Preparing Your People and Culture for a Merger

This article was sourced from our global HR partner, Best Companies Group (Middle East)and was written by its CEO, Michael Burchell, Ph.D.

The appeal of mergers and acquisitions is undeniable. The potential to reduce costs, share resources, expand service offerings, reach new customers, and increase revenues are advantages that can set businesses up for long-term success in unpredictable economic climates. However, these transactions can be risky, costly, and, international research shows they have a high failure rate, hovering somewhere between 70-90%.

The majority of mergers and acquisitions fail to meet expectations because of poor culture integration.  M&A deals tend to focus on financial synergies, and when organizational issues are addressed, the focus is on organizational redesign and managing talent.

Business implications

No matter the industry, the process of integrating two – or more – company cultures is complex on a variety of levels. The intricacies of combining companies is a daunting task and is what contributes to such high failure rates. However, a thoughtful and thorough approach to M&As can help companies navigate the obstacles and emerge as success stories.

One of the key aspects of M&As that organizations should be mindful of is the impact these transactions have on employees. Feelings of uncertainty and anxiety often arise when the employee experience isn’t considered and can lead to issues of engagement, retention, and morale. A 2013 study by Aon showed that M&As caused more disruption to employee engagement than other type of change and that it can take up to three years for employees to recover positive levels of engagement. Disengaged employees cost companies billions of dollars each year in lost productivity, missed workdays, and increased absences due to illness.

Companies should consider key areas of the employee experience when developing and implementing M&A plans: communication, culture, talent strategy, and systems.

Communication

While it might not always be possible to communicate all of the details of pending mergers and acquisitions until the deal is done, a thoughtful and comprehensive communication plan should be put together and launched in a timely way so employees can get up to speed on the details quickly and from trusted leadership sources. Determine and identify key messages and communicate through a variety of channels, and make sure leaders at all levels are prepared with talking points, FAQs, and details to support in answering questions from employees. Messages should come from the highest levels of the organization, most importantly the CEO and senior executives, so that employees feel informed from the top.

Culture

Company culture is another aspect to consider and plan for. When merging two distinct entities, values, behaviors, and norms can be wildly different. To help mitigate any culture shock across your newly merged employee populations, take time to understand and analyze both cultures for similarities and differences. Instead of expecting one company culture to assimilate entirely within another, consider ways to integrate practices, programs, and initiatives from both to create a sense of shared ownership. It is critical for the executive team to articulate the “to be” culture and what mindsets and behaviors will drive business success. A sophisticated culture plan will integrate the “best of” previous culture practices and highlight what is new in the “to be” culture of the emerging organization.

Talent Strategy

When combining workforces, you’ll have to account for increased headcount and additional training and development needs. Working with your human resources, talent, and learning departments to create an integrated talent strategy that will help employees succeed within the new organizational paradigm will not only set your business up for success but will show employees that you are invested in their careers and their continued contributions to your organization. Importantly, organizational leaders need to match talent to the new value creation agenda. If there are any “cost savings” because of role duplication and overlap, it becomes essential to manage redesign efforts in a high-trust manner so as to not erode trust in the new organization.

Systems

There’s nothing worse than not knowing how to use systems or platforms necessary to do your job. When employees integrate with another organization, there may be significantly different systems in place for things like communication, knowledge management, timesheets, procurement, and other important tasks. Make sure your subject matter experts and responsible teams are prepared and able to support employees in transitioning to different systems and can provide the necessary training. It is useful to “overestimate” the amount of time required because not understanding or managing changes in systems and processes can create organizational drag and increase cost.

Mergers and acquisitions are complex but taking an employee-focused approach to preparing and implementing the change can set these transactions up for lasting success. Loeb Leadership specializes in working with organizations on culture transformation efforts and employee engagement.