Restructuring the Organization and Group Entities to Accelerate Success (Part 1)

It is necessary to recognize that, even within the same corporate group, the parent and subsidiary companies may have distinctly different organizational cultures and traditions that emphasize autonomy. If, during integration, the parent company’s rules and policies are applied unilaterally without sufficient regard for the subsidiary’s culture and traditions, this can lead to field-level opposition and a decline in motivation, often resulting in missed synergies and the failure to achieve expected integration benefits.

For instance, if cultural differences are ignored during the integration process, employees from the subsidiary may struggle to adapt to the new environment, risking dissatisfaction or mistrust. This may result in the loss of highly talented personnel, undermining the anticipated synergy, and in some cases, cultural differences can lead to friction within the organization, significantly lowering operational efficiency.

These challenges are not exceptions even when integrating wholly owned subsidiaries. Even if there has been ongoing business exchange, the subsidiary usually maintains its own culture and retains a strong desire to preserve existing workflows and mindsets. Therefore, in the integration process, one must not simply assume that “it will work out fine because it’s a wholly owned subsidiary.” Progress should be careful and conducted on equal footing, respecting both cultures.

Integration usually accompanies psychological resistance at the worksite, which is especially pronounced when the subsidiary’s business performance has been strong. This resistance typically arises from anxiety about adjusting to new work procedures, attachment to current practices, and reluctance to form new relationships with supervisors and colleagues.

To prevent such problems, it is essential to repeatedly communicate the integration vision and deepen understanding. Integration leaders should explain the purpose and policy of the integration directly to the top management of the subsidiary, clarifying intentions and identifying concerns so that countermeasures can be implemented in advance. Sharing the integration policy with key department leaders and engaging them early can help smooth onsite acceptance. Also, setting up open channels for dialogue to address employee concerns and questions will be key to achieving a smooth integration.

For successful business integration, the post-integration business structure and operational processes must be clearly defined, and sufficient time must be spent to build a shared understanding among stakeholders. Especially when the subsidiary needs to adapt to the new parent company’s basic policies or strategies, it is vital to clarify the scope of impact and take suitable countermeasures. This means comparing the basic policies and management strategies between companies and identifying, along with key stakeholders, which types of transactions post-integration are acceptable and which are difficult.

For example, if it is decided that specific products will be discontinued after integration, it will be necessary to discuss and agree on the criteria and processes for these decisions and to plan appropriate countermeasures for existing clients together with key personnel from the subsidiary.

If drastic changes to management structure or authority are imposed on the subsidiary without operational understanding, this may cause confusion and disrupt business continuity. Therefore, it is important to respect the existing structure as much as possible, especially in core departments, and ensure the smooth transfer of management to the integrated entity.

So far, this article has focused on the key points for successful subsidiary integration from the perspectives of organizational culture, psychological resistance, and business processes.

The next part will address additional points for successful subsidiary integration from the perspectives of branding policies, business policies, accounting systems, and IT systems.