Innovation Outcomes Brochure M and A Integration _________________________________________________________________________________ Innovation and Enhanced Performance Through Merger & Acquisition Integration
In many cases, acquiring organizations are buying intellectual capital. As a way of avoiding unintended consequences, maximizing continuity, and ensuring alignment, some organizations carefully assess key leaders and potential people issues as part of the overall due diligence process. But many do not. Integration planning ideally starts in pre-M & A stages, but in reality, it usually doesn't begin until the actual purchase of the organization, if at all. Sometimes acquiring organizations look only at the potential synergy and make the mistake of disregarding potential differences in leadership style, values, or culture.
Innovative Outcomes consultants work with organizations at various stages of the M & A process, which we divide into (a) pre-merger target research and evaluation; (b) pre-merger due diligence; (c) pre-merger discovery and courtship; (d) planning and strategy formulation, (e) pre-merger restructuring; (f) pre-merger communication; and (g) post-merger integration or assimilation. (For more information about our services in early stages of the M & A process, see our Organizational Assessment brochure.) To learn how we help clients successfully manage M & A Integration, in later stages of the process, read on. __________________________________________________________________________________________
Identifying and Reconciling Differences
the risk of sounding simplistic, we believe that effective M & A
integration can be summed up effectively by saying it's all about
seeking win-win solutions and effectively managing differences at micro and micro levels. However, there is nothing simple about how differences are
effectively managed. Joint strategic and operations planning are good
ways to identify differences in strategies and approaches to meeting
goals, but there are aspects of organizational culture that also demand consideration.
For example, how compatible are the
organizations' leadership styles? Is one collaborative and the other
autocratic? If so, the question of "Who is in charge?" must be
carefully decided, negotiated, and communicated.
Other important considerations are differences in the organizations'
structural dimensions (i.e., the internal and external environments in
which they operate). Still other considerations regard business horizons
(i.e., whether the focus is on long-term strategic approaches or
short-term and tactical). These considerations and others are part of
the assessment process that determines the degree to which gaps need to
be closed and what kind of investment each organization is willing to
make, to ensure the success of the blended organization.
typically work with both the acquiring and acquired
organizations, to evaluate their respective cultures and provide
assistance in decisions about which aspects of culture should be built
upon and which
should change. We also ensure that
the history and accomplishments of leaders and associates in the
acquired organization are honored, recognized, and valued.
Integration or assimilation is much easier if leaders and associates in
both organizations believe they bring value to the blend. This is a basic concept in change management, but there are other factors to consider when attempting to achieve full value from an acquisition or other business combination. __________________________________________________________________________________________
Aggressively Minimizing Turnover
Numerous studies and an abundance of articles written during the last 10-15 years show that more often than not, the primary cause of M & A failure is an inability to effectively address people issues. As mentioned in other sections, the intellectual capital residing within an organization's employees is a key differentiater and source of competitive advantage, yet, effective integration during M & A continues to be the most neglected area in business combinations.
In the spirit of quickly putting together a deal, some organizations fail to manage talent management risk. By talent management risk, we mean the risk of losing intellectual capital that an organization has invested in recruiting and developing. In the case of M & A integration, talent management risk is most often related to perceived negative outcomes of the business combination. Key talent often "jumps ship" because they want to avoid uncertainty, they fear job loss, or they have concerns about a lack of an established career ladder or promotional opportunities.
Some organizations involved in M & A activity recognize the importance of leadership and associate retention, and in some instances, pay retention bonuses on either an incremental or earned basis (i.e., meeting specific performance objectives). However, bonuses can only provide financial incentives. Organizations also need to address the many other areas in which employees feel concern during integration or assimilation activity. In addition to investing time in determining who should stay and who should go, organizations need to carve out time for "re-recruiting" key talent. This means discussing career plans and concerns with key leaders and associates. We assist clients by helping them identify required competencies for the blended organization's workforce and by providing coaching to leaders who need to effectively communicate with other leaders and associates during the M & A process. But that's not all. Buy-in and sponsorship are also key to successful change management efforts, including M & A. __________________________________________________________________________________________
Managing Change and Transforming Culture
By the very nature of M & A, acquiring organizations
assume the responsibility for effective change management
or culture transformation that is an opportunity created by the business
combination. Acquiring organizations need to ensure early on that the
culture of the
blended organization maximizes employee retention and will ultimately
provide support for innovation and strong individual, team, and
organizational performance. But is
that really possible, early on, when two organizations are attempting to
differences, when there are many competing priorities, and when stress
might be at its peak?
