When two companies join forces to become a new business, the company name isn't all that usually changes. One modification that has great potential to affect the new business is a change in the organizational structure. Regardless of whether the changes are large or small, planning and an intense analysis are vital to creating a decision-making and communications framework that will support post-merger objectives and help the new business grow.
Structural Change Considerations
An organizational structure refers to the levels of hierarchy, chain of command, management systems and job structures and roles. In response to a merger, duplicate departments need to be merged or eliminated, and at least some employees from both companies will either transfer to new positions or leave the company. In the same way, eliminating duplicate management positions will result in reassignment or termination for some managers. Communication patterns will typically change as managers acquire new employees and everyone adapts to changes in policies and procedures designed to fit the new company.
Premerger Due Diligence
Review the organizational structures of both businesses to see how well each compares to the mission and long-term objectives for the new company. Analyze hierarchies and reporting relationships to see where the existing structures clash and where they're synchronized. Once you’ve completed an initial review, appoint an integration team to speak with core employees and get their perspective on what works and what doesn’t work in their respective structures. Make preliminary decisions about which features best support the new business.
Structural Change Options
Organizational structure change options include starting from scratch, eliminating one in favor of the other and combining the best features of both structures into one. Which is the best option depends on the size, complexity and objectives of the new business. For example, two small businesses with flat organizational structures may need to convert to a more hierarchical and organized structure that allows for greater internal controls and division of responsibilities. It's also useful when the owners or chief executive officer delegates some decision-making responsibilities.
The Three Phases of Change
Changing an organizational structure due to a merger involves much more than creating a new organizational chart. Although the chart will reflect decisions made about how the new business’s employees will communicate with one another and make decisions, this typically occurs in multiple phases. The first phase is awareness, during which employees from both businesses come to understand the new company’s direction and what it will mean to them. The goal of the second phase is acceptance, as the integration team works to build new relationships and employees at every level transition into new roles and new ways of getting work done. In the final phase, the merger is complete and the new organizational structure becomes fully adopted.