Uncertain times

From early tea traders to modern day technology leaders, businesses have built partnerships, merged, or taken over the competition to gain market strength. Because of the economic challenges brought on by the COVID-19 pandemic, mergers and acquisitions may increase as companies struggle to survive, reorganize, and discover new ways of working.

 

In recent polling, approximately 40% of respondents indicated the current market conditions would not change their deal strategy over the next 12 months with 8% of respondents considering divesting some parts of their business. Even before the global pandemic changed our lives, 98% of executives that responded to Mercer’s 2020 Global Talent Trends study plan to redesign their organizations to make them fit for the future and 40% are considering increasing strategic partnerships to mitigate the impact of the economic downturn.

 

Mergers and acquisitions can make perfect sense on paper — whether it is acquiring a technology to enable remote working, consolidation in an industry, or merging two large organizations to respond to changing market dynamics. However, in practice, companies inevitably encounter a host of daunting challenges that — if not handled with care and precision — can sap business performance and drive away prized employees.

 

The majority of these unions are likely to fail. In fact, one comprehensive study found that a staggering 83% of M&A transactions were unsuccessful in producing anticipated shareholder value.1 Why such long odds? Poor change management is often to blame.

 

While that may sound intense, mergers and acquisitions, if done well, can drive growth, strengthen operations, and create a new work environment. It is more critical than ever to think strategically about your change strategy.

 

To join the exclusive list of M&A success stories, companies must manage change effectively, placing the employee experience at the heart of their efforts. Whether it is planning the technical and operational aspects of a merger, overcoming fear and uncertainty or fostering a healthy company culture, engaging people in the process is the key to making it all work.

 

Plan strategically for the new normal

Mergers and acquisitions following a global crisis can take on a completely new dimension, with employees concerned about their job security, their health and their families’ wellbeing. Adding new leadership, systems integration, business processes reconfiguration and an array of other complex activities required to make the merging companies act as one can make people lose focus and reduce productivity. Any significant missteps can wreak havoc within the organization, frustrating employees and customers alike.

 

Planning strategically for the human impact of change by focusing on culture and the way people work can make all the difference. The COVID-19 pandemic has already changed the way we work. Adding a merger or acquisition to the mix requires employers to respond to the needs of employees and of the business, while also planning carefully for how to return to work in a new organization and reinventing what a combined organization looks like. Learn more about how companies overall are responding, returning and reinventing in the Mercer article Insights from Asia: Managing Return to Work.

 

Allowing key stakeholders to play a direct role in managing change can aid in a smoother transition. Engaging employees in the rationale, what is happening and why, can provide leaders with valuable insights on what may work and what may fail, as well as help employees stay motivated, and even more deeply engaged.

 

Pre-merger, companies need to consider carefully:

 

  • What work streams will change
  • How employees will be affected
  • How business disruptions can be minimized
  • What will make the new organization sustainable

Keep empathy at the center of change

In Mercer's 2020 Global Talent Trends study, job security was the top reason why employees join a company and choose to stay. Understandably, M&A activities can lead employees to question their job security; people are concerned about how their responsibilities or benefits might change, or whether their role might be eliminated altogether. With thousands of employees in a state of anxiety — or outright panic — over their career prospects, productivity can suffer and key employees may leave.

 

Early in a transaction, communication is the key element for solving this problem and a cornerstone of effective change management. 

 

By communicating early and often, with clear and consistent messaging, management can help to quell the rumor mill and keep people focused and motivated about the work at hand. Employees need to know what will change and how they might be affected, both in the short term and down the road.

 

Beyond the scope of their own positions, employees also need to understand the rationale for the merger, how it will benefit the company as a whole, and what new opportunities it may present for individuals. At the same time, it's essential to be forthcoming and transparent about potentially negative side effects. For example, if there are possible job cuts, glossing over the truth can quickly undermine leadership's credibility. Ideally, good communications will leave the majority of employees with calmer nerves, a clear sense of direction and a positive outlook on the future of the company.

 

Change management is more than just communications though.  Early two-way listening an analytics can help build understanding of employee perspectives, but it is just the first step as companies come together and the cultures evolve. 

 

Unify your culture

After a transaction is underway, broader change management activities and ongoing communication are essential over the months or years it takes to complete the integration. "Culture clash" is a legitimate threat to success, as two sets of employees suddenly forced to work together will not always see eye to eye. They may harbor feelings of resentment for being "bought out," frustrated by  new ways of working, unhappy with a new reporting structure or generally at odds with the other company's values and work environment.

 

Designing programs, policies, and practices that align with the strategic business priorities as well as with employee values, needs and aspirations can be wrought with challenges. The change management, HR and communications teams all play important roles in guiding the combined organization through these relationship challenges. Reducing the risk of failure from the start by developing a change strategy, assessing impacts and organizational readiness, and understanding the cultures that are coming together gets the process started. Determining capabilities to support the business strategy and providing training to enable new behaviors allows an organization to move through the change and come out stronger on the other side.

 

From the beginning, leaders should engage employees in an ongoing dialogue, using surveys and interviews to solicit employee input and identify where cultures align or diverge. In the longer term, the new culture can combine the best of both worlds, showing all employees that their opinions are heard and their contributions are valued. At the local level, managers should be encouraged to host team-building activities, such as off-site events or volunteer efforts to foster personal connections and camaraderie.

 

M&As may be conceived of financial statements, market analysis or technical capabilities — but they ultimately depend on people. Effective change management can lead employees in both organizations to embrace and celebrate new opportunities. Eventually, as this mindset takes hold, it can drive business results and cement the long-term success of the merger.

Robin Belk
Robin Belk

Principal, Communication Consultant

Robin Belk

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