What kind of change is best for an M & A integration scenario? Is
incremental change even possible, when M & A, by its very nature, is
disruptive? When the culture is somewhat "fluid," innovation
can be more easily imbedded into the DNA of the organization, and this is particularly true
of blended organizations (i.e., those resulting from two cultures coming
together as a result of M & A). During M & A integration,
customers, clients, investors, suppliers, organizational leaders, and
associates are all predisposed to change because they're already
encountering it and expecting that it will continue. But this concept is based on the assumption that change will be effectively managed.
Our Culture Transformation brochure describes how
the best time to initiate change, particularly culture transformation, is when the existing culture
has already been disrupted. What does that mean? It means that change is best managed when organizations enlist change agents and advocates in the
change process and leverage the
efforts of these employees. Organizations that effectively manage change maximize shareholder value and minimize the negative aspects of
change. And although it's good to focus on the positive aspects of change, it's equally important to remember that, at the same time that change can present opportunities, it can also present
significant challenges. In M & A, it's about the potential that mismanaged or unmanaged change has, for threatening a positive return on investment.
We've seen countless examples of how people enthusiastically
support change when they're allowed to play an active role in it. But too often, organizations that
are inexperienced with M & A spend too much time telling and not enough time listening.
We work with clients to develop active listening skills, and
we coach them in soliciting feedback from associates and organizational
leaders in both the acquiring and acquired organizations. In addition,
we work closely with both organizations, to assess and preserve key
elements of their respective missions and deeply ingrained beliefs and
values that constitute each organization's unique culture. To learn more about the
role of effective change management in M & A integration, click here. To learn about other important aspects of M & A, continue reading. __________________________________________________________________________________________
Planning as a Way of Leveraging Synergies and Avoiding M & A Failure
most important priority of M & A integration is sponsorship and buy-in to the strategies, goals, and objectives of the
blended organization--or in the case of assimilation versus integration--of the acquiring
organization. This often means developing leaders and associates in the areas of change management strategy and
execution. This translates to extensive two-way communication and
formal communications programs that produce clear and consistent
messages about new directions for the blended organization and about the
systems and processes for either assimilating or integrating the acquired organization.
Our primary objective in the post-M & A stage is to help organizations and
individuals move through the period of disruption as quickly as
possible. This requires proficiency in strategy development and execution for the blended
organization that can be gained through joint
strategic and operations planning. Clients who have retained us for
joint planning sessions found it to be an excellent way for each
organization to become intimately familiar with
the others' businesses as well as the deeply held values and beliefs and
the leadership styles that define each organization's culture.
planning efforts can also lay the groundwork for alignment, a key factor
in creating a high performance culture and one that supports
innovation. For more
information about the benefits of joint strategic and operations
planning, see our Planning & Strategy brochure. __________________________________________________________________________________________
Full Integration and Other Options
most challenging method of M & A integration is full integration,
but additional options are also available to acquiring organizations.
Many organizations that are knowledgeable about the risk of losing
customers, clients, and key talent, allow acquired
organizations to function autonomously or semi-autonomously for an
established period of time after a purchase or merger, typically in the
12-18 month range. Other organizations, such as GE Capital, bring in
Acquisition Managers, key talent who have dedicated roles that oversee
activities of the blended organization. Other organizations retain
experienced change management consultants to work with key leaders.
organizations skip the
integration process altogether, attempting to quickly assimilate the
new organization with little regard to existing systems, processes, and
culture of the acquired organization. And still other organizations set
committees and task forces, to maximize sponsorship, buy-in, and team
processes. These are good ways of breaking down silos between the
acquired and acquiring organizations, but speed is the key. In the case
of M & A, and so many other change initiatives, finding the right
balance is key.
In general, integration should occur early on and
quickly, so that uncertainty is reduced and energies are appropriately
re-channeled. Yet integration shouldn't occur so quickly that it's
perceived as a superficial effort or one that's slipshod. It is critically important for organizations to keep in mind that M & A, as other change, needs to be balanced with empathy, sensitivity, and common sense. Returning to our original premise, successful M & A is all about skillfully identifying, reconciling, and respecting differences. To learn about 5 different methods for doing this, see our article on Resolving Differences.
__________________________________________________________________________________________ To read our Tips for Successful M & A, click here. To read what clients say about our M & A integration services, click here. __________________________________________________________________________________________
Copyright 2011, 2012, 2013, 2014, 2015, 2016, 2017 Marilyn J. Blocker. All rights reserved. Innovation Outcomes* is a trademark of Marilyn J. Blocker.