a

GAO

United States General Accounting Office

Report to Congressional Subcommittees

July 2003 RESULTS-ORIENTED 

CULTURES

Implementation Steps 

to Assist Mergers and 

Organizational 

Transformations

GAO-03-669
At the center of any serious change management initiative are the people. 

Thus, the key to a successful merger and transformation is to recognize the 

“people” element and implement strategies to help individuals maximize 

their full potential in the new organization, while simultaneously managing 

the risk of reduced productivity and effectiveness that often occurs as a 

result of the changes. Building on the lessons learned from the experiences 

of large private and public sector organizations, these key practices and 

implementation steps can help agencies transform their cultures so that they 

can be more results oriented, customer focused, and collaborative in nature. 

Key Practices and Implementation Steps for Mergers and Organizational Transformations 

Practice Implementation Step 

Ensure top leadership drives the 

transformation. 

• Define and articulate a succinct and compelling 

reason for change. 

• Balance continued delivery of services with 

merger and transformation activities. 

Establish a coherent mission and 

integrated strategic goals to guide the 

transformation. 

• Adopt leading practices for results-oriented 

strategic planning and reporting. 

Focus on a key set of principles and 

priorities at the outset of the 

transformation. 

• Embed core values in every aspect of the 

organization to reinforce the new culture. 

Set implementation goals and a timeline to 

build momentum and show progress from 

day one. 

• Make public implementation goals and timeline. 

• Seek and monitor employee attitudes and take 

appropriate follow-up actions. 

• Identify cultural features of merging 

organizations to increase understanding of 

former work environments. 

• Attract and retain key talent. 

• Establish an organizationwide knowledge and 

skills inventory to exchange knowledge among 

merging organizations. 

Dedicate an implementation team to 

manage the transformation process. 

• Establish networks to support implementation 

team. 

• Select high-performing team members. 

Use the performance management system 

to define responsibility and assure 

accountability for change. 

• Adopt leading practices to implement effective 

performance management systems with 

adequate safeguards. 

Establish a communication strategy to 

create shared expectations and report 

related progress. 

• Communicate early and often to build trust. 

• Ensure consistency of message. 

• Encourage two-way communication. 

• Provide information to meet specific needs of 

employees. 

Involve employees to obtain their ideas and 

gain their ownership for the 

transformation. 

• Use employee teams. 

• Involve employees in planning and sharing 

performance information. 

• Incorporate employee feedback into new 

policies and procedures. 

• Delegate authority to appropriate organizational 

levels. 

Build a world-class organization. • Adopt leading practices to build a world-class 

organization. 

Source: GAO 

The Comptroller General convened 

a forum in September 2002 to 

identify useful practices and 

lessons learned from major private 

and public sector mergers, 

acquisitions, and organizational 

transformations. This was done to 

help federal agencies implement 

successful transformations of their 

cultures, as well as the new 

Department of Homeland Security 

merge its various originating 

components into a unified 

department. There was general 

agreement on a number of key 

practices found at the center of 

successful mergers, acquisitions, 

and transformations. In this report, 

we identify the specific 

implementation steps for the key 

practices raised at the forum with 

illustrative private and public 

sector examples. 

To identify these implementation 

steps and examples, we relied 

primarily on interviews with 

selected forum participants and 

other experts about their 

experiences implementing mergers, 

acquisitions, and transformations 

and also conducted a literature 

review. 

www.gao.gov/cgi-bin/getrpt?GAO-03-669.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact J. Christopher 

Mihm, (202) 512-6806 or mihmj@gao.gov. 

Highlights of GAO-03-669, a report to 

congressional requesters 

July 2003 

RESULTS-ORIENTED CULTURES

Implementation Steps to Assist Mergers 

and Organizational Transformations 
Page i GAO-03-669 Merger and Transformation Steps

Contents

Letter 1

Appendixes

Appendix I: Mergers and Transformations: Key Practices and 

Implementation Steps for Federal Agencies 7

Appendix II: Objective, Scope, and Methodology 32

Appendix III: Acknowledgments 34

Appendix IV: Selected Bibliography 36

Tables Table 1: Key Practices and Implementation Steps for Mergers and 

Organizational Transformations 8

Table 2: Key Practices for Effective Performance Management 22

Abbreviations

DHS Department of Homeland Security

DOD Department of Defense

FAA Federal Aviation Administration

FBI Federal Bureau of Investigation

GPRA Government Performance and Results Act

IRS Internal Revenue Service

NASA National Aeronautics and Space Administration

TSA Transportation Security Administration

VBA Veterans Benefits Administration

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Page 1 GAO-03-669 Merger and Transformation Steps

United States General Accounting Office

Washington, D.C. 20548

Comptroller General A of the United States

July 2, 2003 Lret

The Honorable George V. Voinovich

Chairman

Subcommittee on Oversight of Government 

Management, the Federal Workforce, and the 

District of Columbia 

Committee on Governmental Affairs

United States Senate

The Honorable Jo Ann Davis

Chairwoman

Subcommittee on Civil Service and Agency Organization

Committee on Government Reform

House of Representatives

Implementing large-scale change management initiatives, such as mergers 

and organizational transformations, are not simple endeavors and require 

the concentrated efforts of both leadership and employees to realize 

intended synergies and to accomplish new organizational goals. At the 

center of any serious change management initiative are the people—people 

define the organization’s culture, drive its performance, and embody its 

knowledge base. Experience shows that failure to adequately address—

and often even consider—a wide variety of people and cultural issues is at 

the heart of unsuccessful mergers and transformations. Recognizing the 

“people” element in these initiatives and implementing strategies to help 

individuals maximize their full potential in the new organization, while 

simultaneously managing the risk of reduced productivity and 

effectiveness that often occurs as a result of the changes, is the key to a 

successful merger and transformation. Thus, mergers and transformations 

that incorporate strategic human capital management approaches will help 

to sustain agency efforts and improve the efficiency, effectiveness, and 

accountability of the federal government. 

GAO convened a forum on September 24, 2002, to identify and discuss 

useful practices and lessons learned from major private and public sector 

organizational mergers, acquisitions, and transformations. This was done 

to help federal agencies implement successful transformations of their 

cultures, as well as the new Department of Homeland Security (DHS) 

merge its various originating components into a unified department. 
Page 2 GAO-03-669 Merger and Transformation Steps

The invited participants were a cross section of leaders who have had 

experience managing large-scale organizational mergers, acquisitions, and 

transformations, as well as academics and others who have studied these 

efforts. The forum neither sought nor achieved consensus on all of the 

issues identified through the discussion. Because no two merger, 

acquisition, or transformation efforts are exactly alike, the “best” approach 

for any given effort depends upon a variety of factors specific to each 

context. Nevertheless, there was general agreement on a number of key 

practices that have consistently been found at the center of successful 

mergers, acquisitions, and transformations. We reported the key practices 

participants identified that can serve as a basis for subsequent 

consideration as federal agencies seek to transform their cultures in 

response to governance challenges.1

 These key practices are to:

1. Ensure top leadership drives the transformation. Leadership must 

set the direction, pace, and tone and provide a clear, consistent rationale 

that brings everyone together behind a single mission.

2. Establish a coherent mission and integrated strategic goals to 

guide the transformation. Together, these define the culture and serve 

as a vehicle for employees to unite and rally around.

3. Focus on a key set of principles and priorities at the outset of 

the transformation. A clear set of principles and priorities serves as a 

framework to help the organization create a new culture and drive 

employee behaviors.

4. Set implementation goals and a timeline to build momentum and 

show progress from day one. Goals and a timeline are essential because 

the transformation could take years to complete. 

5. Dedicate an implementation team to manage the transformation 

process. A strong and stable team is important to ensure that the 

transformation receives the needed attention to be sustained and 

successful.

1

U.S. General Accounting Office, Highlights of a GAO Forum: Mergers and 

Transformation: Lessons Learned for a Department of Homeland Security and Other 

Federal Agencies, GAO-03-293SP (Washington, D.C.: Nov. 14, 2002).
Page 3 GAO-03-669 Merger and Transformation Steps

6. Use the performance management system to define 

responsibility and assure accountability for change. A “line of sight” 

shows how team, unit, and individual performance can contribute to 

overall organizational results.

