Senior Client Partner
6 M&A must-dos to create a winning organization
Successful mergers result in healthy, unified companies. The most successful mergers begin building organizational strength early in the premerger process.
In every merger, there are inevitably “hardware” issues (like process and systems integration) and “software” issues (think talent retention and organization design). These priorities and activities are not independent of each other. Approaches to integration often favor hardware issues with software issues taking a back seat. The faster an organization can focus on human capital integration issues, the more likely the company will successfully perform in the overall transaction.
“Successful CEOs get three things right pre-close,” says Sherry J. Duda, a Korn Ferry Senior Client Partner leading the firm’s merger and acquisitions (M&A) solution. “Selecting the right leadership team through an intentional data-driven approach, designing the new organization to accelerate growth and collaboration, and focusing the organization on the ‘must-be-great-ats’—the three to five organization capabilities that are the fundamental premise of the merger.”
Leadership and people issues are at the heart of building a winning, integrated organization. Drawing from our research, experiences, and insights from executives, here are
6 M&A must-dos to create a winning organization.
The key to success for most mergers is having the right leaders and top talent in place to drive value. Leaders define the strategy for the new company, inspire people to be part of something bigger, and maintain a laser-like focus on integration priorities. More importantly, through their communications, actions, and behaviors, leaders set the standard for how work will get done in the new organization.
Leverage data-driven insights to select and appoint the right talent into key leadership and mission-critical roles. You need resourceful leaders who can shift and adapt quickly, thrive on change, make sense of uncertainty, and perform regardless of circumstances. Not only is learning agility a predictor of leadership potential, but it impacts the bottom line. Our research shows that companies with the greatest rates of highly agile executives produced 25% higher profit margins than their peers.
During a merger, the natural inclination is to look inward and downward—to be cautious and focus on the details that are most easily controlled. In successful mergers, executive leaders set the tone by constantly looking up and beyond. Making sure you are looking up should become a regular challenge for everyone involved.
Gain leadership alignment and commitment on the vision for the combined organization and the “make or break” outcomes that matter most in building an industry leadership position. Keep key stakeholder needs at the forefront of decision-making, ensuring that customer-centric and employee communications are a high priority for leaders. By linking priorities to the needs of customers, you will build momentum, focus, and enthusiasm.
To be effective as a merged organization, communications need to start from the top, then cascade through all levels of the company. In fact, Korn Ferry research shows that building confidence, describing the vast opportunities, and being fair and transparent are critical to a successful merger. Organizations that prioritize communication around why the merger will be a success are 5 times more successful throughout the transaction lifecycle.
People want to know that they will be working for a winner. They want confidence in their company, its leadership, and the direction its heading. Even though today is still unfolding, reassure your people that tomorrow is full of possibilities. Lead an executive-led communication cascade—internal and external—that shares the value proposition for the combined company. It is an easy, yet powerful way for leaders to retain and engage top talent.
“Nothing changes until it changes” is a phrase you can leverage to create immediate focus. People know that changes are coming. However, maintaining continuity and consistency up until the change decision is made is critical. Help others stay focused on the must-be-great-ats and integration priorities while providing a calm, steady appearance. Until change happens, leaders and employees alike need to stay rooted in the present, pursuing the work at hand, and not make assumptions nor predictions about the future.
Turbulent times are the best times for change, and stakeholders expect change during a merger. Make additional desired changes that will be valuable to the organization and its people yet may have been seen as too disruptive previously. At the same time, assign someone to tackle get-to-close activities like regulatory compliance issues and risk management, while the leadership team focuses on critical issues that only the leadership team can solve.
Culture is the primary delivery method for the integration plan. Merger winners use the pre-close and post-close periods to invest heavily in solidifying the Newco identity and empower leaders to embody the new values.
How do you know how to describe your future culture when you haven’t even decided upon the culture strategy? Is it “mine plus yours”? Do you lean towards the culture that has produced better results? Or do you create a completely new culture that’s better aligned to Newco’s vision? Until you align on a culture strategy, discuss what makes you great. The stories mean everything. But even when companies think they share a cultural strength, it doesn’t mean they share an understanding of what that strength means. You can’t chart the right course if you don’t understand what makes each business successful, how work gets done, and what people value.
As a leader, you want to make an impact. You want to have the answers. You want to create the next big thing that will change the world. And you want to get there fast. But building something new and great takes time, patience, and intention. This means leaders need to manage their energy first, then meet people where they are.
Korn Ferry’s own research shows that when your personal energy levels are high, you are more motivated, engaged, creative, and productive. You perform as your most effective self. When your demands outweigh the amount of energy you must give, you can fall victim to burnout. During a transaction, there is inevitably work that people are doing that is no longer a priority. Stopping work can alarm people and cause resistance, especially in those who initiated the work. But intentionally pausing work can help merger teams increase capacity, as it will lead to an increase in energy. And when you have more energy, only then can you multiply energy in others.
To learn more, click the image to download our complete paper.