People Make Mergers Work: The HR Imperative

Mergers and Acquisitions (M&As) have a profound and significant impact on the people involved in both companies at all levels. Managing this ‘people impact’ is a crucial dimension of managing a successful transition to the new business strategy, yet it often receives scant attention – says Ita Dureke, Executive Vice President EMEA at Mannaz.

If vastly different or conflicting corporate-culture issues are not addressed, this will inevitably lead to problems. People and cultures do not respond to mergers in the same way as more literal business assets. Databases can be merged, office layouts and furniture can be streamlined, but neurosciences have not advanced to the point where the desired elements of two people can be merged into a new, fully-functioning and uncomplaining new person.

M&As are usually motivated by an aim to provide scale of operations, resources and capabilities for the business, achieving financial strength, and broadening the market reach necessary for growth and competitiveness. Yet numerous studies show that even well-conceived deals fail to deliver these promised benefits.   M&A failure usually has little to do with poor strategy or paying too much to complete a deal. On the contrary, failure frequently results because of people-related issues – such as loss of key talent, lack of attention to the transitions involved, and management conflict over the direction of the new company. The implication is clear: strategic people-management is as crucial to a successful merger or acquisition as sound strategy and fair valuation.

The Human Resources, and Learning and Development functions, can add value in the early stages of a merger or acquisition, by positively influencing decisions that determine success or failure – such as the fit of the two organisations to be joined, the compatibility of the companies’ management and cultures and the transitions (emotional and behavioural) employees need to make.

Although M&As are motivated by a myriad of factors, the most common objectives are growing market share and industry consolidation. Research shows that only half of the respondents are typically able to fully achieve those goals: less than a third are able to enhance the strength of their brand image. In the present environment, where M&As are often motivated by longer-term survival, this level of failure should ring alarm bells: survival is not something you can achieve only a fraction of.

According to the research, the top seven obstacles to achieving M&A success are:

·         loss of productivity and distractions to business drivers as the merger is rolled out

·         a clash of cultures that drives negative behaviours and business loss

·         push and pull factors that lead to the loss of top talent

·         positioning for power and a clash of management styles and/or egos

·         lack of leaders’ understanding of how to implement change management

·         failure to appreciate the need to synergise the changes of process and people

·         poor understanding and/or communication of objectives.

HR has a significant role in all of these activities, all of which relate either directly or indirectly to the strategic management of people. Of these, cultural differences between companies may be the single highest barrier to success. Addressing this issue early will positively impact the outcomes.

The same research that identifies the high level of failures also reinforces the importance and the difficulty of integrating two cultures, and confirms that early HR involvement in cultural integration can make the difference between success and failure. Comparison of responses from successful and unsuccessful companies reveals significant gaps in every aspect of cultural integration – from desired behaviours for the new company’s culture during management selection, to agreement of the most important attributes of the new company’s desired culture.

It is vital, therefore, that HR take proactive steps to develop strategies that will recommit those critical employees who will make the new company a success. In any M&A scenario, at least some employees are being implicitly – or even explicitly – asked to ‘remain’ loyal to an organisation that may differ quite fundamentally to the one they previously worked for.

These strategies must be underpinned with change management programmes, learning and leadership development interventions and succession planning that help managers to implement the necessary changes. As awareness of people issues in M&A activities grows, it is imperative HR sees the need to take a more strategic role. Managing the impact of a merger or acquisition on the people is a crucial dimension of managing the successful transition to a unified leadership, business model, and organisation.

So why – given the huge price of failure – are these people or ‘softer’ issues so often given low priority and scant (or even no) regard at all? We all know that actions speak louder than words: sometimes, silence can send a deafening message too.

Mannaz is a global capability development partner, which supports the deployment and execution of strategy through leadership development.  

With a client satisfaction and loyalty index of 86, and a brand promise of ‘Enabling real achievement’, Mannaz works with global clients to design, deliver and evaluate fully customised programmes in strategy execution, change management and leadership development.  Mannaz guarantees global consistency across 50 countries, and in 35 languages.

You can reach Ita Dureke, Executive Vice President EMEA on +44 203 119 1247 and itd@mannaz.com