7. Establish a communication strategy to create shared 

expectations and report related progress. The strategy must reach out 

to employees, customers, and stakeholders and engage them in a two-way 

exchange. 

8. Involve employees to obtain their ideas and gain their ownership 

for the transformation. Employee involvement strengthens the process 

and allows them to share their experiences and shape policies.

9. Build a world-class organization. Building on a vision of improved 

performance, the organization adopts the most efficient, effective, and 

economical personnel, system, and process changes and continually seeks 

to implement best practices.

At your request, this report identifies the specific implementation steps for 

these key practices raised at the forum with illustrative private and public 

sector examples that agencies can take as they transform their cultures to 

be more results oriented, customer focused, and collaborative in nature. 

These implementation steps and examples are described in appendix I. To 

identify these steps and examples, we interviewed selected forum 

participants about their experiences managing mergers, acquisitions, and 

transformations and reviewed literature on the subject drawn primarily 

from private sector mergers and acquisitions change management 

experiences to gain a better understanding of the issues that most 

frequently occur during such large-scale change initiatives. We also used 

our guidance and reports on strategic human capital management and 

results-oriented management. Our scope and methodology is described in 

more detail in appendix II. 
Page 4 GAO-03-669 Merger and Transformation Steps

We have observed in our recent Performance and Accountability Series

that there is no more important management reform than for agencies to 

transform their cultures to respond to the transition that is taking place in 

the role of government in the 21st century.2

 We highlighted the following 

agencies as among those that have transformations under way: 

• Establishing the new DHS is an enormous undertaking that will take 

time to achieve in an effective and efficient manner. DHS must 

effectively combine 22 agencies with an estimated 170,000 employees 

specializing in various disciplines, including law enforcement, border 

security, biological research, computer security, and disaster mitigation, 

and also oversee a number of non-homeland security activities. The 

new department will need to build a successful transformation that 

instills the organization with important management principles; rapidly 

implements a phased-in transition plan; leverages the new department 

and other agencies in executing the national homeland security strategy; 

and builds collaborative partnerships with federal, state, local, and 

private sector organizations. 

• The Department of Defense (DOD) transformation involves a strategic 

imperative needed to meet the security challenges of the new century. 

DOD has emphasized force transformations as necessary to effectively 

anticipate, counter, and eliminate the emergence of unconventional 

threats overseas and at home. DOD’s transformation will require 

cultural change and business process reengineering that will take years 

to accomplish. In addition, DOD is seeking congressional approval to 

undertake significant changes in its civilian personnel policies.3

• The National Aeronautics and Space Administration (NASA) has also 

begun a major transformation effort. Although NASA is in the very early 

stages of its transformation, the challenge ahead for NASA will be to 

maintain the momentum to transform, to effectively use existing and 

new authorities to strategically manage its people, and to quickly 

implement the tools needed to strengthen management and oversight. 

2

U.S. General Accounting Office, Major Management Challenges and Program Risks: A 

Governmentwide Perspective, GAO-03-95 (Washington, D.C.: January 2003).

3

See most recently, U.S. General Accounting Office, Human Capital: Building on DOD’s 

Reform Effort to Foster Governmentwide Improvements, GAO-03-851T (Washington, D.C.: 

June 4, 2003).
Page 5 GAO-03-669 Merger and Transformation Steps

• The Federal Bureau of Investigation (FBI) has begun its transformation 

by organizing its operations to strengthen its management structure and 

enhance accountability. FBI’s ongoing reorganization includes shifting 

some resources from long-standing areas of focus, such as drugs, to 

counterterrorism and intelligence; building analytical capability; and 

recruiting to address selected skill gaps. 

• The Federal Aviation Administration (FAA) faces the need for 

transformation to implement new ways of ensuring transportation 

security and improving safety, mobility, and economic growth. For 

example, FAA faces an impending wave of air traffic controller 

retirements. While FAA has made progress in addressing its problems, 

more remains to be done. 

• The U.S. Postal Service’s long-term outlook continues to be high-risk 

and the Service faces challenges in managing its finances, human 

capital, and infrastructure. The Service has developed a transformation 

plan, which it can use to make progress on specific actions under its 

existing authority. 

• The Internal Revenue Service (IRS) has a multifaceted effort under way 

to transform its operations. IRS has made important progress, but its 

transformation continues to be a work in progress, and IRS is now 

halfway through the 10 years it estimated would be needed to complete 

its modernization. 

Although transformation efforts are under way, more remains to be done. 

Building on lessons learned by large private and public sector 

organizations, the key practices and implementation steps to assist 

mergers and organizational transformations discussed in this report can be 

modified to fit the circumstances and conditions that are relevant to each 

agency. We at GAO are using these key practices and implementation steps 

to guide our own organizational transformation. Collectively, these key 

practices and implementation steps can help agencies transform their 

cultures so that the federal government has the capacity to deliver its 

promises, meet current and emerging needs, maximize its performance, 

and ensure accountability. 

As agreed with your office, unless you announce its contents earlier, we 

plan no further distribution of this report until 30 days after its issuance 

date. At that time, we will provide copies of the report to the Director of 
Page 6 GAO-03-669 Merger and Transformation Steps

the Office of Personnel Management and the Director of the Office of 

Management and Budget. Copies will be made available to others upon 

request. This report will also be available at no charge on GAO’s Web site at 

http://www.gao.gov.

For additional information on our work on federal agency transformation 

efforts and strategic human capital management, please contact me or 

J. Christopher Mihm, Director, Strategic Issues, at mihmj@gao.gov. Carole 

Cimitile, Fig Gungor, and Lisa Shames were key contributors to this report.

David M. Walker 

Comptroller General

of the United States
Page 7 GAO-03-669 Merger and Transformation Steps

Appendix I

Mergers and Transformations: Key Practices Apendxeis

and Implementation Steps for Federal 

Agencies ApenIdxi

The Comptroller General of the United States convened a forum on 

September 24, 2002, to identify and discuss useful practices and lessons 

learned from major private and public sector organizational mergers, 

acquisitions, and transformations. This was done to help federal agencies 

implement successful transformations of their cultures, as well as the new 

Department of Homeland Security (DHS) merge its various originating 

components into a unified department. We subsequently reported the key 

practices participants identified that have consistently been found at the 

center of successful mergers, acquisitions, and transformations and can 

serve as a basis for subsequent consideration as federal agencies seek to 

transform their cultures in response to governance challenges.1

 At the 

request of the Chairman, Subcommittee on Oversight of Government 

Management, the Federal Workforce, and the District of Columbia, Senate 

Committee on Governmental Affairs; and the Chairwoman, Subcommittee 

on Civil Service and Agency Organization, House Committee on 

Government Reform, this report identifies the specific implementation 

steps with illustrative private and public sector examples for these key 

practices raised at the forum. These key practices and implementation 

steps can be modified to fit the circumstances and conditions that are 

relevant to each agency as it transforms its culture to be more results 

oriented, customer focused, and collaborative in nature. These key 

practices and implementation steps are shown in table 1.

1

GAO-03-293SP.
Appendix I

Mergers and Transformations: Key Practices 

and Implementation Steps for Federal 

Agencies 

Page 8 GAO-03-669 Merger and Transformation Steps

Table 1: Key Practices and Implementation Steps for Mergers and Organizational 

Transformations

Source: GAO.

Practice Implementation Step

Ensure top leadership drives the 

transformation.

• Define and articulate a succinct and 

compelling reason for change.

• Balance continued delivery of services with 

merger and transformation activities.

Establish a coherent mission and 

integrated strategic goals to guide the 

transformation.

• Adopt leading practices for results-oriented 

strategic planning and reporting.

Focus on a key set of principles and 

priorities at the outset of the 

transformation.

• Embed core values in every aspect of the 

organization to reinforce the new culture.

Set implementation goals and a timeline to 

build momentum and show progress from 

day one. 

• Make public implementation goals and 

timeline.

• Seek and monitor employee attitudes and 

take appropriate follow-up actions.

• Identify cultural features of merging 

organizations to increase understanding of 

former work environments.

• Attract and retain key talent.

• Establish an organizationwide knowledge 

and skills inventory to exchange knowledge 

among merging organizations.

Dedicate an implementation team to 

manage the transformation process.

