Black Team:

The Black Team has a more balanced mix, with a stronger focus on visionary (25%) and democratic (10%) styles. This balance likely contributed to better coordination and innovation during the merger.

Takeaway: The Red Team's focus on performance and harmony is valuable, but incorporating more visionary leadership could enhance innovation. Meanwhile, the Black Team's balanced approach provides them with more flexibility and adaptability during the merger.

Kotter’s Change Model: Red vs. Black Team

The graph above compares both teams based on Kotter's Change Model, evaluating factors such as Sense of Urgency, Communicating Vision, and Empowering Others during the merger process.

Red Team:

• Strong in establishing Sense of Urgency and delivering Short-Term Gains but weaker in Anchoring Change in Culture and Communicating Vision.

Black Team:

• Likely performs more evenly across all factors, with a better balance between short-term execution and long-term cultural integration.

Takeaway: The Red Team needs to focus more on embedding changes into the company culture and improving communication for sustained success. The Black Team shows a more holistic approach to change management, handling both immediate and long-term challenges well.

Resistance Management

The final graph above compares the Red Team's efforts to reduce or create resistance during the merger.

• Reducing Resistance (Green): The Red Team excels at minimizing resistance, showing effective efforts to address concerns and ease transitions.
• Creating Resistance (Red): However, a portion of their actions still unintentionally causes resistance, likely due to unclear communication or decisions that create confusion.

Takeaway: The Red Team could improve by identifying and addressing specific actions that are causing resistance. By doing so, they can further streamline their project management and make their merger process more effective.

Summary

Mergers require a careful balance of process and people management. The Black Team excels at driving processes forward but could improve by addressing emotional concerns, while the Red Team successfully builds trust but needs to accelerate the process. Similar to @DSV’s acquisition of DB Schenker, timing plays a crucial role in determining the success of mergers. The ideal approach involves advancing the process without leaving people behind, ensuring both the operational and emotional needs of the organization are met for long-term success.

Change Management in Mergers:

• Kotter, J. P. (1996). Leading Change. Harvard Business Review Press. Kotter’s model of change management is widely regarded and used in discussing how to lead and manage change processes, which is directly relevant to your discussion of Kotter’s Change Model.

Emotional Intelligence and Leadership:

• Goleman, D. (1998). Working with Emotional Intelligence. Bantam Books. Goleman’s framework of emotional intelligence in leadership supports your discussion on leadership styles and how they impact organizational change, as discussed in the simulation.

Resistance to Change:

• Maurer, R. (1996). Beyond the Wall of Resistance: Why 70% of All Changes Still Fail--and What You Can Do About It. Bard Press. This book explains the types and causes of resistance to change and is useful in understanding the dynamics in your resistance graph analysis.

Leadership Styles:

• Goleman, D. (2000). Leadership That Gets Results. Harvard Business Review. This article dives into Goleman’s six leadership styles (including pacesetting, affiliative, and visionary), which you reference in the game analysis of the Red and Black Teams.

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