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The people side of an M&A – why it matters

Tom Smith

UK merger and acquisitions (M&A) activity has started strongly this year. According to the Office for National Statistics, in the three months to March 2018, there were 75 transactions worth £21.7bn, up from 44 transactions worth £3.6bn from October to December 2017. A merger or acquisition can be an extremely exciting time for a business. But it will inevitably have a profound effect on the employees of all of the organisations involved. Contributor Tom Smith, Product Director – Lane4.

Most of us are naturally hardwired to respond negatively to change. Of course, there are employees who will be positive and welcome change, seeing the potential opportunities it brings. But it often only takes one employee worried about worst-case scenarios for anxiety to spread. If not carefully managed, this can lead to demoralisation and retention issues.

Despite the fact that keeping the right talent is key to the long-term success of an M&A, properly managing people through the change is often neglected in the whirlwind of other activities. So, what can HR professionals do to ensure that employees don’t just become an afterthought?

Merging cultures
Failure to place enough importance on the need to integrate the two cultures that come together during a merger is an often-cited reason why M&As fail. But, this explanation risks ignoring an underlying micro-cultural force. Whilst many HR practitioners actively consider the culture of the newly merged organisation, they often forget about the lasting imprint that the separate cultures can leave. There are numerous anecdotes from companies where years after the merger had completed, people were still talking about which side of the organisation they came from.

The lesson for HR here is that an organisation’s cultural imprint cannot be ignored, especially because M&As challenge the organisational identity of employees. Asking a number of crucial questions can help successfully shift a culture. These include, ‘what should be done with the parties’ historical identities’? And ‘how can a common identity for the future be built, taking this into account’? Once these questions are answered, a new culture that reflects processes, values and stories from the ‘old’ culture can be created.

The power of informal and unstructured communication
The human brain inherently likes certainty, and even if this is difficult to provide during change, an effective communication strategy can help reduce the natural and expected ambiguity and tensions during an M&A.

But, in our experience, even seemingly robust communication strategies often don’t pay enough attention to the power of unstructured and informal conversations. No matter how well communications are structured and planned, all employees will take part in a network of sense-making conversations. So, alongside a structured communication strategy, it’s important that unstructured communication, such as informal storytelling, is used to emotionally engage employees in the change.

More formal but unstructured channels, like role modelling, can also have a significant impact on ensuring successful change. Role modelling can be an especially effective way for leaders to communicate unity to the rest of the business – for example by sharing an office.

Providing New Opportunities
Our research suggests that the coming together of two cultures can resemble a competition with ‘winners’ and ‘losers’. As we naturally assess our standing in relation to others, this can be highly damaging and does not create a level playing field for effective talent management. To avoid this scenario, HR should demonstrate actions that reflect equality between the two companies. Including filling roles and promoting people from both organisations.

Finally, it is key to recognise that employees need time to adjust and make sense of proposed changes. Leaders may have been preparing for change for months but, they can often forget that others are only at the beginning of the process. It is essential to support and champion change visibly throughout the launch and roll-out and the period after that. The ability to listen, even to feedback that perhaps is not comfortable to hear, is also important. Promoting this kind of honest dialogue through visible leadership is key to organisations being able to take employees along with them on the M&A journey. This is not just something that is nice for companies to do, but is actually fundamental to the overall success of an M&A, and organisations neglect it at their peril.

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