An M&A masterclass: Merging the people and policies of three big European banks

When the decision was made to merge three of Hungary’s major financial institutions; Budapest Bank, MKB Bank, and MTB to create a central corporation under the umbrella of the Hungarian Bank Holding, Chief HR Officer, Kitti Dobi, was tasked with managing the people processes for all three distinct cultures. Considering that the member banks already serve 1.4 million active retail customers and 208,000 active corporate customers, it was certainly not a modest project to undertake.

While there are many ways to skin a cat, in order to enable a smooth transition for a merger as intricate as this, flexibility, agility, resilience and innovation are definite qualities to possess. Thankfully, Dobi not only has these characteristics but also the prerequisite experience needed to lead Hungary’s biggest-ever merger thanks to positions held in corporate HR for the likes of Proctor & Gamble, Vodafone, BP and MKB Bank itself where she was MD of Human Resources.

It was this breadth of experience which saw her drive forwards the new organisational transition, marrying together three unique and long-established cultures and navigating everything from disgruntled workers, redundancies, new job roles, logistical challenges – and let’s not forget the global pandemic which kicked off just as the ink was drying on the paperwork.

Future-proofing financial institutions

The merger itself was prompted by the general acknowledgement that a couple of banks in the Hungarian market were ripe for a merger. “They were too small to really last long-term or too narrow in their focus to last more than five to ten years,” explains Dobi. “Yes, they were profitable, but they would need to change and grow if they were to survive. So, after the first year of the pandemic, the decision was made that the three banks would merge and build one large, unified institution.”

In fact, just prior to the merger, Dobi had completed an organisational development project for the previously German-state-owned MKB Bank which she was initially brought in to manage back in 2016: “I was hired to turn this traditional old-fashioned into something more competitive but at the same time staying loyal to the Hungarian employees,” she explains. And while the cultural transition went well, in January 2020 as the team was set to celebrate the completion, the world turned upside down and priorities shifted overnight. “It was really demotivating for the management because, after four years of really hard work and transforming the culture, we wanted to celebrate, to acknowledge everyone’s efforts but we just couldn’t.”

Cultural quandaries

The three member banks in question couldn’t be more different culturally speaking, each one having its specific quirks and from an HR perspective, forming the decision-making team, drawing up the new company vision, purpose and values, and creating synergy with the people processes was a whole fresh challenge.

“Budapest Bank with 3,000 people had very good procedures and processes, it was very profitable, but the focus was on retail and small to medium enterprises. Then there was this ex-German bank with 2,000 employees and a focus on corporate and private banking. And finally, there was a so-called countryside savings bank with 800 branches and 6,000 employees,” she says. “They are all so different and have different expectations so that was something that we had to manage carefully,” she adds.

Once the merger was in motion, the first deliverable was to select the leadership team, and this was managed by Boston Consulting Group. Dobi was selected as the head of HR for the newly formed organisation: “We had to work out the strategy, which will run until 2026 and which considers how we merge and move into a profitable organisation on a sustainable basis. The merger itself takes three years because it’s so complex. In fact, when I say merger it’s actually a series of mergers, it has a lot of subsidiaries so it can’t be any faster from a legal perspective. We started last year, and we will finish at the end of next year,” she explains.

Finding the right competencies

Another major challenge for Dobi and her team was identifying the right skill sets needed by leadership in order to best manage such a complex merger: “We wanted to source the team internally but there were certain competencies which we just couldn’t find within the existing workforce.

Digital and IT skills and certain risk handling skills are critical in a bank, so this new strategy needed a very different set of digitalisation skills, as well as having a very deep understanding of the European authorities and banking sector,” she explains.

When the right candidates were selected for the leadership team – or Super Team as they are referred to, they were tasked with creating new company values: collaboration, respect, and being accelerators of change, which were launched in October 2021: “Prior to this, we carried out a lot of surveys and culture baselining in the three organisations then heat mapping and organisational design,” says Dobi.

“Once I had the new values, I could form the new leadership models, the new competency models, performance management systems, and so on. Then the middle management teams were formed again using the new cultural roadmap as a template for the competencies we needed.”

