The 'X' Factor for Successful M&As!

It won’t be far from the truth to say that M&As are driven largely by financials or strategies to integrate synergies of products, markets or scale. Studies however show that more than 70 percent of mergers fail to achieve their full potential, as they are unable to integrate people. Now, most mergers take into consideration the people angle and typical activities would include formal communications, town halls, aligning grades and designations and usually the top of the list, even retention bonuses for top talent!

A people audit would usually be a part of the checklist, but then, why do so many M&As fail due to people reasons? Let’s take a hypothetical case to see how the people angle might be impacting business. Let’s assume that we give retention bonuses to the top 10 percent, the next 15 percent attrite due to ambiguity and the last 25 percent are made redundant to rationalize costs and headcount; we are still left with 50 percent of employees who are a critical part of the system, but have not been engaged emotionally. This is a large number that can prevent the merged entity from achieving its full potential. So why is this 50 percent so important and cannot be ignored? People are networks and communities that engage, inspire and generate value that gives the organization invisible advantage. When this 50 percent feel inadequately engaged, they start sharing stories that impact their networks which then impacts the business adversely. Imagine an employee who has been a consistent performer in the organization for the last 12 years talking to customers, but not knowing if he/she has a career in the organization! This can make that slight difference in attitude, which can impact customer service and sales directly! So how do we take people along and make them believe in a common purpose? 

A Culture Audit and Integration Action Plan could be an answer to this. People are their minds and the mind generates emotions and feelings. How do we engage these feelings of joy, apprehension, fear, frustration, hope which come with any change that impacts people? The answer lies in a deeper understanding of the human mind and its workings. Our state of mind is impacted by the belief of being part of a bigger picture vs. believing that one’s a part of circumstances beyond our control. It is impacted by the stories we construct and tell each other as a group and the energy we get from them in the process. The Culture Audit is one such tool that can help us bridge this gap and a proposed three step approach could be as under.  

The first step starts with an understanding of the current norms and beliefs. This should be done with the use of a well-designed diagnostics tool applied by a trained OD professional. This could be a mix of free-flowing (but well designed) conversations, an analysis of the internal people survey and the quality of complaints around people and service issues on the whistle blowing helpline. It’s important to focus on stories that reveal norms and beliefs around e.g. customer service, quality, profitability, on-time delivery, social responsibility, supplier relationships, people. This step is important as these stories reveal the underlying belief systems and norms that drive behavior. This process should be run in both organizations using the same diagnostic tool and sample groups. Power is a crucial element in any organization this step will give insights to balance the power equation in the best interest of the new organization. 

Once the diagnostics has been done, inputs should be analyzed to identify common areas of strength and gaps. These areas of strength and gaps are what flow into the design. M&A is a massive change exercise and such an intervention should be designed for a minimum of 18 months. Design elements should include a Strategic Communication Plan, Culture Workshops, Re-structuring, Rewards Program, Culture Ambassadors and a Strat (HR) team that owns, monitors and reports this progress against hard and soft success parameters to the CEO’s office or the Chief Strategy Officer. 

The delivery of this program itself should comprise of multiple nudges, delivered over the 18 months, through multiple channels and touchpoints. These multiple touch points would form part of the Overall Strategic Communication plan and would include Town Halls, Floor Walks, Posters, Intranet Message Boards, Videos from the CEO’s Office and Management Team, Press Inserts. There should be a special focus towards integrating culture though leadership workshops with mixed groups from both sides of the organization which should focus on breaking silos, building trust, developing a common vision, and building a common story of the future. Discussions should be leader-lead facilitated in a way (through good design) to create a “one integrated picture of the future”; a picture that is common to people coming from both sides, is simple to understand and respects the legacy of both organizations. One has to be ruthless at this stage and drop legacy behaviors that add no value to the joint entity. This will be a crucial step and a two-way process that takes the best elements of both organizations forward. 

Culture is a complex topic and M&As are complex in itself. If we take the two, it makes a potent cocktail of complexity! Maybe that’s the reason businesses have found it so hard to crack the culture puzzle for a successful integration. Trying to write about it in about a thousand words is a disservice to its complexity. The effort, however, has been to share a macro plan that gives an overview and helps to address the “X” factors that enable success! 

Emotions have been a powerful driver of the human race and M&As are as much about emotions as financials. A well-designed and followed through intervention that addresses this aspect of human nature will deliver rich dividends.