Success in post-acquisition integration is essential to the success of any M&A. Even if the strategy behind the acquisition is brilliant, it must also have brilliant leadership in execution to achieve success. Based on our experience and research, we have identified five critical success factors for leaders in post-acquisition integration, in implementing organizational change and integrating new organizations.
These factors are:
- Communication, communication, communication
- Maintaining stabilities
- Integration of management processes and systems
- Organization design
- Winning hearts and minds
In post appraisals of acquisition integrations, the one item which stands out is communication. Employees say there was not enough communication, even when those leading the acquisition think “we over-communicated”. In planning an acquisition, it is important to remember that communication is a critical element. Too often communications are thought of after the fact, and become a “bolt on” to the overall integration planning. That is an often-fatal mistake. Communication provides stability, which is essential to people during change.
Communication is the primary tool of leaders. The leaders must see communications as coming first and be in the forefront, rather than an afterthought. Communications and those delivering the communicating must be authentic, committed, and passionate about success of the business. The employees must see high levels of congruence and consistency between their leader’s ways of being, communications and actions.
An often-overlooked element in successful change is maintaining stabilities during the change. This is important for all individuals experiencing change. Those leading organizations during acquisitions can assist their people by talking about the importance of maintaining personal stabilities as well as reinforcing organizational commitments, policies, practices and values.
Acquisitions are stressful for all concerned. There is tremendous uncertainty for employees on both sides of the deal. Some people benefit from reinforcing of boundaries and controls during these times of change and uncertainty. Clarity of policies serves as a “safety rail” to people during change. As an example of why reinforcing policies is useful, I have seen that during this period of uncertainty sales people consider making “special deals” with customers as a means of gaining favor and possibly a new job. These “special deals” are usually discovered at some point, and create an awkward situation between the company and its customers.
Once the acquisition closes, it is important to rapidly clarify policies and processes for the new organization. An effective way to accomplish this is to have process simplification / work elimination sessions to streamline policies that work best for the new company. I have facilitated a number of there around the globe, and have found it to be excellent tool for bringing the two organizations together to focus on how they can “win together”. It also brings to the surface other integration issues which need to be dealt with. Following alignment on policies and processes, it is important to quickly get communication out to every employee. Clarity on policies and practices is important for maintaining stabilities.
Integration of Management Processes and Systems
Successfully integrating management processes and systems is both a people and technical issue. This is the area where post-acquisition integration projects “hit the rocks”. I am often surprised how invested people are in these processes and systems. So much so that any change occurs like a personal affront and attack. People often complain about these processes and systems, and then become upset by any attempt to change them. By its nature, an acquisition means that people in at least one of the companies will be upset by the changing of management processes and systems. It is often seen as the real communication about winners and losers, which of course is deadly in post-acquisition integrations.
As part of planning the integration process, it is useful to rapidly identify those processes which must be addressed. This includes identification of processes to be eliminated or retired, reports which will be retired, and meetings that will be eliminated. Streamlining processes from the perspective of the customer will improve the business and help manage issues with customers. As an example, if the two organizations have common customers, how will sales relations, pricing, inventory numbers and supply agreements be handled? This information allows the customers to experience the workability of the combined organizations, rather than waiting to see if it will actually work out.
Integrating management systems is often a huge challenge. There are two types of management systems to consider:
- Policy based, e.g., benefits, compensation, etc.
- Computer systems, e.g., As one company uses Oracle while the other SAP. There are often good business reasons for these differences. Planning the integration of computerized systems is crucial for success.
Organizations have designs which determine how they function. Coming into an acquisition, the two organizations each had a unique organizational design. Hence the importance of examining the existing organizational designs in order to create new organizational alignment to be used going forward.
Organizational design is a concept that is undergoing considerable change. For many the term, organizational design was considered to be synonymous with structure. Managers often think the place to start thinking about organizational design is to identify the desired structure, with key positions. Organizational structure is important, yet is probably the last factor to consider rather than the first. Instead, we recommend using design thinking to assist in developing the new organizational design. Design thinking begins with an inquiry such as:
- What are these organizations designed to accomplish today?
- What changes can we already see occurring, e.g., customers’ preferences, competitors, digitation of the industries, market dynamics, etc.?
- What organizational design will best serve us in the future?
- How can we create this new design which best fits our needs?
- What future and strategic intent shapes our thinking about this design?
- Who should be involved in creating this design?
Winning Hearts & Minds
People engagement and mobilization ultimately requires winning the hearts and minds of all stakeholders. Absent that, meaningful change does not occur. Engagement seldom occurs until the person has handled their question of “what is the impact of this on me” and “what do I feel/think about these changes”. At the same time, having the opportunity to be involved and participate is an important opportunity for becoming engaged. Winning hearts and minds is a reflection of leadership, for both the full engagement of the mind and the full-on commitment of the heart can only be achieved by a leader who is fostering this kind of ownership and engagement in this major change effort.
Half of M&A transactions fail to create value. Ever wonder why? Download our whitepaper ‘The Conundrum of People in M&A’, and understand the critical elements that impact mergers and acquisitions success or failure.
In it, you will learn:
- Eight common flaws in decision-making often made by executives in M&A transactions
- Why the integration process is so critical
- Tactics in organizing, planning, and communicating that lead to successful integrations