• Establish networks to support 

implementation team.

• Select high-performing team members.

Use the performance management system 

to define responsibility and assure 

accountability for change.

• Adopt leading practices to implement 

effective performance management 

systems with adequate safeguards.

Establish a communication strategy to 

create shared expectations and report 

related progress.

• Communicate early and often to build trust.

• Ensure consistency of message.

• Encourage two-way communication.

• Provide information to meet specific needs 

of employees.

Involve employees to obtain their ideas 

and gain their ownership for the 

transformation.

• Use employee teams.

• Involve employees in planning and sharing 

performance information.

• Incorporate employee feedback into new 

policies and procedures.

• Delegate authority to appropriate 

organizational levels.

Build a world-class organization. • Adopt leading practices to build a worldclass organization.
Appendix I

Mergers and Transformations: Key Practices 

and Implementation Steps for Federal 

Agencies 

Page 9 GAO-03-669 Merger and Transformation Steps

Ensure Top Leadership Drives 

the Transformation

Because a merger or transformation entails fundamental and often radical 

change, strong and inspirational leadership is indispensable. Top 

leadership (in the federal context, the department Secretary, Deputy 

Secretary, and other high-level political appointees) that is clearly and 

personally involved in the merger or transformation represents stability 

and provides an identifiable source for employees to rally around during 

tumultuous times. Leadership must set the direction, pace, and tone for the 

transformation. We have reported that the appointment of agency chief 

operating officers is one mechanism that could help to elevate attention on 

management issues and transformational change, integrate these various 

initiatives, and institutionalize accountability for addressing them.2

 

Experience shows that successful major change management initiatives in 

large private and public sector organizations can often take at least 5 to 7 

years. This length of time and the frequent turnover of political leadership 

in the federal government have often made it difficult to obtain the 

sustained and inspired attention to make needed changes. 

At the outset of the merger or transformation, it is important that leaders 

move quickly to both “make a statement” about the importance of change 

and demonstrate conviction to making it, as well as deliver early successes. 

In addition, the experience of major private sector mergers and 

acquisitions is that productivity and effectiveness actually decline in the 

period immediately following a merger and acquisition. Thus, top leaders 

must also balance the continued delivery of services with merger and 

transformation activities. The following steps provide additional detail on 

how this practice can be achieved.

Define and articulate a succinct and compelling reason for change. 

Top leadership must provide a clear, consistent rationale that brings 

together the originating components behind a single mission to guide the 

transformation and bridge the differences in leadership and management 

styles among the originating components. Also, articulating this succinct 

and compelling reason for change helps employees, customers, and 

stakeholders understand the expected outcomes of the merger or 

transformation and engenders not only their cooperation, but also their 

ownership of these outcomes.

2

U.S. General Accounting Office, Highlights of a GAO Roundtable: The Chief Operating 

Officer Concept: A Potential Strategy To Address Federal Governance Challenges, GAO-03-

192SP (Washington, D.C.: Oct. 4, 2002).
Appendix I

Mergers and Transformations: Key Practices 

and Implementation Steps for Federal 

Agencies 

Page 10 GAO-03-669 Merger and Transformation Steps

For example, in 1995, in anticipation of the intense and complex process of 

restructuring of local governments and the merging of several health 

authorities of the National Health Service, the United Kingdom Audit 

Commission identified lessons from the private and public sectors’ 

experiences with mergers to help leaders and employees who were to be 

directly involved in the health authorities’ mergers.3

 The Audit 

Commission found that a critical first step was to define the benefits of the 

merger and describe how the future will be both different from and better 

than the past. The Audit Commission emphasized that a clear and 

compelling picture of what the organization intends to achieve helps build 

morale and commitment to the new vision. The Audit Commission 

underscored the need to “be clear about what will constitute success after 

reorganization...[because] realizing improvements in efficiency, 

productivity, and performance will be a much more uplifting goal than 

simply surviving” the mergers. The compelling reasons for change can help 

leadership reinforce the message of “success rather than survival” to those 

immediately affected by the merger or transformation.

Balance continued delivery of services with merger and 

transformation activities. Leadership’s primary roles during a merger or 

transformation are to help the organization remain focused on the 

continued delivery of services, while simultaneously conducting the 

activities of the merger or transformation. Leaders need to acknowledge 

that productivity often decreases as attention is concentrated on critical 

and immediate integration issues and diverted from longer-term mission 

issues. This happens for a number of reasons. Employees may be 

concerned about their place in the new organization or may be unsure 

about how they are to conduct their day-to-day responsibilities because of 

confusion over the policies and procedures they are to follow during the 

time of transition.

For example, to help ensure continued delivery of services, Northrop 

Grumman leadership addresses employees’ concerns or confusion during 

the early days of a merger or transformation by issuing short-term 

operating policies or “STOPs” that usually hold from 30 to 120 days. STOPs 

supercede the legacy organization’s (in the federal context, the originating 

component’s) operating policies and thus stabilize operations and provide 

clear guidance to employees about how to conduct business during a 

3

United Kingdom Audit Commission, Less Dangerous Liaisons: Early Considerations for 

Making Mergers Work (London: HMSO, 1995).
Appendix I

Mergers and Transformations: Key Practices 

and Implementation Steps for Federal 

Agencies 

Page 11 GAO-03-669 Merger and Transformation Steps

potentially turbulent period. STOPs stipulate the way that the new 

organization will handle everyday transactions such as contracts, finances, 

security, facility management, or ethics. Additionally, employees may also 

have concerns about whether the previous company’s commitments will be 

honored. For example, employees may be concerned about whether their 

current health benefits will remain in place while the merger or 

transformation unfolds. STOPs can let employees know that for at least a 

certain period of time, their benefits and other related commitments will be 

administered under particular guidelines until final decisions can be made. 

Northrop Grumman also offers orientation programs to both new and 

legacy employees to help them learn the new business processes. One 

such program, called “Navigating Through the Sector,” addresses the “how 

do you do it?” questions of the new organization. As an added benefit, 

employees are provided with an opportunity to meet the new leaders and 

managers with whom they will be working. 

Establish a Coherent Mission 

and Integrated Strategic Goals to 

Guide the Transformation

The mission and strategic goals of a transformed organization must 

become the focus of the transformation, define the culture, and serve as the 

vehicle for employees to unite and rally around. The mission and strategic 

goals must be clear to employees, customers, and stakeholders because 

they may not see a direct personal connection to the transformation. In 

successful transformation efforts, developing, communicating, and 

constantly reinforcing the mission and strategic goals give employees a 

sense of what the organization intends to accomplish, as well as help 

employees figure out how their positions fit in with the new organization 

and what they need to do differently to help the new organization achieve 

success. The following step provides additional detail on how this practice 

can be achieved.
Appendix I

Mergers and Transformations: Key Practices 

and Implementation Steps for Federal 

Agencies 

Page 12 GAO-03-669 Merger and Transformation Steps

Adopt leading practices for results-oriented strategic planning and 

reporting. The Government Performance and Results Act (GPRA) 

provides a strategic planning and reporting framework intended to improve 

federal agencies’ performance and hold them accountable for achieving 

results. Effective implementation of GPRA’s results-oriented framework 

requires agencies to clearly establish performance goals for which they will 

be held accountable, measure progress towards those goals, determine 

strategies and resources to effectively accomplish the goals, use 

performance information to make the programmatic decisions necessary to 

improve performance, and formally communicate results in performance 

reports. We have developed a body of work to assist agencies in 

implementing a strategic planning and reporting framework that agencies 

involved in a merger or transformation can adopt to help make them results 

oriented.4

 

For example, in November 2001, the Congress created the Transportation 

Security Administration (TSA) as a new organization first housed in the 

Department of Transportation and then merged into the new DHS. TSA is 

responsible for security in aviation and other modes of transportation. The 

Congress required TSA to adopt a results-oriented strategic planning and 

reporting framework and, specifically, to provide an action plan with goals 

and milestones to outline how acceptable levels of performance for 

aviation security will be achieved. We reported that TSA has taken the first 

steps in performance planning and reporting by defining its mission, vision, 

and values and that this practice would continue to be especially important 

when TSA moved into DHS.5

 TSA’s overall strategic goal was to prevent 

intentional harm or disruption to the transportation system by terrorists or 

other persons intending to cause harm, and TSA had defined three 

performance goals to support this strategic goal. TSA had established an 

initial set of 32 performance measures that will allow it to demonstrate 

progress toward meeting performance goals. We recommended that TSA, 

4

See for example U.S. General Accounting Office: Agency Performance Plans: Examples of 

Practices That Can Improve Usefulness to Decisionmakers, GAO/GGD/AIMD-99-69

(Washington, D.C.: Feb. 26, 1999); Agencies’ Annual Performance Plans Under the Results 

Act: An Assessment Guide to Facilitate Congressional Decisionmaking, GAO/GGD/AIMD10.1.18 (Washington, D.C.: February 1998); Agencies’ Strategic Plans Under GPRA: Key 

Questions to Facilitate Congressional Review, GAO/GGD-10.1.16 (Washington D.C.: May 

1997); and Executive Guide: Effectively Implementing the Government Performance and 

Results Act, GAO/GGD-96-118 (Washington, D.C.: June 1996).

