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In our psychological safety series, we have discussed its importance and its link to improved company outcomes. In our final article we dig a bit deeper and examine the contribution that ongoing learning and the important role that mistakes make in the creation of a psychologically safe workplace. In situations like these, “leaders need to remember that no one wakes up and wants to do a bad job”.1

Acknowledging Fallibility Amy C Edmondson, Novartis professor of Leadership at Harvard Business School in Building a psychologically safe workplace 2 provides three key tips for leaders to establish a psychologically safe workplace – an important one, is the need for leaders and managers to acknowledge their own fallibility. In a later HRM interview, she reaffirms this concept of fallibility and says that team leaders need to remember that in order for their people to adopt a growth mindset, they will need to stretch themselves and they will most likely make mistakes and falter.

“That means [they’re] going to be bad at things and [they’re] going to be wrong about things, but that’s okay. We need to have a comfort level with being a fallible human being, but that’s a barrier because most of us don’t have that comfort level.” 3

Establishing a culture where all contributions are valued and recognised as opportunities to learn, even when mistakes are made, things don’t go to plan or expectations are not met, is an integral component of a psychologically safe workplace.4 However barriers to psychological safety can occur for many reasons, one of which can be when leaders’ mindsets get in the way. This can result from the leaders or managers being averse to negative feedback and overacting accordingly.

“Nobody likes to look ignorant or incompetent in front of their colleagues, and certainly not in front of their boss. That’s a very fundamental desire. Unfortunately, in highly uncertain and highly interdependent environments, we’re going to look incompetent and stupid at times, and we’re going to make mistakes or ask questions that someone else believes to be a stupid question.”

So we need to train ourselves, and our leaders, on how they should deal with this. 5

Reframe the work as an opportunity to learn

Professor Edmondson’s second tip to create a psychologically safe workplace centres on the need for leaders to reframe the work as a learning problem as opposed to an execution issue. She reiterates that in within the modern workplace, there is great uncertainty and interdependence, so to get the work done, “We’ve got to have everybody’s brains and voices in the game.”6

“It’s about explicitly calling attention to the challenge that lies ahead. You might say, ‘This [project] really matters to our customers, so we’re going to depend on each other to get this right’.7 By framing the work as interdependent and important, and providing meaning around the work, this clarifies why other people’s voices matter and need to be heard.

Don’t shoot the messenger

Professor Edmondson’s third tip revolves around how leaders respond to people when they come to them with a mistake – how do they allow voices to be heard? Leaders need to be measured in their first response and it shouldn’t be accusatory to an admission of an error because initial reactions matter; it sets the tone for future interactions not only with that person but for anyone else present.

She concludes her advice that with these three principles in mind, if organisations are still unsure where to start – that they should just focus on one goal. “Whether that goal is to grow the business by X per cent or to move into a new market, start by articulating that and getting everyone on the same page about what it is that you’re trying to do. From there, explain that it might not be easy and so that’s why you’re going to need to have very candid, learning-oriented conversations.”8

Where to start to create psychological safety?

Change2020 partners with and helps to equip leaders to establish psychologically safe workplaces; below are some of the behaviours and actions leaders can incorporate in team meetings and interactions, and include:

· Asking a question where the team leader genuinely wants to know their team member’s answer (not their preferred answer)

· Where the leader speaks last, so as to not influence the group

· Where the leader can say ‘I don’t know how to solve this one’ or ‘all ideas are good ideas’

· Where ‘the pen’ is handed to another to lead the conversation and attempt to solve the problem

· Where defensiveness is reserved and where open dialogue is encouraged

· Where the leader models and encourages curiosity

“Leaders need to create a psychologically safe environment – What questions are asked and how they are asked is a starting point for creating an environment where people feel safe to be themselves.” (Maree Gardner – Principal Consultant, Change2020)

Our coaching sessions for leaders include questions for their team like, “What’s the one thing you see me doing that’s helping me best contribute to the team?” And, “what motivates you and how can we bring more of that to your work?”

Starting this journey is all the more necessary right now – with the accelerating pace of change, disruption and uncertainty arising from the pandemic, there is even greater need for leaders to focus on creating psychological safety for their people.

