Each month we will be sharing four, carefully-chosen articles from the Latest Issue of our flagship publication ‘theHRDIRECTOR’ which exemplify the high standards we strive to archive. We hope you find this in-depth article of interest and decide to become one of our valued Subscribers.
From the first M&As in the 18th century, where be-wigged and powdered captains of industry counted out the guinea notes, right up to the late noughties, the human commodity of the deal was very much part of the chattels, and either perceived of value or dispensable. Today, and only recently, the people aspect of an organisation present an altogether more complex equation, such are the seismic changes to currently playing out.
Article Dr. Alison Maitland, Research & Product Director – Lane4
Unquestionably, the M&A environment has, of course, evolved since the first mergers occurred over a century ago. Beyond a growing recognition that employees should not just be an afterthought, the makeup of the modern workforce and their working practices have changed significantly. Today, most organisations’ employees are not only more diverse and increasingly virtual but also contain people working in different locations and on different contracts. So, what are the implications of this multifaceted workforce when it comes to managing the people side of an M&A? And how can organisations make sure the process runs as smoothly as possible despite the growing complexity? Studies have shown that there is typically a higher turnover of employees during an M&A, as most people are naturally hardwired to respond negatively to change. An issue that can be more difficult to manage in a fast paced, globalised and increasingly virtual word. But, as the retention of key talent is crucial to the long-term success of an M&A, it’s important that these challenges are addressed to ensure everyone is engaged with the change.
With five different generations now making up the workforce, one of the traps organisations can fall into during an M&A is to make generalisations about how different age groups will experience the change. For example, by claiming that younger employees will be more excited about change while older ones are more likely to be tired of it. In fact, the differences between certain generations are far less important than the varying experiences of change that people have had. For example, between those who have recently joined the organisation and don’t have a lot of experience of how it approaches change, versus those who have been a part of the team for a long time and have seen the successes and failures of each change it has gone through. Don’t assume that older employees have had more experience of change in their organisation than younger ones. Anyone who’s been hired since the previous large-scale change, regardless of generation, has no experience of how the organisation approaches change. Knowing what previous exposure to change employees have had, and how they have dealt with it, is an important consideration for any change programme.
Another challenge that many modern businesses come up against during an M&A is a sentiment amongst the freelance population that they will be first in line to have their contracts terminated. When, in reality, they are just as important to retain. Especially as hiring new contractors can prove challenging in an uncertain environment. At the same time, there is also a risk that freelancers, and permanent employees based remotely, could get lost during the M&A process. In order to not just retain these employees, but keep them engaged, they should be treated in the same way – and with the same importance – as those on more conventional contracts. While there are clearly a number of new challenges to managing an M&A, when we compare our research on change from around ten years ago to that undertaken more recently, there are many similarities. In fact, there are core enablers and derailers that can make or break a change regardless of the context, such as co-creation, which involves finding a way to bring employees on the change journey with the organisation; the provision of a safe environment, where people feel comfortable to raise concerns and ask for help; the creation of a future-vision reality, which means giving employees a compelling and vivid vision to buy into. Something that is key in order for them to really get behind the change.
Pullquote: “An effective communication strategy can help temper the natural ambiguity and tension that exists during a merger. Not communicating regularly can provide the space for employees to create doubt”
On the opposite side of the spectrum, major derailers of change are obviously; underestimating the ‘human stuff’ or emotional fallout that comes with change. Factoring in the neuroscience of how our brains respond to change by providing open and honest communication, is one way to overcome this. Equally, a lack of upskilling can be detrimental as there are a number of valuable skills people need to perform successfully during change, such as resilience and the ability to negotiate. But most damaging of all is a disconnected leadership team; seemingly oblivious to people’s real concerns, the current change and each other. One way of helping to address the first issue is holding Q&A sessions, where leaders can provide the answers (anonymous or not) that people really want. In addition to paying attention to the enablers and derailers of change, understanding the company’s culture and having a well-informed communication strategy can help an organisation to retain and engage a diverse workforce through an M&A. Again, the power of clear and consistent communication during an M&A cannot be underestimated. Especially as an effective communication strategy can help temper the natural ambiguity and tension that exists during a merger. Not communicating regularly can provide the space for employees to create doubt in their own – and the minds of others – about the change. What this means is that the businesses involved in the merger need to proactively create a story about the drivers of the change and their future vision that all levels can buy into.
Understanding how different people feel about the change, including their hopes and fears, is key to creating a communication strategy that can work towards getting everyone on board. Setting up focus groups which include individuals from all aspects of both businesses (think about different generations, employment status, seniority, departments etc.) to ensure a real representation of the employees, can help generate this understanding. As will creating opportunities for everyone to talk about and ask questions. That can be tougher for more remote employees, so don’t forget to think about how to reach them. Inviting them into the office is one option, but running tailored and interactive webinars can also be a great way to engage large numbers with the story of change. One of the biggest mistakes’ organisations can make when going through an M&A is to not truly understand the cultures they are bringing together. Whilst it’s not too hard to gauge the articulated or experienced culture of an organisation, it’s often the implicit and unquestioned assumptions that underpin a culture – ‘deep culture’ – that derails bringing two together effectively. An audit of the cultures of both organisations is therefore a great first step in managing the people side of an M&A. Getting under the skin of the existing cultures will provide a better chance of a successful integration. When thinking about what the new culture of the organisation will be, it’s important that it reflects processes, conversations, values and stories from both organisations.
Finally, making sure that there are change champions across the businesses, will also help the M&A process run more smoothly. Change champions can be used to help gather and provide input on the process, communicate aspects of the change, as well as influence and engage others to support it. Most employees will be more likely to accept the change when they know that their close colleagues or peers have been involved, rather than just senior leaders or colleagues they don’t interact with often. Organisations can ask for volunteers or select them in some way, but it’s important to make sure they are representative of their multifaceted workforces. The most successful change champions will be those who are well networked in the businesses, have a large amount of knowledge (that might be technical, product or historical) and have personal impact. Look for the influential, the popular and the disruptive people to champion change. Change that is planned and executed exclusively from the top down is less likely to succeed because it fails to considers how the change will impact those working lower down the organisation. Ultimately, this could have a negative impact on customer-facing staff and customers. So, taking the necessary time to upskill and support change champions to ensure they can be effective, is a worthwhile investment. Whilst today’s diverse workforce has brought new challenges when it comes to managing people through an M&A, in terms of those things that can drive or derail the change, much has remained the same. This is because while the makeup of the employee population might have evolved, the way people react to change has remained the same. In order to overcome employees’ innate negative response to change, a comprehensive communication strategy which considers everyone across the organisation, and the creation of a supportive culture will always be key to a successful M&A.