Merger Aftershocks -...
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Merger Aftershocks Surviving the people challenges of a post-merger integration Deloitte Consulting LLP
Transcript of Merger Aftershocks -...
Merger Aftershocks
Surviving the people challenges of a post-merger integration
Deloitte Consulting LLP
Table of contents
Introduction 2
Leadershipalignment
Effectivemergerintegrationbeginsatthetop 3
Organizationaldesign
Morethanlinesandboxes 4
Talentretention
Holdingontoyourmosteffectivepeople 5
Communications
Fightingrumorswithfacts 6
Culture
Cultureclashisoftenthemostsignificantobstacletoaneffectivemerger 7
Dayone
Theendofthebeginning 8
Puttingtogetherthepieces 9
Contact information 10
The announcement of a merger or acquisition typically sends shockwaves of anxiety rippling through an organization. Employees worry about losing their jobs. Managers struggle to maintain control in an environment where everything is shifting. Leaders agonize over the tough decisions that need to be made. And, people at every level may even lie awake at night wondering about their role in the new organization.
This initial shock is often followed by a series of aftershocks. Unexpected defections of key talent. Bouts of organizational panic caused by rumors and innuendo. Sharp declines in productivity and morale. And in some cases, the loss of customers and poor market performance.
Organizations that are unprepared to tackle these challenges quickly and decisively are likely to find themselves watching helplessly as their merger benefits – and chances for achieving desired results – rapidly slip away.
Here are six critical actions to consider that can help you stabilize your organization after a merger announcement.
Introduction
Leadership alignmentEffective merger integration begins at the topAnalignedleadershipteamsetsthetonefortherestoftheorganization.Whenkeyleadersfrombothsidesofthemergerareactivelyengagedintheintegrationeffort–andbehaveinapositiveandconsistentmanner–employeesaremorelikelytoengageandfollowsuit.
Thefoundationforleadershipalignmentissetwithacommonvision,purpose,andstrategy.Thesesharedelementscangiveleadersapersonalreasontopullinthesamedirection.
Aclearintegrationstrategyisparticularlyimportant.Byidentifyingpotentialbarrierstochange–andmitigatingtheirimpact–aneffectiveintegrationstrategycanacceleratetheintegrationprocess.Itcanalsohelpfacilitateasmoothtransitionduringthefirst90days.
Keystoachievingresults:
Get leaders involved.Createmeaningfulopportunitiesforinvolvementandownershipbyengagingkeyleadersandstakeholdersindevelopmentoftheintegrationstrategyaswellasthepost-mergeroperatingstrategy.
Make it personal. Alignpersonalgoalsandworkingstyleswiththeoverallgoalsoftheorganization.Createacompellingvisiontoexciteandenergizeleaders.
Follow a structured approach.Usetime-testedapproachesandtoolstofosteralignmentandtoimplementsharedobjectives,goals,andplans.Holdaformal“summit”meetingtogetleadersalignedandonboard.
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People:TheDrivingForceforSustainedTransformation 3
Organizational designMore than lines and boxesAneffectivemergerhingesondeployingtheorganization’sdiverseandcriticaltalenttomeetchangingbusinessneeds.Goodorganizationaldesigncanhelpaddressthischallengebycreatingaclearreportingrelationshipstructureandwelldefinedroles.Itcanalsohelpaddressthemerger-relatedquestionsthatoftenkeepemployeesawakeatnight.Howwillthemergeraffectme?WillIhaveajob?WherewillIwork?WhowillIworkfor?Whataboutmyfriends?
Effectiveorganizationaldesignismorethansimplydrawingsomeboxesandlinesonapage.Itrequiresacomprehensiveapproachthatencompassesallfunctions,cross-functionalareas,andgeographicregions.Italsorequiresclearobjectivesandarobustimplementationplanthatminimizesdisruptiontothebusiness.
Keystoachievingresults:
Take inventory. Identifythecapabilitiesrequiredtosupporttheneworganization’sobjectives.Conductathoroughevaluationofemployeeskills,competency,andperformance.Identifytoptalentanddesigntheorganizationtoharnesstheirfullpotential.
Seek input. Interviewkeystakeholdersfrombothsidesofthedeal.Talktopeopleateverylevel–andfromeachmajorfunction.