Psychological safe workplaces help businesses do more than survive – they provide the ability for people, teams and organisations to actually thrive and see better overall performance despite operating in challenging and uncertain times. 9


1 https://www.hrmonline.com.au/section/strategic-hr/psychological-safety-amy-edmondson/

2 https://www.youtube.com/watch?v=KUo1QwVcCv0 3

3 https://www.hrmonline.com.au/section/strategic-hr/psychological-safety-amy-edmondson/

4 https://www.mckinsey.com/business-functions/organization/our-insights/psychological-safety-and-the-critical-role-of-leadership development#:~:text=By%20setting%20the%20tone%20for,on%20a%20team’s%20psychological%20safety.&text=The%20results%20also%20suggest%20that,team%20climate%20(Exhibit%201)

5 https://www.hrmonline.com.au/section/strategic-hr/psychological-safety-amy-edmondson/

6 https://www.youtube.com/watch?v=KUo1QwVcCv0

7 https://www.hrmonline.com.au/section/strategic-hr/psychological-safety-amy-edmondson/

8 https://www.hrmonline.com.au/section/strategic-hr/psychological-safety-amy-edmondson/

9 https://www.mckinsey.com/business-functions/organization/our-insights/psychological-safety-and-the-critical-role-of-leadership-development#:~:text=By%20setting%20the%20tone%20for,on%20a%20team’s%20psychological%20safety.&text=The%20results%20also%20suggest%20that,team%20climate%20(Exhibit%201)

The concept of Power – positional vs personal power has been a hot topic recently in Change2020’s coaching sessions as the hybrid working model has become the new norm and our sense of uncertainty prevails. Remote working has the potential to present challenges to those who rely on positional power. Our virtual workplace has proven to be a great ‘leveller’ –  we are all stuck at home, we are all juggling the craziness, none of us are wearing our flash suits and sitting in our ‘office with a view’.

Maree Gardner, Principal Consultant with Change2020, observes that positional power more often seems to occur in more traditional, hierarchical organisations. She outlines what happens when this power dominates:

Businesses where this type of culture is present are more likely to see mediocre outcomes as opposed to great ones; they may also experience greater inefficiencies due to conflict; and they also experience staff performance that tends to just scrape in with the bare minimum. Why this happens, is simply because people don’t thrive or respond well to positional power.

Maree Gardner

Both positional and personal power are about trust, and trust is key to remote working. In a recent Harvard Business Review article, it states that for managers, their main job is to heed Ernset Hemingway’s advice, which is: “The best way to find out if you can trust somebody is to trust them.”[1] And personal power extends this concept to beyond merely doing the job but invokes for managers that just because they cannot see their people does not mean they do not trust them. They know that they can still influence, inspire and lead their people using their ‘style’ as opposed to their ‘power”. 

In this first part of our series on Leadership, we break down and explain the difference and impact of personal and positional power. Also importantly, we discuss how leaders and aspiring leaders can start the journey to develop greater personal power.

The Different Powers

Positional power is where leaders use their authority derived from their position in an organisation’s structure and hierarchy to direct or command their staff. Personal power is the ability of managers and leaders to influence people and events with or without the formal authority of a position title or hierarchy.

So what does personal power look like?

Leaders with personal power demonstrate behaviours which enhance their effectiveness and support them in building high-performing cultures. In some of our recent articles, we have discussed much around the importance of resilience in the workplace – and here again leaders’ psychological resilience, their sense of self and self-awareness is strengthened by personal power.

Brene Brown broadens the concept a little when she talks about ‘power over’ as compared to ‘power with/to/within’ and explains the difference by stating that: “What makes power dangerous is how it’s used. Power over is driven by fear. Daring and transformative leaders share power with, empower people to, and inspire people to develop power within.”[2]

With great power, comes great responsibility

There is considerable research to support that for a leader to improve their team and performance, they first have to work on themselves. The research shows that a key skill that leaders need to learn to master is being personally accountable.[3] In the words of another very wise man, Spiderman, he states “That with great power, comes great responsibility.” Leaders with a good sense of self are equipped to take responsibility for when things go right and for when things go bad.

Nobody’s perfect

Leaders with a strong sense of personal power also recognise that they are not perfect – they know what they are good at and what areas need work [4]– but that each day, they are doing the best they can to show up in excellence. A mindset that comes from personal power accepts the inevitability of mistakes and embraces the lessons that come from failing and then moving forward.

The importance of SHARING Success

Another very important element of personal power is the ability of leaders to share the praise for successes as the results of team efforts, without trying to shine a light on themselves. It is so important for leaders to promote that the positive outcomes achieved result from the collective efforts of ALL of the team. In an HBR article Ego is the Enemy of Good Leadership[5], it talks to how “an inflated ego makes us susceptible to manipulation; it narrows our field of vision; and it corrupts our behaviour, often causing us to act against our values.” The article refers to the need of breaking free of an inflated ego and recognising that leadership roles require selflessness, reflection, and courage.[6] Selflessness can also help leaders to push their team to the front to receive ALL the accolades – and they as leaders are absolutely fine with that.

It is the comfort in one’s own skin and self-awareness that is at the foundation of real leadership power, not from your title on your door or the corner office.  Remember that it is not your position in the company that will energise your people – and sure they may obey your positional power, but it is your personal power that they will be inspired by.[7]

Bringing personal power to your leadership is the difference between mediocrity and greatness. We will explore more guidance and tips on how to build personal power and the positive impacts you are likely to see in your organisation in our next article – we hope you join us then.


