For a leadership team looking to boost performance or ‘jump-start’ growth, acquiring or merging with another business can be an enticing option, according to Karen Gately, founder of HR consultancy Ryan Gately.
However, realising the value of a transaction is typically easier said than done. While on paper a deal may stack up, when it comes to executing, costly mistakes can be made, Gately added.
According to the authors of the HBR article The Big Idea: The New M&A Playbook “study after study puts the failure rate of mergers and acquisitions somewhere between 70% and 90%”.
Gately also cited KPMG research which shows that only a third of mergers, acquisitions and takeovers add value. In fact, an astonishing 70% “reduce shareholder worth or, at best, are neutral”.
So why do things so often go wrong? Gately said research consistently points to a number of factors.
Inadequate focus on value creation, as opposed to just getting the deal done and both “a gaping inability to keep key personnel and get the two corporate cultures to work in unison”, according to KPMG.
Incompatible management styles leading to an erosion of clarity, trust and engagement is typically at the heart of the issue when mergers and acquisitions fail, said Gately.
She added that HR plays an essential role in working with leaders to overcome these challenges and successfully navigate the transition journey.
According to Gately, the most important steps HR teams can take include the following:
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 organisations 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 roles to have a positive influence on integration. Identify key influencers who have the power to enable or derail the sense of confidence and therefore engagement people feel.
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 organisations 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.
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 transitions steps that will be essential to enabling success. Take the time needed to understand not only the scope of 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 make-up 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 do. Remember, most people move on because they no longer enjoy the culture, their manager or colleagues.
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 focused 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 simply being resistant to change or a ‘neigh sayer’.
Despite their emotional and at times counterproductive approaches, those you perceive as the biggest roadblocks to success can in fact be offering valuable insights to what’s needed to smooth the path ahead.
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 to hold people accountable to standards of behaviour and performance the new organisation needs.
Guide leaders to be respectful of people’s fears of the unknown and insecurities, 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.