5

U.S. General Accounting Office, Transportation Security Administration: Actions and 

Plans to Build a Results-Oriented Culture, GAO-03-190 (Washington, D.C.: Jan. 17, 2003).
Appendix I

Mergers and Transformations: Key Practices 

and Implementation Steps for Federal 

Agencies 

Page 13 GAO-03-669 Merger and Transformation Steps

among other things, establish security performance goals and measures for 

all modes of transportation as part of a strategic planning process that 

involves stakeholders. TSA concurred with this recommendation.

Focus on a Key Set of Principles 

and Priorities at the Outset of the 

Transformation

In bringing together the originating components, the new organization 

must have a clear set of principles and priorities that serves as a framework 

to help the organization create a new culture and drive employee 

behaviors. Focusing on these principles and priorities helps the 

organization to maintain its drive towards achieving the goals of the 

transformation. In particular, principles are the core values of the new 

organization, and like the mission and strategic goals, can serve as an 

anchor that remains valid and enduring while organizations, personnel, 

programs, and processes may change. The following step provides 

additional detail on how this practice can be achieved.

Embed core values in every aspect of the organization to reinforce 

the new culture. Core values define the attributes that are intrinsically 

important to what the new organization does and how it will do it. They 

represent the institutional beliefs and boundaries that are essential to 

building a new culture for the organization. 

For example, on “Day One” of a merger or acquisition, Northrop Grumman 

leadership defined the values intrinsic to its new organization and issued 

“non-negotiables” such as “maintaining respect for employees in all legacy 

or incoming organizations.” These “non-negotiables” can also include 

ethical boundaries, such as the continued adherence to financial reporting 

standards. Similarly, immediately following its recent merger with 

Compaq, Hewlett-Packard implemented the “FAST-START” program to 

embed key principles in its new organization. FAST-START focused on the 

new company’s core values that emphasized “motivated employees 

generate good customer service” and was intended to convince employees 

that they could make the merger successful. Hewlett-Packard piloted the 

FAST-START program first with senior executives, cascaded it throughout 

the new company reaching 150,000 employees. According to a HewlettPackard vice-president, an additional benefit of FAST-START was the 

opportunity for employees from the originating components to meet each 

other face-to-face for the first time and gain a different perspective on the 

common goals and programs they would be operating.
Appendix I

Mergers and Transformations: Key Practices 

and Implementation Steps for Federal 

Agencies 

Page 14 GAO-03-669 Merger and Transformation Steps

Set Implementation Goals and a 

Timeline to Build Momentum 

and Show Progress from Day 

One

A merger or transformation is a substantial commitment that could take 

years before it is completed, and therefore must be carefully and closely 

managed. As a result, it is essential to establish and track implementation 

goals and establish a timeline to pinpoint performance shortfalls and gaps 

and suggest midcourse corrections. By demonstrating progress towards 

these transformation goals, the organization builds momentum and 

demonstrates that real progress is being made. Successful mergers and 

transformation efforts can be much more difficult to achieve in the public 

sector than in the private sector for a number of reasons, including that 

public sector efforts must contend with greater transparency. Further, as 

mentioned previously, research suggests that failure to adequately 

address—and often even consider—a wide variety of people and cultural 

issues is at the heart of unsuccessful mergers and transformations. Thus, 

people and cultural issues must be monitored from day one of a merger and 

transformation. The following steps provide additional detail on how this 

practice can be achieved.

Make public implementation goals and timeline. The demand for 

transparency and accountability is a fact that needs to be accepted in any 

public sector transformation. A full range of stakeholders and interested 

parties are concerned not only with what results are to be achieved, but 

also which processes are to be used to achieve those results. We reported 

in the GAO Mergers and Transformation Forum that in developing 

implementation goals and a timeline for a merger or transformation, it is 

helpful to think in terms of multiple “Day Ones” to determine—and focus 

attention squarely on—critical phases and the essential activities that need 

to be completed by and on any given date. By demonstrating progress 

towards these goals, the organization builds momentum and keeps 

employees excited about the opportunities change brings and thereby 

helps to ensure the merger or transformation’s successful completion. 

For example, according to a JPMorgan Chase managing director, the chief 

executive officer (in the federal context, the department’s Secretary) and 

the merger implementation team publicized and reported progress on 

specific goals for each phase of the merger to help rally employees and 

maintain their drive towards reaching full integration. The goals were 

connected to overall themes and to particular milestones. The chief 

executive officer reinforced these goals at leadership meetings and 

employee townhalls, and in Web-based messages and other 

communications, to help keep employees focused on achieving them. The 

managing director recommends that mapping out an overall timeline for 
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what goals are realistic to accomplish within a set time frame can minimize 

employee “merger fatigue.” 

In addition, Deloitte & Touche suggests setting quantifiable and measurable 

goals as well as target dates and deliverables to give the implementation 

team and employees an objective means to track and report progress. 

Deloitte & Touche also recommends its clients strengthen accountability 

for implementation goals by having a manager or executive from different 

operating units within the organization have responsibility for monitoring 

the progress of interim organizational performance results for each other 

and reporting that progress to top leaders.

Seek and monitor employee attitudes and take appropriate followup actions. Because people are the drivers of any merger or 

transformation, it is vital to monitor their attitudes. Especially at the outset 

of the merger or transformation, obtaining employees’ attitudes through 

pulse surveys, focus groups, or confidential hotlines can serve as a quick 

check of how employees are feeling about the large-scale changes that are 

occurring and the new organization as a whole. While monitoring 

employee attitudes provides good information, most importantly is for 

employees to see that top leadership not only listens to their concerns, but 

also takes action and makes appropriate adjustments to the merger or 

transformation in a visible way. By not taking appropriate follow-up action, 

negative attitudes may translate into actions, such as employee departures, 

among other things, that could have a detrimental effect on the merger or 

transformation. 

For example, Deloitte & Touche suggests asking employees to respond to a 

pulse survey with 6 to 10 statements, such as “My job is now easier or 

harder since the merger” and “I hope to be in this organization 2 years from 

now.” These responses are used as a diagnostic reading of how well the 

merger is going from the employee perspective. Management then has an 

opportunity to implement strategies to address the concerns of employees 

with low morale or who plan to leave the organization. According to a 

Deloitte & Touche principal, employees experience discernible phases 

during a merger and transformation. The first 3 months after a merger or 

acquisition is announced are often marked by the excitement of joining the 

new organization. Employees are drawn into new activities, such as 

employee welcome or orientation programs explaining the opportunities 

employees may have in the new organization. Approximately 3 to 12 

months following the announcement of the merger, the excitement ends. 

Deloitte & Touche calls this next phase the “Second Moment.” This is when 
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employees wait to see how the organization and their positions will change 

and whether the opportunities mentioned at the outset of the merger will 

be realized. According to the Deloitte & Touche principal, unless 

leadership continues to emphasize the importance of employees and their 

contributions to the new organization, some people will give up their 

aspirations and instead return to “business as usual” or even make plans to 

leave the organization. 

Identify cultural features of merging organizations to increase 

understanding of former work environments. Fundamentally, a 

change of culture is at the heart of a successful merger or transformation. 

