A merger and acquisition can be tough on employees. To ensure maximum value is achieved, HR needs to carefully facilitate the process.
For a leadership team looking to boost performance or “jump-start” growth, acquiring or merging with another business can be an enticing option. But realising the value of a transaction is typically easier said than done. While a deal may stack up on paper, when it comes to the execution, costly mistakes can be made.
According to the an article in HBR, “study after study puts the failure rate of mergers and acquisitions somewhere between 70 per cent and 90 per cent”. KPMG research shows that only a third of mergers, acquisitions and takeovers add value. An astonishing 70 per cent in fact “reduce shareholder worth or, at best, are neutral”.
So why do things go wrong so often? Research consistently points to three key factors:
- inadequate focus on value creation;
- a struggle to retain personnel and fuse two different organisational cultures; and
- incompatible management styles.
As a result, an erosion of clarity, trust and engagement is typically at the heart of the issue when mergers and acquisitions fail. HR plays an essential role in working with leaders to overcome these challenges and successfully navigate the transition journey.
Among the most important steps HR teams can take include:
1. Know what and who you’re acquiring
Success begins in the due diligence stage of the process. Typically, vast sums of money, time and resources are spent assessing the financial performance and potential of the organisation. Less focus is often placed on the human side of the equation and what it will take to successfully bring people from different workplace cultures together.
Understanding the organisation’s leadership strengths and development needs is fundamental. So too is having full appreciation of the values and behaviours leaders typically bring to their roles. Form a view of what it will take for people in leadership to have a positive influence on integration. Identify key influencers, for example, who have the power to enable or derail the sense of confidence and therefore engagement people feel.
2. Know what success looks like
Creating a unified culture, and ultimately team, begins by understanding what success looks like. Take deliberate steps to create a clear and compelling vision of the cultural environment that will enable the newly formed team to thrive. Identify what aspects of each organisation’s culture remain important to collective success and which need to change.
Be honest and yet sensitive about aspects of culture that have enabled success to date, and those that need to change in order for the new organisation to achieve its full potential.
3. Plan to succeed
HR plays an essential role in not only determining whether or not a particular transaction is a wise investment, but also in understanding the transition steps that will be essential to enabling success. Take the time needed to understand not only the scope of the change ahead, but also the implications for individuals and teams.
Understand the ways in which the merger or acquisition will impact upon career paths, reporting lines and the makeup of teams, for example. Never underestimate the extent to which people can become unhappy at work simply because they no longer get to work with the people that they used to. Remember, most people move on because they no longer enjoy the culture, their manager or their colleagues.
4. Listen and respond
No matter how well considered your integration plans, people are likely to respond in unexpected ways. At every step along the integration journey, listen to understand. All too often organisations are focussed on telling people how things will be, rather than listening to what people on the team believe will make the biggest difference.
Be careful to listen to all of the voices on your new team. It can be easy to perceive some people as “neigh sayers” or simply resistant to change. Despite their emotional and at times counterproductive approaches, those you perceive as the biggest roadblocks to success can in fact offer valuable insights to what’s needed to smooth the path ahead.
5. Coach leaders to coach
Take a hands-on approach to supporting leaders to in turn coach their people through change. Among the most important ingredients of success is clarity and accountability. Help leaders to set clear expectations and hold people accountable to the standards of behaviour and performance the new organisation needs.
Guide leaders to be respectful of people’s insecurities and fears of the unknown while at the same time expecting that they work through their concerns and “get on the bus”. While people may experience a sense of loss in the merging of their organisation with another, focus on their ability to engage with the new world and be a part of a successful future.
Karen Gately is a people-management specialist and founder of HR Consultancy Ryan Gately.
Learn about the strategies, tools and techniques to effectively manage the people aspect of changing systems, structures and behaviour within your organisation, with the AHRI short course ‘Change Management’.