How can leaders rapidly get value from mergers and integrations?
16 November 2018
Although it’s probably the most difficult element of a merger or integration to get right, establishing a new culture and building engagement is the fastest way to deliver value – as long as the CEO and their team prioritise several key areas.
It’s no secret that mergers and integrations take a significant amount of time and money to plan, negotiate and formalise, so when the ‘deal is done’ it’s understandable that senior leadership teams are keen to see value for shareholders from the investment. This value can be realised in a number of ways from accelerated growth and sustainable profitability, newer products and services as a result of innovation to better customer service or lower costs.
Instinctively, senior leadership teams focus all their energy on ensuring the new organisation has robust strategies and financial processes in place to achieve these outcomes. While this isn’t incorrect, surprisingly it won’t actually deliver value terribly quickly if attention isn’t paid to culture and engagement at the same time.
Why? Because culture is the set of beliefs, values, assumptions, norms and behaviours that drive how people perform their roles and conduct their relationships with team members, peers, superiors, customers and other stakeholders. Failing to place priority on these areas can have some ramifications, not only for productivity and innovation but for the success of the merger itself. In a case study released by the Society for Human Resource Management, the culture was found to be the cause of 30 per cent of failed integrations (Isaac Dixon, "Culture Management and Mergers and Acquisitions," Society for Human Resource Management case study, March 2005).
Our experience at The Oxford Group confirms this: a recent client acquired two other businesses and discovered that although there was a fit in terms of values and vision (and therefore a high level of commitment to make things work), there were very significant differences in their ways of working. Furthermore, expectations regarding the roles and responsibilities of the leadership team weren’t clarified early enough and led to operational and motivational challenges that impacted how quickly the acquired companies could hit the ground running.
Post-merger or acquisition it is common for people to defer to silos, so one of the biggest challenges for organisations is getting their people to collaborate and form strong networks with new groups of colleagues. Fortunately, these challenges can be overcome in two ways: 1) by establishing a ‘People and Culture’ workstream and steering group which receives the same level of attention and commitment as financial and logistical processes during the integration process, and 2) through the personal, hands-on involvement of the CEO and other C-suite executives in the areas explored below.
a) Senior leadership appointments. Ideally, the key roles in the senior leadership team should be a balanced representation from across the newly merged organisations. The focus should be placed on appointing people who are role models for the best of the values and behaviours from each of the original organisations. Making the correct appointments is critical in setting the right culture from the beginning.
When it comes to communicating a new culture, what counts is not what senior leaders say, but how they behave. People pay significantly more attention to leaders’ informal, unconscious communications (tone, body language, the focus of their attention) than to formal, conscious communications (emails, newsletters or videos).
b) Clarification of roles. Without clarity on how work is to be conducted in the new environment, it is almost impossible for senior leaders to do their jobs effectively. At the very outset of the integration, CEOs and their direct reports need to have a conversation dedicated to setting mutual expectations. These expectations go beyond roles, responsibilities and reporting lines, to ways of working with other senior leaders and with their own teams, collaboration, and the frequency, content and methods of communication that should be used.
c) Establishing team values. The new senior leadership team should be brought together rapidly to forge trusting personal relationships. This is best started by having two-way conversations that allow each party to get to know each other on a deep level by exploring backgrounds, values, aspirations, likes and dislikes. As a team, they are then in a position to explore a set of values for the new organisation drawn from the original organisations, and to identify and commit to the behaviours that are required to translate these values into action.
d) Talent Management. The CEO must share with their new senior leadership team how the integration process will take place, including plans for redundancies and cost savings, and ask for their commitment to communicating and owning this process. Senior leaders must collaborate to develop strategies to make the process as fast and humane as possible for both leaving and remaining staff to reduce feelings of uncertainty and insecurity.
It is also wise to invest in career advice and outplacement services for leaving employees to support them in their transition. It is important that senior managers dedicate time to meet with each exiting member personally to show genuine appreciation for their service and contribution. The details of the process and support mechanisms should be communicated with sensitivity by CEOs and senior leaders via team briefings and ‘town hall’ forums.
e) Training. When lower levels of managers are appointed, roll out training in how to live the new values and how to build trusting relationships (our 5 Conversations programme is a great base to work from). There should be visible involvement of the CEO and new senior team.
Furthermore, our experience has highlighted that training in specific skills needs to be implemented early on to keep up with the pace of change happening in the organisation. This will foster a culture of continual learning and ensure people can succeed in new and emerging roles.
f) Monitoring the effect of the merger. We recommend implementing a ‘live’ employee engagement survey process (there are software packages that facilitate this) to enable the senior leadership team to access real-time information on morale and engagement within the organisation. Incorporate this as an agenda item at every Board Meeting so that plans can be made to address issues as they arise.
It is often – and rightly – said that “Culture always trumps strategy”. Without a cohesive culture, power struggles and silos will render the most logical, rational and financially-astute strategy ineffective. The moral of the story is to work hard to develop a new but authentic culture, based on the best values from the original organisations that support and align with the new business strategy. That work starts with the CEO and their senior leadership team.