The importance of redefining the organizational culture should not be 

avoided, but rather must be aggressively addressed at the outset and 

throughout the transformation process. An organization’s culture 

encompasses the values and behaviors that characterize its work 

environment, and in particular, how people work with each other, how they 

are held accountable, how they are rewarded, as well as how 

communication flows through the organization.6

 Many mergers or 

transformations fail because the cultures of the originating components are 

not fully understood or considered. Thus, identifying cultural features of 

the originating components, prior to, or early on, in the merger and 

transformation process, can help leadership gain a better understanding of 

their beliefs and values. Organizationwide surveys, employee focus 

groups, and individual interviews can assess the culture and identify both 

similarities and differences in order to provide a better understanding of 

how work gets done and what values are important to employees. 

For example, in a recent Northrop Grumman acquisition, a significant 

portion of the management team was formerly from the military. Through 

an assessment process, Northrop Grumman learned that team members 

were concerned that if they did not have a former military background, 

their skills would not be valued in the new organization. Once 

management was made aware of employees’ concerns, they let them know 

that a military background was not necessary to succeed and future 

opportunities existed. Northrop Grumman relied upon graduate students 

from a local university to conduct the assessment.

6

Schmidt, Jeffrey A. ed., Making Mergers Work: The Strategic Importance of People, 

(Alexandria, Va.: Towers, Perrin, Foster and Crosby/Society for Human Resource 

Management, 2002).
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Attract and retain key talent. Success is more likely when the best 

individuals are selected for each position based on the competencies 

needed for the new organization. Private sector experience with mergers 

and acquisitions suggests that over 40 percent of executives in acquired 

companies leave within the first year and 75 percent within the first 3 years. 

While some turnover is to be expected and is appropriate, the new 

organization must “re-recruit” its key talent to limit the loss of needed 

individuals who leave because they do not see their place in the new 

organization. When re-recruiting key talent, top leaders should select 

individuals who demonstrate the competencies to help make the merger or 

transformation succeed and achieve its goals, and not just the top 

performers from previous originating components. 

For example, Northrop Grumman identifies the key individuals it would 

like to retain in the new organization within the first 30 days of the effective 

date of the merger or acquisition, meets one-on-one with each individual to 

let them know that they have the competencies desired for the new 

organization, and informs them of the high-potential opportunities that 

exist for them with the new organization. Once placed in the new 

organization, management checks in with them frequently and provides 

them with visible opportunities with the new leadership. 

Establish an organizationwide knowledge and skills inventory to 

exchange knowledge among merging organizations. At the outset of 

the merger and transformation, new organizations recognize the value in 

creating an employee knowledge and skills inventory. Valuable information 

resides in the originating organizational components of mergers and 

transformations, and when these components are combined, these 

intellectual assets are extremely powerful and beneficial to employees and 

stakeholders. Knowledge and skills inventories not only capture the 

intellectual assets of the new organization, but also signal to employees 

that their particular expertise is valued by the organization and foster a 

knowledge-sharing culture.
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According to Conference Board research, when people freely share and are 

rewarded for what they know, they are more likely to feel a stronger 

connection to the new organization. For example, a recently merged 

company recommended setting up a knowledge and skills inventory that 

would be immediately and widely available to those in the new 

organization who need to find employee expertise on particular topics.7

 

The value of the knowledge and skills inventory occurs when people from 

the merging entities are able to quickly contact those with particular 

knowledge and expertise to help them accomplish their work. The 

company also suggested making employees aware that sharing expertise 

and experience is important to the future success of the organization and is 

valued in the new organization. 

Dedicate an Implementation 

Team to Manage the 

Transformation Process 

Dedicating a strong and stable implementation or integration team that will 

be responsible for the transformation’s day-to-day management is 

important to ensuring that it receives the focused, full-time attention 

needed to be sustained and successful. Specifically, the implementation 

team is important to ensuring that various change initiatives are sequenced 

and implemented in a coherent and integrated way. Top leadership must 

vest the team with the necessary authority and resources to set priorities, 

make timely decisions, and move quickly to implement top leadership’s 

decisions regarding the transformation. In our Mergers and 

Transformation Forum, participants observed that the size of the 

implementation team needs to be scaled to the size of the merger and 

transformation. The composition of the team is also important because of 

the visual sign it communicates regarding which components are dominant 

and subordinate or whether the new organization is a “merger of equals.” 

In addition, the qualifications of implementation team members are also a 

visible sign that top leadership is serious and committed to the merger and 

transformation. The following steps provide additional detail on how this 

practice can be achieved.

Establish networks to support implementation team. Because a 

transformation process is a massive undertaking, the implementation team 

must have a “cadre of champions” to ensure that changes are thoroughly 

implemented and sustained over time. Establishing networks, including a 

senior executive council, functional teams, or cross-cutting teams can help 

the implementation team conduct the day-to-day activities of the merger or 

7

Lucenko, Kristina, Implementing a Post-Merger Integration (New York: The Conference 

Board, 1999).
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transformation and help ensure that efforts are coordinated and integrated. 

To be most effective, establishing clearly defined roles and responsibilities 

within this network assigns accountability for parts of the implementation 

process, helps reach agreement on work priorities, and builds a code of 

conduct that will help all teams to work effectively. 

For example, a leading management consulting firm advises creating a 

senior executive council that provides the implementation team access to 

leadership and reinforces its accountability for successfully implementing 

the merger and transformation. This council can set policies for the merger 

or transformation implementation, ensure that decisions are made quickly, 

resolve conflicts that arise, review and approve implementation plans, and 

monitor and report progress back to top leaders of the organization. 

Members of the council might include senior executives representing the 

legacy organizations. In our Mergers and Transformation Forum, it was 

observed that in the federal context, such a council could be comprised of 

political and career executives from within the organization and would be 

particularly useful to work with top leadership (the department Secretary, 

Deputy Secretary, and other high-level political appointees) in developing 

the leadership’s direction and communicating its position. 

Similarly, Hewlett-Packard establishes networks of both functional and 

cross-cutting teams to ensure that these priorities are adequately addressed 

and integrated in the implementation of a merger or transformation. 

Functional teams are responsible for areas such as human capital, financial 

management, and information technology. Cross-cutting teams are 

responsible for areas such as organizational culture, communication, and 

training and development. 

Select high-performing team members. A strong and stable 

implementation team comprised of top performers that is responsible for 

the transformation’s day-to-day management is not only important to 

ensuring the focused, full-time attention that the implementation needs to 

be sustained and successful, but is also a visible signal that the merger or 

transformation is being undertaken with the utmost seriousness and 

commitment. Team members are selected for their ability to drive results 

in a fast-paced and changing environment and their understanding that the 

ultimate goal is to create a new and more successful organization. 
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Both Hewlett-Packard and Northrop Grumman executives told us that 

merger and transformation implementation teams should be composed of 

people with prior merger or acquisition experience and good program 

management skills. In addition, a Hewlett-Packard vice-president told us 

that for their merger with Compaq, most team members selected for the 

integration team were at the level of director or vice-president and also had 

the skills and background to replace their superiors if necessary. HewlettPackard told us that a selection criterion for integration team members was 

that their previous individual performance ratings had to fall into the top 

two ratings categories. After the integration team disbanded, these 

selected integration team members were assigned permanent positions in 

the new organization.

In addition to selecting high performers, Northrop Grumman also builds 

the credibility of the implementation team in the eyes of the employees by 

selecting team members from each of the originating components and then 

distributing an organization chart that indicates the component from which 

each team member originated. Employees can see that some of their 

former leadership still exists in the new company and can help represent 

their concerns in the transformation process. However, Northrop 

Grumman adds that team members are still selected based on their 

competence for the job and not just because they were leaders from the 

legacy organization.

Use the Performance 

Management System to Define 

Responsibility and Assure 

Accountability for Change 

The new organization’s performance management system can be a vital 

tool for aligning the organization with desired results and creating a “line of 

sight” showing how team, unit, and individual performance can contribute 

to overall organizational results. The performance management system 

can help manage and direct the transformation process. The system serves 

as the basis for setting expectations for individuals’ roles in the 

transformation process. 