[1] https://hbr.org/tip/2020/04/trust-is-even-more-important-when-youre-working-remotely

[2] https://brenebrown.com/wp-content/uploads/2020/10/Brene-Brown-on-Power-and-Leadership-10-21-20.pdf

[3] https://hbr.org/2019/01/to-improve-your-team-first-work-on-yourself

[4] https://www.mckinsey.com/featured-insights/leadership/the-ceo-moment-leadership-for-a-new-era

[5] https://hbr.org/2018/11/ego-is-the-enemy-of-good-leadership

[6] https://hbr.org/2018/11/ego-is-the-enemy-of-good-leadership

[7] https://brenebrown.com/wp-content/uploads/2020/10/Brene-Brown-on-Power-and-Leadership-10-21-20.pdf

In the final part of our series on mental health at work, we examine the importance of ensuring and creating a psychologically safe workplace. We have previously emphasised that where a culture promotes psychological safety, where it is ‘safe’ to voice an opinion, make a mistake or challenge an idea, that this creates a sense of value; it says to people ‘you are important, you are valuable’. Not only does such an environment generate wellbeing for your people but there is considerable research that demonstrates that the highest performing teams have one thing in common – psychological safety.

The numbers don’t lie

The research shows that psychologically safe workplaces that enable people to undertake moderate risk-taking, be upfront with ideas, and more open to creativity – these are the kind of things that promote innovation and market breakthroughs. Also, there is hard financial data that supports this premise, with a 2017 Gallup report which found that “if organisations increase psychological safety, it makes employees more engaged and can lead to a 12% increase in productivity.”[1]

Start by shifting your mindset

So psychological safety generates multiple benefits, but how can you ensure that your workplace is a psychologically safe space for your team? First, shift your mindset when conflicts come up, and step away from adversarial “I win, you lose” scenario. Instead take a more conciliatory approach, a team player approach by asking, “How could we achieve a win-win situation here?” Be brave and ask for feedback to enable other perspectives – remember that innovation and new ideas come from diverse thinking. Also remember at the end of the day we are all human and can learn a lot from each other – adopt a learning mindset, be authentic and receptive to different viewpoints – you will be richer from the experience.[2]

Self-awareness and looking good

Another important step for all staff, both leaders and team members, is to develop greater self-awareness. This is because self-awareness is closely linked to psychological safety, as when we feel psychologically safe at work, we are willing to accept that we have skills and knowledge in some areas but don’t have all the answers. “Psychologically safe employees are more interested in learning, excellence, and genuinely connecting with others than in looking good.”[3] And whilst this sounds like something to which we all aspire, human nature often is the stronger force, plus we are socialised from early childhood to worry about how others perceive us. Sometimes “we may need to override some of our very human instincts, the instinct to look good instead of being truthful, or to avoid hurting someone’s feelings instead of being truthful.”[4]

Feeling safe helps feeling included

Psychological safety also plays an important role in diversity, inclusion, and belonging. Workplaces when hiring can establish policies and processes to achieve greater diversity—whether gender, ethnicity or geography. But this is not enough – diversity and inclusion mean exactly that. Real inclusion is when people of different backgrounds feel that their voice, opinion and contribution matter. There are times where people speak up at important meetings but still do not feel that people like them belong there. For people to have a real sense of belonging, they need to feel that this is a place where they can thrive; plus feel that their contributions are recognised, and they are included as a member of the group.[5]

Making it safe – both near and far

A key focus of this series is that during a global pandemic, it more important than ever to focus on the mental health of your staff. Lock downs and other safety precautions have created a huge part of the workforce to work remotely which may seemingly lessen leaders and managers ability to address their people’s welfare, face to face. Fortunately, “we have the technology” and can be effective virtually with things like break-out rooms and chat functions to encourage everyone to participate off-camera; and managers can continue conversations with staff one-on-one for specific questions or more personal discussions.[6] Also the upside of the technology is that it enables leaders and managers to get access and communicate more effectively (with virtual meetings there is no one at the back of the room who can’t see or hear what’s going on) and to more of their people.

When the going gets tough

Psychological safety is also important in tough negotiations or difficult conversations.  At Change2020 we have found in our work in the industrial relations area, that by creating an environment of psychological safety, better outcomes are more likely to be achieved. A safe environment enables ideas to be presented; questions to be asked and concerns to be raised.  Psychological safety helps reduce our brain’s threat response so all involved can participate, listen and understand and be understood.

We work hard to build and protect psychological safety – within our own team, when working with our clients, when tackling tough subjects with executive teams, and when supporting leaders to make hard and possibly unpopular decisions. And so by creating a psychologically safe workplace, not only are you likely to see increased motivation to tackle difficult problems, you are also likely to see higher levels of engagement, more learning and development opportunities, and importantly, better performance.

