Obtaining organizational growth and innovation through mergers and acquisitions (M&As) is still a common practice. According to the Institute of Mergers, Acquisitions and Alliances, there are 40,000 announced M&As worldwide in 2015 with a total value of approximately $4 trillion. While M&As have been around for a while, the success rate for them is still lacking. Research has shown that 55 percent to 77 percent of completed M&As fail to meet the strategic and financial objectives that initially justified the deals. One might argue that focusing more on mergers instead of acquisitions is the way to go, because mergers are more like creating fair “partnerships.” While this is an interesting point to consider, it is difficult to find a true merger of equals. Even in a merger, one organization typically has more say in what happens than the other.
There are numerous factors that contribute to the success and failure of M&As. One that deserves more attention than it gets during the integration process is the people element. During major transitions like M&As, uncertainty is common which can lead to less productive behavior. For example, I have observed leaders of business units go into “every person for himself/herself” mode by showing how well their business units perform without any regard for the other parts of the organization. This often is done to protect their turf so it is not dismantled during the integration. This survival tactic might work in some cases if the integration partner focuses only on output. This tactic frequently backfires, because the integration partner pays more attention to the lack of alignment the business unit has with the rest of the organization. Consequently, the survival actions of the leader put the business unit on the list of areas to be scrutinized in more detail.
As the prior example illustrates, uncertainty during integrations can produce unproductive behavior that is due to fear of the unknown or loss of control. This fear/loss relates to potential changes in reporting relationships, decreases in benefits, shifts in organizational culture and reductions in force. According to the Kenexa Research Institute, the event that is the most traumatic during integrations is a layoff. It is this event that produces a significant deterioration in employee engagement.
One element that can help members of organizations that are being combined to stay productively engaged is the way senior executives lead during the integrations. This entails executives being proactive regarding what they communicate about the M&As as well as how they communicate and demonstrate it. Based on experience as well as work done by the Kenexa Research Institute and the Human Capital Institute, here are key behaviors that have helped executives effectively lead employees through integrations:
- Be visible and accessible to employees
- Set the right priorities to establish positive business momentum
- Show concern for the welfare of employees
- Share a clear picture of the direction the company is taking and how employees are critical to the organization achieving its goals
- Inspire a sense of purpose, coherence and community that enables employees to remain focused on the job
- Tell employees what you know as soon as you can to prevent them from filling gaps with inaccurate information
- Be candid and authentic—don’t feel like you have to have every answer before you talk with employees
When they demonstrate these behaviors, executives emerge as credible and capable. This in turn causes employees to be confident in the future. If you are an executive at an organization that is heading down the path of an M&A, what are the top concerns your employees are likely to have, and what is your first step to address them?
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Ryan Lahti is the founder and managing principal of OrgLeader, LLC. Stay up to date on Ryan’s STEM-based organization tweets here: @ryanlahti
(Photo: Dollar Photo Club)