To be successful, transformation efforts must have leaders, managers, and 

employees who have the individual competencies to integrate and create 

synergy among the multiple organizations involved in the transformation 

effort. Individual performance and contributions are evaluated on 

competencies such as change management, cultural sensitivity, teamwork 

and collaboration, and information sharing. Leaders, managers, and 

employees who demonstrate these competencies are rewarded for their 

success in contributing to the achievement of the transformation process. 

Leading organizations have modern, effective, credible, and, as 

appropriate, validated performance management systems with adequate 
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safeguards, including reasonable transparency and appropriate 

accountability mechanisms, in place to support performance-based pay 

and related personnel decisions. The following step provides additional 

detail on how this practice can be achieved.

Adopt leading practices to implement effective performance 

management systems with adequate safeguards. We have identified 

specific practices that leading public sector organizations both here in the 

United States and abroad have used in their performance management 

systems to align their organizations and create a clear linkage—“line of 

sight”—between individual performance and organizational success.8

 

Federal agencies should consider these practices as they develop and 

implement their performance management systems. The key practices are 

listed in table 2. 

8

U.S. General Accounting Office, Results-Oriented Cultures: Creating a Clear Linkage 

between Individual Performance and Organizational Success, GAO-03-488 (Washington, 

D.C.: Mar. 14, 2003).
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Table 2: Key Practices for Effective Performance Management

Source: GAO.

Establish a Communication 

Strategy to Create Shared 

Expectations and Report Related 

Progress 

Creating an effective, on-going communication strategy is essential to 

implementing a merger or transformation. Communication is most 

effective when done early, clearly, and often, and is downward, upward, 

and lateral. The new organization must develop a comprehensive 

communication strategy that reaches out to employees, customers, and 

stakeholders and seeks to genuinely engage them in the transformation 

1. Align individual performance expectations with organizational goals. An 

explicit alignment of daily activities with broader results helps individuals see the 

connection between their daily activities and organizational goals. 

2. Connect performance expectations to cross-cutting goals. Placing greater 

emphasis on collaboration, interaction, and teamwork across organizational 

boundaries helps strengthen accountability for results.

3. Provide and routinely use performance information to track organizational 

priorities. Individuals use performance information to manage during the year, 

identify performance gaps, and pinpoint improvement opportunities. 

4. Require follow-up actions to address organizational priorities. By requiring and 

tracking such follow-up actions on performance gaps, these organizations 

underscore the importance of holding individuals accountable for making progress on 

their priorities. 

 

5. Use competencies to provide a fuller assessment of performance. 

Competencies, which define the skills and supporting behaviors that individuals need 

to effectively contribute to organizational results.

 

6. Link pay to individual and organizational performance. Pay, incentive, and 

reward systems that link employee knowledge, skills, and contributions to 

organizational results are based on valid, reliable, and transparent performance 

management systems with adequate safeguards.

7. Make meaningful distinctions in performance. Effective performance 

management systems strive to provide candid and constructive feedback and the 

necessary information and documentation to reward top performers and deal with 

poor performers.

8. Involve employees and stakeholders to gain ownership of performance 

management systems. Early and direct involvement helps employees’ and 

stakeholders’ understanding and ownership of the system and belief in its fairness.

 

9. Maintain continuity during transitions. Because cultural transformations take 

time, performance management systems reinforce accountability for change 

management and other organizational goals. 
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process. The following steps provide additional detail on how this practice 

can be achieved.

Communicate early and often to build trust. Organizations 

implementing mergers or transformations have found that communicating 

information early and often helps to build an understanding of the purpose 

of planned changes and builds trust among employees and stakeholders. 

Especially for employees, frequent and timely communication cultivates a 

strong relationship with management and helps gain employee ownership 

for the merger or transformation.

For example, to build trust between management and employees, Deloitte 

& Touche suggests first notifying employees of issues pertaining to the 

merger and transformation. In particular, Deloitte & Touche recommends 

information be “prereleased” to line managers whenever possible 

throughout the process. Rather than obtaining information from sources 

outside the organization, this prereleased information offers the courtesy 

to employees of receiving information first and the opportunity to then ask 

questions or voice concerns to leadership. Deloitte & Touche also suggests 

that line managers report the feedback of employees to senior management 

so they can address any concerns. 

Even when information is limited due to legal restrictions or security 

concerns, Conference Board research advises that organizations continue 

to communicate with employees to build trust and to diminish any concern 

or uncertainty that may be generated during these periods. The 

Conference Board research suggests alternative types of information when 

specific details may be embargoed due to legal restrictions or security 

concerns. Such alternative types of information could include status 

reports of the progress being made on the merger or transformation, the 

exact time that specific details will be forthcoming, or responses to rumors 

or news items that have appeared in the press. 

Finally, the time spent on delivering messages to employees about the 

merger or transformation should not be underestimated. One participant 

at our Mergers and Transformation Forum observed that given its 

importance, successful communication will require twice the time and 

effort than was at first planned—no matter how ambitious the original plan 

was. Similarly, a JPMorgan Chase managing director told us that during 

their integration process, managers would dedicate 25 percent of their 

overall work time communicating with employees about the merger. This 

managing director credits JPMorgan Chase’s communication strategy as a 
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major success factor in its recent merger because it was built around 

getting messages out at all levels of the organization and reinforcing the 

progress of the merger. 

Ensure consistency of message. A message to employees and others 

affected by a merger or transformation that is consistent in tone and 

content can alleviate the uncertainties generated during the unsettled times 

of large-scale change management initiatives. Since employees are 

typically coming from different originating components during a merger or 

transformation, sharing a consistent message with employees, customers, 

and stakeholders helps to reduce the perception that others are getting the 

“real” story when, in fact, all are receiving the same information. 

For example, to ensure a message consistent in tone and content as part of 

its communication strategy, Hewlett-Packard sent senior executives with 

scripted talking points to various work sites for face-to-face, interactive 

meetings with groups of employees to discuss the expected changes that 

would occur due to the merger. Senior managers from both originating 

components, Hewlett-Packard and Compaq, would appear jointly at these 

employee meetings to ensure that employees had a chance to meet the new 

members of the team and also see that both sides were in agreement with 

expected changes.

Encourage two-way communication. Communication is not about just 

“pushing the message out.” Rather, it should facilitate a two-way honest 

exchange with and allow for feedback from employees, customers, and 

stakeholders. This communication is central to forming the effective 

internal and external partnerships that are vital to the success of any 

organization. Creating opportunities for employees to communicate 

concerns and experiences surrounding a merger or transformation allows 

employees to feel that their experiences are acknowledged and important 

to management during the implementation of the merger and 

transformation. Once this feedback is received, it is important to consider 

and use this solicited employee feedback to make any appropriate changes 

to the implementation of the merger or transformation. 
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We reported that some agencies also make use of two-way communication 

when implementing human capital flexibility practices.9

 For example, the 

U.S. Mint collected feedback from employees at a “town hall” meeting at its 

San Francisco coin-making plant where employees (with assistance from 

the local union) voted on various options for implementing an alternative 

work schedule for the facility. Based on that feedback, the U.S. Mint made 

changes to employee work schedules.

Communication with customers and stakeholders should also be a top 

priority and is central to forming the partnerships that are needed to 

develop and implement the organization’s strategies. According to a 

Deloitte & Touche principal, establishing a two-way communication 

framework with customers and stakeholders can alleviate their concerns 

about whether they will continue to receive the same levels of service. 

Under this “One Face, One Voice” communication framework, the 

organization:

• catalogs every customer and stakeholder relationship to be affected by 

the merger or transformation, 

• designates a contact or team to keep these customers and stakeholders 

informed about how the merger will affect their particular needs,

• identifies the interests and concerns of each customer or stakeholder, 

• provides information addressing those specific interests or concerns, 

and 

• requires the designated contact to listen to customer and stakeholder 

needs and report these needs to management.

According to Deloitte & Touche, this communication framework gives 

customers and stakeholders a greater understanding of how the merger or 

transformation will affect them and provides leadership with an accurate 

picture of their customer and stakeholder needs, so they can quickly 

correct any misperceptions and address concerns.

9

U.S. General Accounting Office, Human Capital: Effective Use of Flexibilities Can Assist 

Agencies in Managing Their Workforces, GAO-03-2 (Washington, D.C.: Dec. 6, 2002).
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Provide information to meet specific needs of employees. 