“Psychological safety enables GREAT things to happen; LEARNINGS to occur and REAL conversations to take place – without it, mediocrity may prevail.”

Maree Gardner – Change2020


[1] https://www.cnbc.com/2020/10/05/why-psychological-safety-is-important-at-work-and-how-to-create-it.html

[2] https://hbr.org/2017/08/high-performing-teams-need-psychological-safety-heres-how-to-create-it

[3]  https://hbswk.hbs.edu/item/make-your-employees-psychologically-safe

[4] https://hbswk.hbs.edu/item/make-your-employees-psychologically-safe

[5] https://hbswk.hbs.edu/item/make-your-employees-psychologically-safe

[6] https://www.cnbc.com/2020/10/05/why-psychological-safety-is-important-at-work-and-how-to-create-it.html

Workplace Lessons from Tokyo

The close of an extraordinary Olympic Games in Tokyo occurred just a few days ago but the spirit of sportsmanship and the greatness and support of humanity witnessed is still reverberating across the globe. Much has been written of how needed these games were as a salve to the world’s mental health, and the Tokyo Olympic Games delivered that in spades. But never has there been amongst the world’s most competitive athletes such displays of sportsmanship, pep-talking, mentoring and general camaraderie that traversed teams and nations. The team support for some meant going beyond their own extremes of endurance to enable their team mate to win a medal or to decide to share a gold medal with a competitor in recognition of effort, tenacity and performance. From these unprecedented Olympic games where the best of humanity triumphed, we at Change2020 believe there were many great takeaways and lessons that have a place in our workplaces and within our teams – we invite you to read on:

Lessons as to how we can help each other be the best versions of ourselves

Despite the athletes enduring training regimes impacted by lock downs, often limited access to support, and certainly no “roar of the crowd” in the lead up to and during the Olympics, by persevering and competing, they still were and are victorious – medal or no medal.  We believe that from the efforts of all the athletes who competed, are lessons that have broader application for other parts of our lives. There are lessons as to how we can help each other be the best versions of ourselves, how when we work towards a common goal and win, we all win together.

Encouragement and belief can get you over the line

One of the best examples can be found with Aussie Cedric Dubler who was placed last of 21 athletes to finish the decathlon. But what has become more well-known are his efforts to enable teammate Ash Moloney to run a personal best in the 1500m and secure an historic bronze medal.

Moloney, although a medal hero, is the first to say that he owes much to his more experienced teammate Dubler, who despite a hamstring injury finished the gruelling competition. Not only did he persevere to finish, but he also provided passionate encouragement and tactical guidance to Maloney, his teammate who was starting to flag around the halfway mark of the 1500 metre race.

Some days are diamonds, some days are hard and flat

And Maloney was really starting to flag, and he has stated in subsequent Olympic interviews, he was starting to “wobble”. It was at this moment that Dubler started yelling encouragement and reminding Moloney of what he was capable of. We recognise that such a moment is mirrored in life when sometimes, you just need someone to push you along, to motivate and incentivise you – we all have hard days, flat days, and days when we are not at our best. We remind managers and leaders that sometimes your people need someone to remind them that they are capable of and skilled to achieve all sorts of goals, both professional and personal.  And we remind everyone that sometimes that someone has to be you – where you can use things like self-affirmations and resilience training to reiterate that you have put in the hard work and are capable to reach for and attain so much.

Sometimes changing your style of mentoring can achieve amazing outcomes

Changing your mentoring style or approach can result in amazing outcomes. Dubler’s coaching during the race was more like yelling. Yet in testament to the trust and shared goals of the two teammates, it was exactly what Maloney needed at that particular time. By this stage Dubler had pulled a hamstring, but Dubler through his shouts of encouragement to Maloney, modelled that it is possible to continue through the pain. Push yourself so you can push others, put yourself outside of your comfort zone and push harder – your team will be inspired and follow.

There were many sage life and professional lessons from the Olympics. Chief amongst them we believe, is that we can achieve much together when we work towards a shared goal – there is no “i” in team – life, work and 1500s are much easier when you’re not on your own.[1]


[1] https://www.smh.com.au/national/why-everyone-needs-a-cedric-dubler-in-their-lives-20210808-p58gwq.html

In the first part of our series, we provided an overview of the COVID-19 impact on the mental health of the Australian workforce. In our discussion today, we focus on how you can prepare your workplace to become “resilient-ready” and get on the front foot of your employees’ mental health in readiness of uncertain times ahead.

Our Change2020 expert in this area sums it up beautifully and simply with,

“You can’t triage your people’s lack of resilience as the crisis is happening – that’s like saying, we better create an evacuation plan as the fire alarm bell is going off.”

