Empirical evidence shows that almost two-thirds of Mergers and Acquisitions are failures worldwide. They either end up destroying value, or at best, create far less value than what was anticipated and projected pre-merger. The reasons are many, and academicians world over have spent years in researching trying to unravel the reasons. While an over optimistic projection of synergy and hence potential value, lack of effective over all due diligence, paying a premium price due to market reasons are often identified as the causes, the most important reason for such mega failures have ultimately traced to organizational and people issues.
Culture, values, world views, philosophies are some of the important aspects of this. While such aspects are on some sense looked at as part of due diligence, the comprehensiveness, importance given in due diligence effort to such softer aspects doesn't appear to be adequate. While structure, pay scales, designations, hierarchical levels, authority and responsibilities are certainly studied as part of due diligence process, enough attention and care are not given to softer aspects like cultural fit, value sync and basic vision, and philosophical orientations. The unstated assumption here appears to be that these issues will get thrashed out by the by once the merger is done. While due diligence template might mark this as part of the laundry list, the issue is that of the criticality/importance attached to these, as well as the creativity and imagination applied to study these aspects.
One way to look at this issue is to look at, or borrow the metaphor of an Indian arranged marriage. They on an average last much longer than love marriages which are the norm in the west. Indian arranged marriages last longer purely because of the superb due diligence done and making the commitment to work, a broader and shared responsibility which translates to effort being put by both families before and after the union.
While one is not against love marriages, the problem often is that the due diligence gets compromised. Apart from harmonies playing havoc, the partners put up their best face during the brief encounters that they undergo. When you are infatuated and see only the best face that the other person puts up, you are likely to feel let down sheerly because your expectations were not met. In an arranged marriage, not only do many people get involved in the due diligence, cultural and social fit are also very closely scrutinized. ‘Corporate marriages’ should be no different. While one can sympathize with corporate managers’ struggle to analyze and understand the cultural fits or lack of fit in corporate marriages, the task being so critical, it cannot be left to happenstance with the assumption that post marriage, things will work out. The scrutiny for cultural and social fit and values needs to happen.
And just as the commitment to make the marriage work is broadly shared, and goes beyond just the couple who are getting married, the commitment to ensure that a corporate marriage works, needs to come from the people of both the organizations, and not just the CXOs making the deal. The various departments and employees in the organizations are like the families and communities that are involved in facilitating a smoother integration. They ensure that the softer aspects that are critical are not ignored by default. Based on my studies of major Mergers and Acquisitions, Human Resources, more specifically Learning and Development needs to play a major role. The respective corporate families need to learn the softer cultural aspects of the organization they are merging with and this learning should continue in the post-merger phase. This needs to be done effectively by the initiative being championed by the Learning and Development function.
The Role of Learning & Development
I visualize Learning and Development team playing the role of a coach – like the senior person in the family who proactively guides and acclimatizes the new member into the larger community– in all the three phases i.e., Pre Merger, during the merger, and post-merger.
In the premerger stage, particularly the due diligence phase, a basic cultural fit needs to be ascertained along with a gap analysis that will serve as a starting point for the Human Resources/Learning function once the merger happens. During the merger phase, the Learning and Development team should work with key change agents that are likely to influence large groups within various functions. They need to work with this set of individuals to make specific organizational interventions to smoothen the process of integration of the two erstwhile independent organizations. These interventions could be in the form of workshops or better still live projects that encourage the diverse groups to work with one another.
The major role for Learning and Development really comes in the post-merger scenario. Merger having been a fait-accompli, the task is that of educating and sensitizing the merged organization to whole heartedly adapt to the newer ways of doing things. This requires certain adjustments and modifications in terms of behavior/attitude and orientation. Workshops, retreats, break out sessions, cross functional task forces, project teams, and informal fireside chats with the leaders are some of the ways to bring about the desired integration. Learning and Development plays the most critical role in ensuring that the people know what to expect culturally so as not to have messages lost in translation. This role is no different from that of the senior family members who educate the daughter-in-law on the customs, rituals and values passed on in their family by sharing anecdotes to bring her into the fold.