Communicating with employees must include topics such as the new 

organization’s strategic goals, customer service, and in particular, 

employee concerns. It is important to help employees understand how the 

transformation process will affect them and to address the immediate and 

natural question: “what’s in it for me?” Employees will be concerned about 

whether their jobs might be affected, what their rights and protections 

might be, or how their responsibilities might change with the new 

organization. Not only do employees seek different kinds of information, 

they can receive information through a variety of means. 

For example, Deloitte & Touche advises clients to prepare personalized 

communication folders for various groups of employees, such as senior 

executives, regarding how the merger, acquisition, or transformation will 

specifically affect their salary, benefits, job duties, and career path. These 

folders are distributed to employees and then meetings are held with 

groups or individuals to answer the particular questions that employees 

may have. This customized process helps employees to feel that their 

concerns are specifically addressed.

The Conference Board research also discusses the importance of tailoring 

information for groups of employees that may have divergent interests. 

For example, employees with technical skills may be concerned about 

whether their skills will remain relevant and valued in the new 

organization; administrative staff may desire details about how they may 

cope with new systems and work processes; and customer-service 

representatives may need to know about how to approach relationships 

with customers.

Employees may prefer to receive customized information from a variety of 

sources. Varying the means of communication, such as e-mail, face-to-face 

meetings, large and small group meetings, intranet Web sites, and townhall 

meetings, can also be an effective strategy to reinforce the message and 

reach all employees, while providing an opportunity for management to 

respond to employee concerns. Toll-free hotlines and electronic bulletin 

boards can be used to provide large numbers of employees a forum to 

discuss their concerns and issues about the merger or transformation. 
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For example, during a merger of two consumer products firms, a toll-free 

hotline was established so employees could relate the rumors they had 

heard. Every 2 weeks, a list of top 10 rumors with accompanying factual 

information was posted to help employees compare and contrast the 

rumors against the facts.10 This interactive approach allowed the company 

to simultaneously communicate with large numbers of employees and 

quickly dispel inaccurate information. 

Involve Employees to Obtain 

Their Ideas and Gain Their 

Ownership for the 

Transformation

A successful merger and transformation must involve employees and their 

representatives from the beginning to gain their ownership for the changes 

that are occurring in the organization. Employee involvement strengthens 

the transformation process by including frontline perspectives and 

experiences. Further, employee involvement helps to create the 

opportunity to establish new networks and break down existing 

organizational silos, increase employees’ understanding and acceptance of 

organizational goals and objectives, and gain ownership for new policies 

and procedures. It was noted at our Mergers and Transformation Forum 

that while it is important to involve employees in the transformation 

process, there are cautions. There tends to be a relatively small group of 

employees in every organization who will resist any meaningful change and 

will not or cannot buy into the transformation no matter how compelling 

the case for change may be. This group of employees may try to “wait out” 

the transformation and think that it will pass without taking hold. 

Ultimately, these employees either must accept the changes under way or 

be helped to move elsewhere within the organization or out of it. The 

following steps provide additional detail on how this practice can be 

achieved.

Use employee teams. Creating opportunities for employees to interact 

with each other can help accelerate the merger or transformation process 

by allowing them to learn more about each other, establish new networks, 

and break down organizational silos. Adopting a teams-based approach to 

operations can improve employee morale and job satisfaction by creating 

an environment characterized by open communication, enhanced 

flexibility in meeting job demands, and a sense of shared responsibility for 

accomplishing organization goals and objectives. Using teams comprised 

of a cross-section of individual members can also assist in integrating 

10Marks, Mitchell Lee and Mirvis, Philip H., Joining Forces: Making One Plus One Equal 

Three in Mergers, Acquisitions, and Alliances (San Francisco: Jossey-Bass, 1998).
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different perspectives, flattening organizational structure, and streamlining 

operations. 

For example, JPMorgan Chase engaged employees in shared task forces 

comprised of individuals from the originating components to find common 

solutions to particular issues related to the merger. One such shared task 

force focused on integrating computer systems. Team members weighed 

the pros and cons of legacy systems and were able to arrive at a “best-inclass” solution. The act of working together also helped employees to form 

new bonds around their shared experience and to make it easier to work 

together on future projects.

Employees may need additional training to work effectively together in 

teams or to improve work processes. For example, we reported that as 

part of its major reorganization, IRS’ Ogden, Utah Service Center trained its 

employees in the new ways of conducting business.11 The training 

workshops included learning how effective teams function; improving 

working relationships among peers, managers and employees, and 

managers and union stewards; enhancing effective communications among 

employees, union stewards, and managers; increasing discussions about 

ways to improve work processes and meet customers’ needs; and creating 

a more positive workplace environment.

Involve employees in planning and sharing performance 

information. Involving employees in planning and sharing performance 

information can help employees understand what the organization is trying 

to accomplish and how it is progressing in that direction; facilitate the 

development of organizational goals and objectives that incorporate 

insights about operations from a front-line perspective; and increase 

employees’ understanding and acceptance of organizational goals and 

objectives. 

For example, to involve employees and share performance information, the 

U.S. Fire Administration (formerly within the Federal Emergency 

Management Agency, and now part of DHS), had teams from units 

throughout the organization meet on a weekly basis and identified ways to 

implement over 170 Board of Visitors recommendations for improving the 

Fire Administration’s operations. These teams facilitated communications 

11U.S. General Accounting Office, Human Capital: Practices That Empowered and 

Involved Employees, GAO-01-1070 (Washington, D.C.: Sept. 14, 2001).
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and employee involvement by maintaining a focal point for the 

organization, working toward consensus, and posting performance data 

showing progress toward addressing these recommendations.

Incorporate employee feedback into new policies and procedures. 

Major changes resulting from the merger can include redesigning work 

processes, changing work rules, developing new job descriptions, 

establishing new work hours, or making other changes to the immediate 

work environment that are of particular concern to employees. In leading 

organizations, management and employee representatives work 

collaboratively to gain ownership for these changes. After obtaining 

sufficient input from key players, the organization needs to develop clear, 

documented, and transparent policies and procedures. Establishing clear 

and uncomplicated policies and procedures ensures both that they are used 

fairly and that they are not encumbered with unnecessary administrative 

burdens. 

We have reported on the practices that agencies use to empower and 

involve employees to help them achieve their goals and improve 

government operations.12 For example, because the IRS is exempt from 

certain Title 5 personnel provisions, Congress mandated IRS to involve 

employees in order to gain ownership for the new policies. IRS and the 

National Treasury Employees Union entered into an agreement that was 

designed to ensure that employees are adequately represented and 

informed of proposed new policies and have input into the proposals. The 

agreement also provided for union participation in various forums, such as 

business process improvement teams and cross-unit committees. 

Delegate authority to appropriate organizational levels. In a merger 

or transformation, employees are more likely to support changes when 

they have the necessary authority and flexibility—along with 

commensurate accountability and incentives—to advance the 

organization’s goals and improve performance. Delegating decision 

making within core processes can further serve to streamline and improve 

operations. Specifically, delegation to use certain personnel authorities is 

important for managers and supervisors who know the most about an 

organization’s programs and with that authority, can make those programs 

work. 

12GAO-01-1070.
Appendix I

Mergers and Transformations: Key Practices 

and Implementation Steps for Federal 

Agencies 

Page 30 GAO-03-669 Merger and Transformation Steps

To ensure effective use of human capital flexibilities, agencies need to 

delegate authority to use these flexibilities to appropriate levels within the 

agency, and then agency managers and supervisors need to be held 

accountable—both for achieving results and for treating employees fairly. 

We reported on the flexibilities that agencies could use effectively to 

manage their workforce.13 The Veterans Benefits Administration (VBA) 

office in Philadelphia delegated authority to immediate supervisors to 

approve on-the-spot monetary awards for their employees without review 

by senior managers. VBA supervisors said that under this delegated 

authority they simply complete a short form and present it to the employee, 

who can then proceed to the on-site credit union and receive cash, all 

within 1 hour.

