Unicredit Change Management

Executive MBA

CHANGE MANAGEMENT

The reorganization of the Group Internal Audit Department

FINAL assignment: Carlo Giorgis

EXECUTIVE SUMMARY

UniCredit is one of the largest European financial groups, operating in 22 European countries with around 160.000 employees worldwide and 9.500 branches. In 2005, following the merger with HVB and the appointment of a new Head of Department, the Internal Audit Department (IAD) was reorganized. The expected results were obtained later than planned, with large resistances, process and relationships disruptions and bureaucracy increase. Main reasons were due to a simplistic approach to change, an inadequate leadership style, lack of compelling vision and insufficient communication.

The IAD restructure could have been managed more effectively with a different approach in terms of:

* Organization metaphor: IAD has aspects of both Machine and Organism (Morgan, 1986);

* Model of change: William Bridges's Model (Managing the transition, 1991) and Kotter Eight Steps (1995);

* People's management, keeping into account the Behavioral (Pavlov, 1928 - Skinner, 1953) and Psychodynamic (Kubler-Ross, 1969 - Satir et al, 1991) approaches;

* Team's management, building a project team taking into account the personal traits of team members (Belbin, 1981), involving external consultants and HR;

* Leadership Style, moving from Coercive towards a mixed use of Authoritative, Affiliative, Democratic and Coaching Styles (Goleman, 2000).

The change management plan, defined bringing together the Bridges's and Kotter's approach, focuses on:

* creation of the need for change and of a compelling vision;

* constant, extensive communication to all involved employees, from the very beginning to the end of change, trough:

o periodical IAD meetings;

o one-to-one meeting between employees, Head of IAD and HR;

o open and honest involvement of people into the change process.

* approach to people that takes into account the different feelings in the different phases of change;

* leadership style promoting risk taking and experimentation, responsibility, personal development;

* different rewards, to sustain people through the transition;

* ethical approach in dismissing and hiring decisions.

Table of Contents

1 Overview 4

2 Background 4

2.1 The Company 4

2.2 Triggers for change 4

2.3 The change 4

2.4 The outcomes 5

3 Analysis of the approach to IAD restructure 6

3.1 Organization's metaphor & model of change 6

3.2 Individuals 8

3.3 Teams 9

3.4 Leadership style 9

4 Change Management Plan 11

4.1 Purpose and scope 11

4.2 Leadership Style 11

4.3 Need for change 11

4.4 The change team 11

4.5 Vision and strategy 11

4.6 Communication 11

4.7 Employees' management 12

4.8 Short term wins 12

4.9 Consolidation 12

4.10 Institutionalization of new approaches 13

5 References 14

6 Bibliography 14

1 Overview

The report, starting from the reorganization of the UniCredit Group Internal Audit Department (IAD) that took place between in 2005 and 2006, proposes a management plan that details how the change management could have been handled, based on models and tools of organizational change.

2 Background

2.1 The Company

UniCredit is one of the largest European financial groups, operating in 22 European countries in retail, corporate, private and investment banking, as well as asset management and insurances. It has around 160.000 employees worldwide and 9.500 branches.

2.2 Triggers for change

The triggers for change were:

* the merger between UniCredit, HVB and its Austrian subsidiary, Bank Austria. A big Integration Program was established to consolidate all the acquired legal entities into UniCredit Group, that involved also the Headquarters staff functions. The new Group was:

o larger than before (from 90.000 to 160.000 employees);

o more complex from an operational point of view;

o with a greater degree of diversity.

* the retirement of the Head of UniCredit IAD, replaced by the Chief Administrative and Risk Officer.

2.3 The change

IAD was composed by around 60 employees, allocated into units specialized by process (credit process, investment process, administration, operations) carrying out two main activities:

o coordination of the subsidiaries' internal audit departments, agreeing with top management the annual audit plan and analyzing the results (relationships based activities);

o direct execution of internal audits at local level (on-site audit, technical activities).

IAD restructure was executed allocating the two activities to two distinct units: Audit Monitoring and Audit On-Site. Audit Methodologies