Maree Gardner

As was evidenced in the first part of this series, the global pandemic continues to create high levels of uncertainty, and uncertainty has a direct link to our overall wellbeing. The what and the why for resilience is straight-forward – if your employees’ mental health is flagging, there are direct links to aspects of your operations, where you might see significant dips in production levels or high percentage of absenteeism or staff attrition – risks to your revenue source and rising cost base implications. Building resilience equips your staff to keep ‘find a way to move forward’ despite continued changing and unpredictable conditions. Making the mental health and wellbeing of your people a priority not only is a worthy investment, but it is also key to help secure your organisation’s long-term sustainability.

Fortunately, we can help you along the road to resilience for your people with a range of services and resources; one service we offer that has proven to be highly effective and applicable across all industry sectors, is the personal resilience plan. At Change2020 we facilitate the creation of these plans based on the three Rs:  Refuel, Ready, Reframe.


Refuel

With the rise of remote working there is greater flexibility to incorporate refuelling activities into your working day. Refuelling means to recharge yourself physically-mentally-emotionally with things like exercising and/or stretching, being outside in nature, listening to music, playing with a pet, or playing a musical instrument – whatever recharges your inner batteries. And like other parts of your daily routine these activities need to become ritualised and a non-negotiable part of your daily practices.

Ready

The term “Ready” in the resilience plan refers to a toolbox of techniques that are at hand when you might need them during stressful times at work – tools like utilising your muscles. By tensing our muscles, we mimic our body’s physiological response to stress and anxiety. Then by relaxing them we relieve our body from the stress response and allow our rest and recuperation nervous system to take over.

We also recommend breathing exercises, as research indicates there is a correlation between deep breathing and calming our emotional reactions. The simple 4×4 method, breath in (nasally) for a count of 4, hold it for a count of 4, exhale (mouth) for a count of 4 – repeat 4 times.  There are many more techniques available within RRR Program which can be applied regularly, easily and often while sitting at your desk or carrying out your daily work activities.  

Reframe

For the reframing section of the personal resilience plan, encourages you to identify thinking errors because it is these errors that can cause faulty thinking. Classic examples of faulty thinking: catastrophising – when we blow things out of proportion and immediately go to the worse-case scenario; or black and white thinking – when it is all or nothing thinking with no movement for negotiation; and personalising thinking – at the end of the day, it’s my fault.

In our resilience program, we recommend that as soon as you notice any thinking errors, firmly but gently say to yourself – STOP. Even the action of recognising the thinking errors helps to distance you from them. Another reframe technique is to ‘catch-out the lie you are telling yourself’ otherwise known as a limiting belief. Replace your limiting beliefs with expanding beliefs where you flip the negative into a positive or a worry into a possibility. Your thoughts become your beliefs which, in turn, become your mindset. Your mindset fuels your actions, which create your reality. Choose a positive mindset.


We have just touched on some of the areas of our RRR Resilience Program and there are many more techniques and much more information available, and we encourage you to reach out to our expert here.

In our next and final instalment in this series, we explore more about improving the psychological safety of your organisation and its people – we hope you join us then.

Healthy Minds, Healthy Business

To say that the impact of the pandemic on mental health on individuals and employers is huge, is not remotely an overstatement. Despite the growing awareness of the world’s mental health status across the globe, many companies do not make it a high enough priority and relegate the responsibility to their HR department.[1]

At Change2020 we believe that supporting your workforce’s mental health needs to take more of a front seat in your operating model and your organisational culture. Plus as we all continue to face an uncertain future in regards to COVID, investing in your people is a tangible action you can take to help secure your organisation’s long-term sustainability. This is the first in a series of articles we will bring to you of the importance of tackling mental health challenges for successful and sustainable organisational change.

4.25x ROI for every dollar spent

By integrating workplace mental health best practices, you are likely to see return on investment (ROI) for such actions. McKinsey research states that by doing this, you can significantly boost employee mental health and job satisfaction and generate a return of 4.25x ROI for every dollar spent.[2]

Failure to Address Your People’s Mental Health Costs

If that wasn’t a strong enough reason, failure to address the cost of poor mental health of your workforce, places your business at significant risk. The Australian Productivity Commission estimates that mental health conditions cost Australian workplaces AU $17 billion (US $13.6 billion) every year through absenteeism and lost productivity.[3] These figures have risen significantly since the COVID-19 pandemic, with psychological effects forecast to outstrip physical effects in Australia.[4]

Your Culture is Critical

Investing in your culture is paramount to support the mental health of your employees.

A culture which promotes psychological safety where it is ‘safe’ to voice an opinion, make a mistake or challenge an idea creates a sense of value; it says to people ‘you are important, you are valuable’.

Furthermore, leaders who overtly and comfortably demonstrate their own vulnerabilities and are able to express how they feel adds to the sense of belonging and inclusion. Human’s are designed to ‘belong’; creating and nurturing a culture based on care, kindness, clarity and inclusion has a direct positive impact on the wellbeing of employees.