The Ambassador Academy and Top 300

Two of the things that have been particularly innovative are the creation of the Ambassador Academy, a change management initiative, and the ‘Top 300’ – an extended leadership team, both of which have helped roll out the new values and encourage engagement aligned with the new cultural blueprint.

The Ambassador Academy comprises a community of 100 people operating together to ensure engagement across different teams and the delivery of information to all employees. Via engaging online sessions, they focus on a different change theme as required and Dobi reports an enthusiastic response to the initiative.

Since January this year, over a thousand people have participated via online courses, where they can provide feedback and familiarise themselves with the new processes. “If something is not working in the flow of information, we can reach the different levels of organisations like the top management which are on the new leadership programmes also the external leadership team, the change management team or the ambassador programme,” explains Dobi.

Creating exclusivity has been a tool for engagement as it is seen as a privilege to be involved in these projects and offers exclusive access to the leadership team, early insights into company initiatives, as well as access to different development programmes.

Training has been developed to provide a greater degree of flexibility for those desk-bound front-of-house employees that are unable to access training during core working hours. “We keep our training short, a maximum of 90 minutes, to ensure engagement and so far it has gone really well,” adds Dobi.

Demotivation issues

When it came to maintaining employee engagement over the course of the merger – and additionally with the cultural transformation and process changes that the MKB Bank had already been through, keeping morale high was another hurdle Dobi had to deal with:

To this end Kitti implements mandatory holiday leave and recreation time for all employees, and in particular the leadership teams: “Twice a year you have to take a holiday and go and recharge your batteries. It has been hard for some people who aren’t used to this type of culture, but I insisted on this as they really do need this time off,” she explains.

Another pain point has been the technical silos and HR legacy systems that have required streamlining: “User access rights, for example, and the recommended systems which are all part of the transformation and IT roadmaps are much higher priorities but it’s the operational things that make the employees’ life harder that are causing the headaches. These are, of course at the bottom of the plan.

“It’s hard for motivating people, and hard for leaders to motivate when they don’t have the managerial tools. Of course, we use a lot of different retention schemes from a financial development point of view, but it has been tough from an HR technology perspective.

Dealing with negativity

Of course, there will always be , and this is something Dobi has seen plenty of: “There are those who didn’t want to believe that the change was really happening. They were just looking for the old leaders or managers and it took several months to really put in the effort with these people and reassure them that the changes we were making are positive ones. Just because you appoint someone, send an email or a new business card, it doesn’t mean that they are listening.”

To help increase engagement in the new processes, Kitti worked with the extended leadership team, middle management and change management teams to promote the new business direction and underline the benefits of being a part of such a historic merger: “The banking industry was watching and could see this was a huge career development opportunity. People were knocking on our door, but we wanted to select the best from our own teams first,” she adds. She emphasises that tools like leadership development, peer coaching and change management workshops have been integral to preparing leaders for the transition: “It’s all about collaboration and how we deal with all these things; what is feasible to help achieve our strategic goals; what kind of support we can give each other and what kind of support we need ourselves,” she adds.

When it comes to employee benefits, the people from the rural bank branches have particularly enjoyed the new initiatives as they never had such opportunities previously but the employees in the more corporate environments have higher expectations. “You have to ensure that any content you offer is based on new trends. They expect something new and refreshing and more professional than perhaps the rural employees, so we have had to be extra careful about how we launch things,” says Dobi.

So, does she have any words of advice for those entering a similar process? “I would say you need to prepare for the maximum level of flexibility. Don’t plan rigidly for one, or two years, but take a really agile approach from an organisation perspective. The length of the process is something we didn’t fully realise so you need to be able to see the goals, define the details and focus on that milestone. And then when you hit those milestones, you need to celebrate – each and every one of them.”

Future focus

The merger is set for completion in 2023 when the bank will officially launch its final branding, key messages and corporate values and prepare for an exciting new era in Hungarian banking, but it has been a long process that the team will be happy to see completed. The new financial institution wants to put its clients at its heart, and the new culture focuses on this element, keeping customer service front and centre of all its activities.