Build a World-class Organization Successful change efforts start with a vision of radically improved 

performance and the relentless pursuit of that vision. Participants at our 

Mergers and Transformation Forum observed that in successful private 

sector mergers and acquisitions leaders determine at the earliest 

opportunity the essential systems and processes that will need to be 

consistent across the organization and those that, at least initially, can 

differ across the organization. These decisions, the participants stressed, 

are based not only on what is necessary from the standpoint of operational 

efficiency and effectiveness, but also on what messages are to be sent to 

employees and customers. For example, the decision to use an 

organizationwide convention for e-mail addresses on the first day of 

operation can send a powerful message about the seriousness of the effort 

to create a coherent organization and the speed at which that effort will 

take place. 

The participants also noted that leaders of successful mergers and 

acquisitions seek to implement best practices in the systems and processes 

wherever they may be found and guard against automatically adopting the 

approaches used by the largest or acquiring component. The risk is that 

the new organization may migrate less than fully efficient and effective 

systems and processes merely because those systems and processes are 

most often used. Over the longer term, leaders of successful mergers and 

acquisitions, like successful organizations generally, seek to learn from 

best practices and create a set of systems and processes that are tailored to 

the specific needs and circumstances of the new organization. The 

13GAO-03-2.
Appendix I

Mergers and Transformations: Key Practices 

and Implementation Steps for Federal 

Agencies 

Page 31 GAO-03-669 Merger and Transformation Steps

following step provides additional detail on how to implement this 

practice.

Adopt leading practices to build a world-class organization. 

Selecting systems and processes from among the many choices that may 

exist after a merger or during a transformation can be a difficult prospect. 

To meet the goal of establishing a world-class organization, GAO has 

developed a body of work—best practices reviews—that provides 

guidance to help public sector organizations become world-class. These 

best practices reviews identify other public and private sector 

organizations’ processes, practices, and systems that are widely recognized 

for contributing to performance improvements in areas such as acquisition 

management, financial management, human capital, or information 

technology. They provide models for other organizations as they 

undertake similar management reforms. For our best practice reviews in 

these areas and others, see http://www.gao.gov/bestpractices/reviews.html. 
Page 32 GAO-03-669 Merger and Transformation Steps

Appendix II

Objective, Scope, and Methodology ApenIdxi

On September 24, 2002, GAO convened a forum to identify and discuss 

useful practices and lessons learned from major private and public sector 

organizational mergers, acquisitions, and transformations. This was done 

to help federal agencies implement successful transformations of their 

cultures, as well as the new Department of Homeland Security (DHS) 

merge its various originating components into a unified department. 

This report builds on the practices identified in that forum.1 Our objective 

was to identify specific implementation steps for the key practices raised at 

the forum and provide illustrative private and public sector examples of 

these steps. To meet our objective, we relied primarily on interviews with 

selected forum participants and other experts about their experiences 

implementing mergers, acquisitions, and transformations. See appendix 

III, “Acknowledgments,” for a list of interviewees. We asked the 

interviewees to draw upon their insight and expertise based on their 

experiences managing mergers, acquisitions, and transformations and 

reviewed literature on the subject, including literature recommended by 

forum participants, to gain a better understanding of the issues that most 

frequently occur during such large-scale change initiatives. See appendix 

IV, “Selected Bibliography,” for relevant literature. We also used GAO 

guidance and reports for those practices where GAO had developed a body 

of work, such as in strategic human capital management and resultsoriented management. 

Based on these interviews and literature review, we identified and 

categorized recurring themes under each of the nine practices and 

developed from these themes a set of specific implementation steps 

associated with each practice. We selected examples, that, in our best 

judgment, clearly illustrated and strongly supported each implementation 

step. We asked the private sector representatives to review the examples 

for accuracy and currency and incorporated their comments where 

appropriate. We did not independently verify the effectiveness of these 

examples and did not use effectiveness as a criterion for selecting the 

examples. We relied on issued GAO reports for some of our examples. 

We provided the full set of practices and implementation steps to other 

selected public and private sector individuals, who have been involved with 

1

U.S. General Accounting Office, Mergers and Transformation: Lessons Learned for a 

Department of Homeland Security and Other Federal Agencies, GAO-03-293SP

(Washington, D.C.: Nov. 14, 2002).
Appendix II

Objective, Scope, and Methodology

Page 33 GAO-03-669 Merger and Transformation Steps

mergers, acquisitions, and transformations for their review and 

incorporated their comments where appropriate. We did not obtain agency 

comments on a draft of this report because we did not review any federal 

agency’s on-going merger or transformation effort. We performed our work 

from December 2002 through April 2003 in accordance with generally 

accepted government auditing standards. 
Page 34 GAO-03-669 Merger and Transformation Steps

Appendix III

Acknowledgments ApenIdxi

Anthony Calenda Director, Strategy and Business Development

Citigroup, Inc.

Jay Connor Vice President, Strategies and Marketing, Consulting and Integration 

Hewlett-Packard Company

Patricia DeGennaro Director, The Corporate Preparedness, Security and Response Network

The Conference Board

Patrick J. Donohue Lead Partner, Human Capital M&A and Integration Services

Deloitte & Touche, LLP

Frank M. Ioli Executive Director, Facilities, Security and Administration

Northrop Grumman Information Technology

Steven L. Katz Office of Federal Programs

Deloitte & Touche, LLP

Paula J. Larkin Managing Director, Business Resiliency and Crisis Management 

JPMorgan Chase

Marcia Marsh Vice President, Strategic Human Resources Planning

Partnership for Public Service

Michael K. Neborak Co-Head, Strategy and Business Development

Citigroup, Inc.

Frank Ostroff Consultant

Larry Schein Senior Fellow (retired)

The Conference Board

Jeffrey S. Shuman Vice President, Human Resources and Administration

Northrop Grumman Information Technology

Pete Smith President and Chief Executive Officer

Private Sector Council
Appendix III

Acknowledgments

Page 35 GAO-03-669 Merger and Transformation Steps

Molly Tschang Senior Director, Business Development Integration Group

Cisco Systems, Inc. 

David J. Vidal Director of Research, Global Corporate Citizenship

The Conference Board
Page 36 GAO-03-669 Merger and Transformation Steps

Appendix IV

Selected Bibliography ApenVIdxi

Ainspan, Nathan D. and David J. Dell. Employee Communications During 

Mergers. 1270-00-RR. New York: The Conference Board, 2000.

Galpin, Timothy J., and Mark Herndon. The Complete Guide to Mergers 

and Acquisitions: Process Tools to Support M&A Integration at Every 

Level. San Francisco: Jossey-Bass Publishers, 2000.

Gancel, Charles, Irene Rodgers, and Marc Raynaud. Successful Mergers, 

Acquisitions and Strategic Alliances: How to Bridge Corporate Cultures. 

London: The McGraw-Hill Companies, 2002.

Gates, Dr. Stephen. Performance Measurement During Merger and 

Acquisition Integration. 1274-00-RR. New York: The Conference Board, 

2000.

Lucenko, Kristina. Implementing a Post-Merger Integration. 1257-99-CH. 

New York: The Conference Board, 1999.

Marks, Mitchell Lee, and Philip H. Mirvis. Joining Forces: Making One 

Plus One Equal Three in Mergers, Acquisitions, and Alliances. San 

Francisco: Jossey-Bass Publishers, 1998.

Martino, Jean-Marie. Valuing People in the Change Process. 1265-00-CR. 

New York: The Conference Board, 2000.

Mirvis, Philip H., and Mitchell Lee Marks. Managing the Merger: Making 

it Work. New Jersey: Prentice Hall, 1992.

Muirhead, Sophia A. and Audris D. Tillman. The Impact of Mergers and 

Acquisitions on Corporate Citizenship. 1272-00-RR. New York: The 

Conference Board, 2000.

Schein, Lawrence. Managing Culture in Mergers and Acquisitions. 

R-1302-01-RR. New York: The Conference Board, 2001.

Schein, Lawrence. Post-Merger Integration: A Human Resources 

Perspective. 1278-00-RR. New York: The Conference Board, 2000.

Schmidt, Jeffrey A., ed. Making Mergers Work: The Strategic Importance 

of People. Alexandria, Va.: A Towers Perrin/SHRM Foundation 

Publication, 2002.
Appendix IV

Selected Bibliography

Page 37 GAO-03-669 Merger and Transformation Steps

United Kingdom Audit Commission. Less Dangerous Liaisons: Early 

Considerations for Making Mergers Work. London: HMSO, 1995. 

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