Explain “how” and “why.”Clearlycommunicatetheneworganizationalstructure,explainingexactlyhowitwillwork,whyitwasdesignedthewayitwas,andhowroleswillbestaffed.
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People:TheDrivingForceforSustainedTransformation4
Talent retentionHolding on to your most effective peopleAlthoughamergermightbeagreatopportunityfortheorganization,employeesgenerallyviewitasathreat.Evenyourmosteffectivepeople–theoneswhoshouldhavetheleasttoworryabout–arelikelytostartmakingcontingencyplans.Andinthisperiodofuncertainty,it’salltooeasyforotherorganizationstoswoopinandstealthemaway.
Organizationsneedanexplicitstrategyforretainingtalentduringamerger.Thisisespeciallytruefordealswherepeopleandtalent–ratherthanproducts,financialassets,ormarketposition–areattheheartofthemergerstrategyandbenefits.
Aneffectivetalentretentionstrategycanhelpyouholdontothepeople,knowledge,andfocusyoumostwanttokeep.Thiscanhelpenhancebusinesscontinuityandlaythegroundworkforahigh-performancecultureintheneworganization.
Keystoachievingresults:
Act quickly. Talentedpeoplearedecisive,action-oriented,andhighlymarketable.Besuretheyunderstandtheyarevaluedandhavenothingtoworryabout.Don’tgivethemachancetoeventhinkaboutleaving.
Build commitment. Takespecificstepstoinvolve,engage,andempoweremployeesateverylevel.Helpthemunderstandwheretheorganizationisheaded–andhowtheyfitin.
Work with HR.CollaboratewithHumanResourcestoestablishretentionstrategiesthathelpkeeppeople,transferknowledge,andmaintainfocus.
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People:TheDrivingForceforSustainedTransformation 5
CommunicationsFighting rumors with factsAmerger–oreventhepossibilityofamerger–issuretogetpeopletalking.Andwhentheyaren’ttalking,theyareprobablyworryinginsilence.Eitherway,thenegativeimpacttoproductivityandmoraleisundeniable.Evenworse,thedamagecaneasilyspreadbeyondyourworkforce,poisoningcustomerrelationshipsandunderminingtheorganization’sreputationandbrand.
A360°communicationsprogramcanhelpreducetheserisksbyreplacingrumorsandhalf-truthswithfactsandinformation.Acomprehensiveandstrategicprogramshouldtargetallofanorganization’skeystakeholders–includingmanagers,employees,customers,suppliers,shareholders,boardmembers,andthemedia–withmessagesandcommunicationtailoredtotheirspecificneedsandconcerns.Suchanapproachrequiresasignificantinvestmentanddeliberateeffort,buttheinvestmentgenerallypaysforitselfmanytimesoverduringtheintegrationprocessandbeyond.
Keystoachievingresults:
Don’t wait too long.Executivesareoftenreluctanttoshareinformationaboutamergeruntilalloftheintegrationdetailshavebeennaileddown.Butunlesstheorganization’sleaderscommunicatewiththeworkforce,there’snothingtokeeptherumormillincheck.Andinmostcases,theresultingrumorsandimaginaryfearsaremuchworsethanreality.
Provide frequent updates.Mergercommunicationisanongoingprocess,notaone-timeevent.Communicateearlyandoften,providinginformationupdatesastheintegrationunfolds.Striveforconsistentmessagingovertime–andacrossstakeholdergroups–butdon’tfeelasifyouneedtobeperfect.Mergerscanbechallenging,andpeopleunderstandthat.
Establish a two-way dialogue.Giveindividualsachancetovoicetheirconcernsandtoprovideinput.Peoplearemorelikelytogetonboardwhentheyfeelasiftheyareinvolvedintheprocess.
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People:TheDrivingForceforSustainedTransformation6
CultureCulture clash is often the most significant obstacle to an effective merger
Corporateculturemightbedifficulttoquantify,butitsimpactonamergerisveryreal.Someorganizationsmakethemistakeofignoringculture-relatedissues.Otherscarefullydesignan“ideal”cultureandassumethatemployeebehaviorwillautomaticallyfallinline.Inourexperience,neitheroftheseapproachesiseffective.