You Can Take Action Now

But fear not, you can take steps in the right direction, right now. A very simple action for leaders is for them to encourage informal social groupings (both virtual and face-to-face) that bring together people from across roles and levels, – this all helps to build a greater sense of connection throughout the whole business. Another very simple action that leaders can take is to reach out to their people just to say ‘hi, how are you’ as opposed to a pure work-based discussion – this small act has a big impact, as outlined below.

Four Little Words Can Make a Big Difference

In a recent McKinsey study more than 40% of staff surveyed, described a very real decline in their mental health during the COVID-19 crisis. Perhaps what was more shocking, was the nearly 40 percent of respondents said no one had taken the time to quickly check in and ask, “How are you doing?” No supervisor, no team leader, no one.[5] In previous articles we have reaffirmed the importance of communication in employee engagement and staff retention. The simple act of checking in on people is so important. Those four little words of asking someone how they are faring, makes a big difference.

More To Come

While the mental health fallout issues of COVID-19 are well known, many workplaces still need to prioritise the mental health of their people and to start taking consistent action. We urge leaders to act in support of workplace mental health best practice right now.

In the remainder of our series, we unpack what some organisations have done during the pandemic, how you can design your workplace to minimise mental health issues, plus how to build supportive community groups – all actions to help ensure sustainable change and longevity for your business. We hope you join us for this series.


[1] https://www.mckinsey.com/featured-insights/asia-pacific/out-of-the-shadows-sustainably-improving-workplace-mental-health

[2] https://www.mckinsey.com/featured-insights/asia-pacific/out-of-the-shadows-sustainably-improving-workplace-mental-health.

[3] Productivity Commission inquiry report: Mental health volume 2, Australian Government Productivity Commission, June 2020, pc.gov.au.

[4] https://www.mckinsey.com/featured-insights/asia-pacific/out-of-the-shadows-sustainably-improving-workplace-mental-health

[5] https://www.mckinsey.com/featured-insights/asia-pacific/out-of-the-shadows-sustainably-improving-workplace-mental-health


In the last instalment of our M&A series, we touched on the importance of your most valuable asset – your people.  No less significantly because on the flipside with their link to your ultimate success, is that your people also have the potential to wreak the most havoc – so investing in your people to chart a new course through the merger or acquisition is a wise one.

In this discussion, we expand on the need to invest in your most important asset.

People Can Make or Break the Deal

Change2020 recognises that the vital role of an organisation’s people can make or break a merger or acquisition. We know that in almost equal measure that the most valuable component of the merger and acquisition is also the most challenging. The people can be resentful, nervous, fearful and skeptical of the change; they are wary and therefore often resistant to the communicated ‘future state’. Getting the people on board and trusting the incoming leadership team is the key priority; they need clarity as rapidly as possible so they can remain focused on their role, despite the uncertainty resulting from the merger or acquisition. At Change2020, we build a 100-day transition plan to support the people navigate the change. The 100-day plan focuses on structural design, role clarity, communication and engagement initiatives and building the effectiveness of the newly formed executive leadership team.   

Mergers and acquisitions are relatively common and are attractive business opportunities when managed effectively; too often however investors or leaders fail to take into account that the enthusiasm for the merger or acquisition is often not shared by the employees. So, following from this, we see many deals falter with high staff attrition rates resulting from negative attitudes from employees.[1]

In a Deloitte’s employee survey,[2] results showed that organisations can help address attrition and provide additional support to employees during organisational change by taking the following 3 steps:

  • Providing sufficient access to information about the change/s.
  • Continuing ongoing professional and learning development.
  • Reducing uncertainty through credible leadership

Credible leadership

It is the last of these, when organisations place focus on credible and authentic leadership that the transition to ‘future state’ can be accelerated as employees feel trusted, included and engaged. We know that positive organisational culture and leadership are absolutely key to the success of any merger or acquisition.

During large scale changes, “employees want leaders who are credible and tell the truth. If employees perceive their leaders to be credible, some of their uncertainty about the merger or acquisition can be reduced.”[3] Investing in communication with messages sent by leadership, especially messages that reaffirm ongoing organisational support, can also help convey credibility.

Case Study on Leadership and Culture in M&A

Perhaps the most effective way we can demonstrate the importance of supportive leadership is through our Case Study. In this instance, we helped employees and leaders from three council offices create a binding workplace culture after merging into one larger council.

Process

Communication was critical to the success of this project. We started with a clear explanation of why developing a new mission and vision statement and set of values (MVV) was important and what it would mean for the entire organisation.

We provided coaching to key leaders, interactive facilitation techniques, confidential surveys, and a series of engaging activities and workshops that mixed employees from every level and function. Team leaders were also equipped with the right tools to embed the MVV into day-to-day activities to ensure the organisation was living the values.

