Operational Excellence

How to manage a successful post-merger integration?

3-minute masterclass

Only a few giants will survive in the harsh battle against competitors, new market entrants and external forces best fitting to the new world. The number of banks will shrink tremendously in the upcoming years and we will see many mergers in the market. Applying agile elements in a post-merger integration (PMI) approach is necessary to build the new banks of tomorrow in the post-COVID era. 

A wave of mergers is just around the corner amounting to never seen dimensions. Tech giants with innovative ideas and cutting-edge technology are stealing the show and the need for strongly reducing costs puts high pressure on traditional banks. This forces European banks into severe merger activities for winning in market size to become “too big to fail“. 

You’re growing, good. What now?

But, with size comes complexity. A bank-wide integration project is of large-scale and creates difficulties due to extensive changes occurring on all sides. Experience shows change hurts. It implies that you have to step out of the comfort zone, dive into uncertainty and make your way along an unpaved road. 

Waterfall PMI

The classical waterfall project approach with its pre-defined phases, rigid project plans and no room for altering the route was put to the test and revealed its flaws and limitations. The pure waterfall methodology best matches a world characterised by long phases of stability and only brief interruptions of change periods to overcome that undesirable phase as fast as possible. This doesn’t hold in a constantly changing banking industry and a new era after the COVID crisis.

The COVID situation has been an unwelcome lesson in teaching us how to cope with uncertainty and how to handle unforeseen and long-lasting change. We have had to adapt to a new working environment. We have learned to use new collaboration tools, work in a team scattered around different locations and adapt our way of communication in line with the changing environment. We had to create new work structures on the fly and we constantly revised and corrected our newly established processes in place – both in a business and a private matter. 

In a world which got shaken by a pandemic with unclear consequences, we naturally integrated an agile iterative accommodation approach in the biggest project of our life: “Working in a digital and remote-only mode”. The same holds for a large-scale merger integration project marked by uncertainty for both management and employees.  

Agile PMI

An agile post-merger integration approach offers that same open-mindedness and flexibility we have learned. It brings in speed by fast delivering in incremental cycles. But, completely stepping out of the waterfall world and only surfing on the agile wave is risky for a large project such as a PMI. A pure agile post-merger integration means little upfront estimating and project planning but instead directly jumping into the unknown accompanied by insufficient overall progress tracking, no whole front-to-back view and high risk of scope creep. This doesn’t work.

Hybrid PMI

We need a combination of both worlds. Waterfall + agile = hybrid. A hybrid PMI model allows for being guided by high-level project plans with functional milestones while working iteratively on receiving and integrating constant feedback during the integration process. The waterfall framework in the background gives, especially at the beginning of the integration project, the employees more stability, an already-known framework to hold on to, and a direction in which to go. 

Picture 1: Waterfall, Hybrid and Agile approach

A more agile change management during the long process of merging banks is characterised by not fighting against change but instead embracing it. Responding to an external stimulus rather than sticking to an old plan is the norm. 

By integrating agile elements like managing a backlog, introducing short sprint cycles and reflecting in retrospectives, the new, open and agile mindset can evolve, with the constant feedback loops enabling greater synergies between all parties. During the merger integration, it will be easier to quickly adapt to a changing landscape and it will ensure a smoother way to navigate through the huge change programme. 

The bank of tomorrow

Allowing for an agile mindset and its elements in the post-merger process, the financial institution is on its best way to create a new bank. The new data-driven, digital savvy and open bank of tomorrow can be incrementally built by allowing room for change and a new mindset of continuous development. A more agile PMI approach is a necessary step towards building a stable and future-ready bank with a lean and adaptable operating model and a restless spirit. 

Standing on the side-lines is no option. Are you ready to rebuild PMI? We are! If you’d like to discuss this further or just share knowledge, we’re always up for a good chat!