Corporateculturecanbeincrediblytenacious,resistinganyandallattemptstomodifyitsunderlyingvalues–andassociatedbehaviors–evenwhensuchmodificationswouldclearlyimprovethings.
Acceptthefactthatcultureandemployeebehaviorsaredifficulttochangeandplanyourstrategyaccordingly.
Keystoachievingresults:
Pick your battles.Focusonareaswhereculturaldifferencesarelikelytohavethemostsignificantimpactonpost-mergerresults,suchasthecriticalbusinessinterfacesbetweenthetwoorganizations.Don’ttrytochangecultureovernight;itcan’t–andwon’t–happen.
Work with culture, not against it.Encouragenewbehaviorsthatareanaturalextensionofthecurrentcultures,andthenhelpemployeesunderstandhowtoapplythenewbehaviorstotheirday-to-dayactivities.Buildanewcultural“brand”thatsupportsyourstrategiesandthatpeoplecanidentifywith.
Link cultural issues to business value. Businessleadersoftenhavetroubleunderstandingthevalueandimpactofculture.Gettheirattentionbyshowingaclearlinkbetweenculturalissuesandcriticalaspectsofbusinessperformance.
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People:TheDrivingForceforSustainedTransformation
Day oneThe end of the beginningThefirstdayofcombinedoperations–oftenreferredtoas“DayOne”–isacriticalmergermilestonethatshouldbeacknowledgedandcelebrated.It’sachancetohelpemployeesunderstandwhatisexpectedofthemandtoshowthemhowtheyfitin.Evenmoreimportant,itprovidesanopportunityfortheorganization’sleaderstoshiftattentiontothefuture,totalkaboutthechallengesthatlieahead,andtobuildexcitementabouttheorganization’sstrategicgoals.
GiventheimportanceandvisibilityofDayOne,it’sessentialthatitgoessmoothly.Thatmeanssettingtheappropriateobjectives,andthendesigninganddeliveringaDayOneexperiencethatbringsthetwoorganizationstogether–boostingmorale,engagingtheworkforce,andcreatingpositivemomentumforthefuture.
Keystoachievingresults:
Celebrate.DayOneisworthcelebrating,bothasamajorachievementandasthestartofevenbetterthingstocome.
Set the tone for the future.UseDayOnetoreiteratetheorganization’svision,aspirations,andstrategy–andtogenerateexcitement.
Don’t let up.DayOneismerelytheendofthebeginning.Themostsignificantchallenges–andaccomplishments–arestillahead.
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People:TheDrivingForceforSustainedTransformation8
Thesesixactionsmightseemstraightforward,butinthefrenzyofactivitythatusuallyfollowsamergerannouncement,evensimplethingscanbedifficulttorememberandexecute.Moreover,eachofthesepeople-relatedactionsmustbecloselycoordinatedwithothermergerintegrationinitiativesthattoucheverypartoftheorganization–frombusinessstrategyandoperationstoadministrativefunctions,informationsystems,andalloftheabove.
Giventheseimmensechallenges,it’snowonderthatmostmergersendupdestroyingmorevaluethantheycreate.1Toovercometheodds,youneedasimple,practicalandtime-testedapproachfortacklingtheorganizationalaftershocksassociatedwithpost-mergerintegration.Addressingtheseissuesquicklyanddecisivelycanhelpyoucaptureallofthemergerbenefitsyourshareholdersexpect.
Putting together the pieces
1 “Solving the Merger Mystery: Maximizing the Payoffs of Mergers & Acquisitions” Deloitte Reseach, 2000
People:TheDrivingForceforSustainedTransformation 9
TheinformationcontainedhereinusbasedontheexperiencesofourDeloitteConsultingLLPprofessionals.
Contactinformation:Formoreinformation,pleasecontact:
CarolynVavrekPrincipalDeloitteConsultingLLPPhone:[email protected]
EileenFernandesPrincipalDeloitteConsultingLLPPhone:[email protected]
JohnFiorePrincipalDeloitteConsultingLLPPhone:[email protected]
FredMillerDirectorDeloitteConsultingLLPPhone:[email protected]
KevinKnowlesSeniorManagerDeloitteConsultingLLPPhone:[email protected]
MichelleAngierManagerDeloitteConsultingLLPPhone:[email protected]
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