The Outcome

The process we used helped build trust, enhanced relationships and improved knowledge of what all parts of the business do. A new platform for behaviour was developed, along with a new strategic focus, all of which contributed to establishing a fresh, vibrant culture for the new merged organisation.


[1] https://www2.deloitte.com/content/dam/Deloitte/jp/Documents/human-capital/hcm/jp-hcm-hr-retention.pdf

[2] https://www2.deloitte.com/content/dam/Deloitte/jp/Documents/human-capital/hcm/jp-hcm-hr-retention.pdf

[3] https://www2.deloitte.com/content/dam/Deloitte/jp/Documents/human-capital/hcm/jp-hcm-hr-retention.pdf

In a recent McKinsey review,[1] it revealed that nearly 79% of large-deal mergers and acquisitions (M&As) were still outperforming years after the M&A had concluded. So, what did the CEOs of those organisations do to achieve this success? There were four practices that successful M&As implemented for long term success with one of the key practices being “institutionalising new ways of working.”

Interestingly, in the same McKinsey review, they included survey results that showed “60 percent of acquirers expressed regret that they did not dedicate more resources to #culture and #changemanagement during the integration process.” In this article, the final part of our M&A series, we expand on how successful M&A deals transition in the short term, and set up for success into the future, specifically how they shift and change in order to implement the new ways of working.

Once the acquisition or merger negotiation is complete, organisations frequently need support through the transition phase for a variety of things, like operational and workforce planning strategies, the implementation of new processes, fostering stronger employee engagement and communication.

Senior leaders often have spent considerable time on negotiating the M&A deal, yet they underestimate the complexity of shifting the combined organisation to new ways of working.  Operating model and cultural changes need to have clear employee expectations and consequences communicated, which in turn needs an extensive communication strategy that meets the needs of your new stakeholders.

Communications is just one area where we at Change2020 can provide you with comprehensive support and expertise in transitioning the business and employees through the M&A process.  We can also work with you to formulate due diligence, bid risk analysis and develop a sound people acquisition strategy, right through to integration of transition plans following the successful bid. We take due diligence seriously so you can confidently rely on the data you’re using to inform your decisions and reduce risk.

We can also assist you to change critical processes because we are able to recognise that by changing things like approval levels, metrics, and expectations in the capital spend, you can drive more capital to new profitable projects.[2] These are simple process changes that have big impact but often neglected as considerations for M&A transition success.

Another key consideration that often does not get due attention but has potential for major post deal fallout is the people impacted by the new ways of working. We can help you create powerful employment engagement strategies for all levels including executive management. People are your most important asset within the M&A deal and they have the potential to wreak the most havoc, so an investment in helping your people chart a new course through the M&A is a wise one.

Each M&A deal is unique, but they all face common challenges. “Industry changes, post-deal expectations, market downturns, and executive management can make or break a transaction.”[3] Setting an effective change strategy that looks beyond the completion of the deal, will equip organisations for long-term success, well beyond the merger and acquisition negotiation.


[1] https://www.mckinsey.com/business-functions/m-and-a/our-insights/post-close-excellence-in-large-deal-m-and-a?cid=other-eml-alt-mip-mck&hdpid=3ef849c4-1aa2-4b97-8755-63bc0f3d87b7&hctky=12420608&hlkid=dc53caf901494289b405ec062ae56ed7

[2]  https://www.mckinsey.com/business-functions/m-and-a/our-insights/post-close-excellence-in-large-deal-m-and-a?cid=other-eml-alt-mip-mck&hdpid=3ef849c4-1aa2-4b97-8755-63bc0f3d87b7&hctky=12420608&hlkid=dc53caf901494289b405ec062ae56ed7

[3] https://www2.deloitte.com/us/en/pages/mergers-and-acquisitions/articles/merger-and-acquisition-compendium.html

Companies often make communications for a merger a low priority compared to the seemingly more pressing operational issues. Not a great plan, as research into mergers has shown that effective communication for the merger and acquisition (M&A) journey is key to the ultimate success of the merger.[1] Importantly, merger communication can only be truly effective, if it can properly explain and engage all stakeholders with the “why”. In getting the M&A process right, it is very often about the WHAT, HOW and WHEN – in this second part of our M&A series, we talk about the importance of communicating the WHY.

All merger communications need to be based on a set of core messages arising from three things: the reason or rationale for the M&A, the employee value proposition (EVP), and the associated change story. The rationale is an explanation of why the merger is taking place and what value will emerge as a result. The EVP describes why the M&A will provide a range of opportunities for employees – note careful language needs to be used here, as in some restructure situations, jobs will be lost. Lastly, the change story needs to describe what must be done to ensure that the M&A delivers value, and why the merger departs from “business as usual.”[2]

The core messages around these three areas must also be specifically tailored for each group of stakeholders; external – customers, shareholders/investors, business partners/suppliers; and the very important internal group, the employees. It is within this area of communicating to stakeholders, that Change2020 can assist with developing the right set of strong core messages that outline the value proposition that works for each group.

