The Human Side of Managing Mergers

A large number of M&As lead to underperformance or failure. Being a CEO who excels at managing mergers and delivers benefits will boost career prospects.

A common reason for M&A (mergers and acquisitions) failure is downplaying the people element. During due diligence, planning focuses on how to realise strategic and financial benefits such as access to new markets, distribution synergies and economies of scale. It’s often assumed the human side will take care of itself once the integrated entity is operational. Yet 3 out of 10 mergers fail for cultural reasons.

Organisational culture — how people think, behave and act — is hard to address, particularly in the time-pressured environment of a typical merger. It is not data-driven; it is difficult to measure and impossible to control. Furthermore, culture change is often resisted because it moves employees out of their comfort zone. No wonder it is downplayed, ignored or dismissed as too ‘soft’ to bother with.

Yet managing mergers to create the correct culture is essential for achieving the full value. It impacts everything from cross-function projects and customer relationships to strategic decision making and line management style. It deserves to be high on the M&A-planning priority list.

6 WAYS TO SUPPORT INTEGRATION WHEN MANAGING MERGERS

Your approach will depend on the type, scale and complexity of the integration.

1. Address culture at every stage: For example, include culture assessment in the due diligence process, ensure its challenges are prioritised by the transition steering committee and conduct a post-merger risk assessment.
2. Communicate its business value: Put senior managers in charge of culture change with a direct reporting line to you and a clear idea of what you expect.
3. Create a compelling story: Loss of valuable talent is a major risk so retention should be a priority. Create an internal brand communication program that helps people to understand how the merger benefits them and identify key individuals whose loyalty needs to be secured.
4. Reward desired behaviours: Tie KPIs, remuneration, incentives and career progression to required behaviours at all levels and provide regular culture training and development activities that showcase how behaviour impacts business outcomes.
5. Remove obstacles: Sometimes individuals, processes or policies can inhibit a smooth transition. A manager may be vocally opposed to the new culture or a process may inhibit decision-making. It is essential to quickly identify and mitigate any risk to success.
6. Never introduce change for change’s sake: If your organisation acquires a business that functions well, there is little point in changing its culture unless it is opposed to yours. A risk assessment will uncover any downside to continuing the status quo.

GETTING THE EXPERIENCE

As a leader, managing critical transitions is an important learning experience. Ensure your career development plan includes exposure to opportunities of growing complexity and responsibility. These might include new system roll-outs, departmental mergers and major cross-function programs. The more change management is on your CV, the better your chances of success with a full-blown M&A.

This article was originally published for CEO Magazine

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