Driving Optimal Business & Workforce Outcomes during M&As
How to build thriving teams and achieve powerful business results during times of change
No matter the industry or deal size, mergers & acquisitions are a serious challenge for any organization.
Global M&A activity hit a record high in 2018. Approximately 68% of executives at US-headquartered corporations and 76% of leaders at domestic-based private equity firms say deals will increase throughout 2019.A
Most Common Industry Mergers:
- Technology & Telecommunication
- Energy & Construction
- Construction & Manufacturing
- Retail & Technology
- Healthcare Providers & Plans
Most Common Reasons for M&A Transactions:
- Geographic Expansion
- Acqui-Hiring of Talent
- Product/Service Acquisition
- Financial Efficiencies
For these deals to succeed, leaders must make their human capital strategy a critical business priority. This is essential to retaining key talent, maintaining high engagement, and getting employees excited about the future organization.
How can you make your people a core pillar of your end-to-end M&A strategy?
Create Space for Collaboration
As the deal takes shape, ensure key leaders from all facets of your organization have a seat at the table. In addition, make sure your CHRO/CPO is a strategic systems thinker.
Build teams for finance, technology, and human capital that work collaboratively and strategically instead of in silos. As they achieve this, they will focus on critical areas beyond the tactical IT and finance requirements that are urgent needs in the beginning. Furthermore, remember that talent and organizational misalignment can seriously delay or even derail any integration.B
Providing opportunities for all sides of the business to collaborate ultimately speeds up the integration process. Likewise, a big mistake made during mergers is not communicating enough. What seems obvious and logical to the executives needs to be communicated clearly and regularly across the entire organization. Leaving your people in the dark makes them assume the worst.
In addition, the more your company focuses on the long-term instead of the urgent, the stronger your foundation will be for achieving your strategic goals. This is ultimately the whole reason for the M&A initiative in the first place.
Prioritize Workforce Due Diligence Throughout the Entire Process
Through all the required changes, you have the power to shape teams that are powerful, united, and high performing. Start by analyzing the key talent from both organizations as early as possible. Most importantly, ask yourself:
- Who do you want to actively invest in to ensure they thrive and remain with the organization?
- Where do you see clear gaps in the new organization and how will you fill them?
- Which employees have skills they can leverage in a new capacity through redeployment?
- How will you conduct layoffs with compassion and care?
Redundancies are unavoidable during M&A. In fact, your company will have to make tough decisions along the way. How you handle these necessary changes will shape everyone’s perception of your M&A initiative. Also, it can trigger strong emotions and reactions. Partnering with a compassionate outplacement partner will provide you with the guidance, expertise, and resources you need to handle sensitive layoffs and redeployments that, in the end, benefit everyone involved.
Once you move into the integration phase with your go-forward team, make investing in your talent a priority. Turnover in acquired companies is double that of non-merged companies for a full decade following an M&A.C In fact, a Bain & Company study found that 70% of M&As fail to create meaningful shareholder value. Furthermore, Hay Group and the Sorbonne presented a similar finding, sharing 90% of mergers in Europe fail to reach financial goals.D One reason is the loss of key talent.
Consider leading cohort development programs to build synergy and break down walls between the newly formed team members. In addition, it is wise to train managers on how to lead through change and help employees deal with loss and grief after the necessary disruption. This is a crucial time for people to feel that they belong, are united as a team, and are safe within the organization. Offering development opportunities sends a powerful message that you are making your people your top priority.
There is another group critical to the growth of your business: the external talent market. M&A has the potential to disrupt hiring.E As a result, how you manage the layoff and company integration affects your employer brand and your ability to attract star talent during times of growth.
Prioritize Culture as a True Driver for M&A Success or Failure
The big question is what defines organizational/corporate culture? Once you are clear on what you want, determine what it will take to create the merged culture you desire. Remember, there is no instruction booklet for changing corporate culture. Thus, organizational culture clashes are a key reason why mergers & acquisition fail.F
During times of change, it is natural for human beings to be stressed and enter the fight or flight mode. In fact, change induces fear in the brain. This causes it to continuously scan its environment for potential threats – perceived or real. As a consequence, individuals are prohibited from being naturally inclusive. This can be a particular challenge when two organizations are not aligned culturally.
If the culture is toxic or vastly different, employees become unproductive, innovation stalls, and silos emerge.
In the absence of a healthy culture, employees will not approach the new organization with a growth mindset, become inclusive, or embrace the necessary changes.
To achieve M&A success, it is critical to discuss cultural alignment between the two organizations at the beginning of the deal. Key questions need to be:
- How does the acquired organization engage with and treat their clients?
- How do they approach decision making?
- What is the hierarchy like?
- Is there autonomy?
Smart acquisitions define and reinforce company culture as a key component of the transition plan. Make this an imperative component of your due diligence process.
In order for your deal to succeed, your human capital strategy needs to be as important as your tech and finance strategy. Your people shape your organization and determine where you will go in the future. They deserve to be at the forefront of your M&A initiative.
A US Mergers & Acquisitions 2018 Trend Report, Deloitte
B The Risks of Underestimating IT Alignment in M&A, Deloitte & Wall Street Journal
C Why Acquisitions Fail, Business Insider
D Mergers Fail More Often Than Marriages, CNN
E Maintaining the Talent Pipeline During M&A, Deloitte
F Mergers & Acquisitions: 10 Things HR Won’t Tell You, ToughNickel