Change2020, has a number of senior consultants who are experts in this space – one such expert is Ms Tracey Wright who has extensive experience in M&As, in particular establishing a corporate communications function areas for a merger of three large corporations. Tracey outlines the importance of getting the “why” out in all merger communications.

“Explaining the reason why the merger is happening must be the very first step in the communication process. Communications should have targeted messaging, explaining why it is good for the customers, the employees and why it is good for the business.”

Tracey Wright

People are generally attached to their employer’s brand and have invested time, effort and loyalty in the business.  It’s really important to show empathy and to ensure you understand the sensitivities around mergers and/or acquisitions for those experiencing it.  For employees, M&As bring uncertainty, they can be confronting and an emotional time.  To help minimise this, it’s vital to consult thoroughly with stakeholders, asking for their opinions, acknowledging their perspective and experience and taking them on the journey.

The next step is then to be very transparent in the following communications, as to what is going to change and how people are likely to be impacted. Special attention also needs to be made to communications to illustrate that the leaders are aware of how people will be affected. Employees need to know that they have been considered.”

Change2020 works with communications teams to create the core messages and assist CEO and leadership teams to develop and clearly articulate the vision and value of the M&A, and importantly the “why”.  As a part of this process, Change2020 also supports leaders and their senior teams with the tools and resilience needed to take their people through the M&A process. Change can generate uncertainty, fear, and disengagement. So, during the turbulent times of the merger process, leaders need to focus on providing clarity, rather than confusion.


[1] https://www.quantumworkplace.com/future-of-work/how-to-create-stability-in-the-workplace

[2] https://www.mckinsey.com/business-functions/organization/our-insights/communications-in-mergers-the-glue-that-holds-everything-together

June 30 fast approaches, and with rallying financial markets and vaccine rollout, financial analysts anticipate that Mergers and Acquisitions (M&As) will continue their upward trajectory for the next financial year and beyond.

With M&A continued growth projected, we bring you a 3-part series with tips and advice on the challenges and opportunities for organisations who are about to embark, have embarked or who have merged and are wondering, “what now?”. Change2020 has comprehensive experience in providing support and expertise in transitioning businesses and employees through the M&A process.

In our first M&A discussion, we focus on an issue that often presents many challenges, and it is all about the organisation’s most important asset, its people. With M&As, the human factor plays a huge role and organisations need to plan for this area. They need to consider how they will navigate through employment contracts, negotiate and manage union representatives and make sure there are no potential breaches of labour laws or exposures to industrial risk and merge the two cultures to create a sustainable organisation moving forward.

A leading HBR article in this space, The Big Idea: The New M&A Playbook states, “study after study puts the failure rate of mergers and acquisitions somewhere between 70% and 90%”. KPMG research also shows that only a third of mergers, acquisitions and takeovers add value. In fact, 70% “reduce shareholder worth or, at best, are neutral”.[1]

So, these are worrisome stats, and beg the question why do things so often go wrong?

KPMG proposes that an inadequate focus on value creation and “a gaping inability to keep key personnel and get the two corporate cultures to work in unison” are the cause of many M&A failures. They also state that during the process, it’s easy to treat a prospective transaction as a purely mechanical and scientific process. Often the critical people aspect of an M&A, which is rarely straightforward, gets overlooked as a key issue. [2]

We recognise that when dealing with complex industrial and human relations surrounding mergers and acquisitions, organisations need to be aware of specific issues and have access to specialist knowledge of the industrial relations space. Our M&A industrial and workplace relations expert, Brad Bevan, in conjunction with the M&A advisory team work closely with clients to anticipate and manage potential issues. Brad also has extensive experience dealing with C-suite and board level industrial relations issues. He has a special knack of solving difficult industrial negotiations and avoiding things escalating to litigation.

Once these negotiations are complete, Change2020 continues to support organisations through the transition phase with advice on immediate practical needs, such as operational and workforce planning strategies, fostering stronger communication and employee engagement to sustain positive M&A outcomes achieved.

Parts 2 and 3 of this M&A series will look at other people issues relating to due diligence, compliance with post-deal clauses, intellectual property, key personnel and integrating the acquisition into existing business structures and culture.

We encourage you to consider these articles, as they examine the significant challenges that organisations can face on the M&A journey. What’s more, these issues can potentially become future major challenges unless they are effectively addressed right now in the present.


[1] https://www.hrmonline.com.au/how-tos/hr-influence-merger-acquisition/

[2] https://www.hcamag.com/au/news/general/how-can-hr-help-with-mergers-and-acquisitions/152417