Mergers and acquisitions (M&A) are a driver of business growth, offering companies a fast way to expand market reach and increase capabilities. The financial and strategic aspects of a deal are always front and center, but what about people? The combination of two companies is more than just assets, products, technology, and operations. It is the employees that drive innovation, engage customers, and ensure continuity.
Successful integration of employees leads to greater value creation and longer-term success of an acquisition, yet it often is the least prioritized aspect of a merger. It can be daunting integrating diverse workplaces and blending two corporate cultures, but with a people-centered focus and the right strategies, a successful transition is possible.
The Challenges of Integration
One of the most significant hurdles in any M&A is merging corporate cultures. Each organization operates under its own set of values, norms, and practices. When these cultures come together, misunderstandings and conflicts can arise, creating tension. For instance, one company might have a hierarchical decision-making process, while the other promotes a more collaborative approach. These differences can lead to friction or inaction if not addressed proactively.
Communication is another critical challenge. Employees from both companies will have questions and will be searching for answers the minute the deal is announced. In the absence of information, employees tend to make up their own stories, which is often far worse than the reality. Natural resistance to change combined with uncertainty surrounding roles, future direction, and operational changes can lead to employee anxiety, disruption, decreased morale and ultimately turnover.
Language choice affects how a deal is perceived. The very word “acquisition” can stir negative feelings for employees. The fact that one company is purchasing another leads to an imbalanced power dynamic. The acquiring team is now in control, which can further fuel anxiety and disruption, further impacting integration efforts.
Strategies for Effective Integration
Navigating the human side of M&A integration starts before the ink dries and the deal closes. It is best started during the due diligence process. Due diligence is an opportunity to identify cultural gaps. Although not a black and white check list item such as payroll registers and I-9 compliance, there are ways to vet cultural alignment.
The tone of corporate communications and materials is important. A spot review of companywide and department messages offer insight into day-to-day messaging. Company handbooks shed light on whether policies are employee-supportive or more geared toward company protection. While reviewing documents it is important to look for potential disconnects in messaging, such as a value statement focused on trust but a handbook that reflects the opposite.
Employee engagement and pulse surveys are another window into a company’s culture and paint a picture of employee morale. Similar to company documents, a due diligence review should consider any disconnects between employee experiences and stated company values.
Another opportunity for due diligence review of cultural alignment is interactions with those privy to the deal. Interviews and informal observations are a chance to assess leadership styles and can provide a different perspective on employee experiences. These discussions can provide a window into the story behind the numbers and documented processes. It is important to understand how goals and objectives are set, how performance is tracked and measured and the history of achievement. This knowledge will support a more effective integration plan post close.
Once cultural gaps are known, strategies to minimize them may be developed. Comprehensive integration plans with a people-centric focus drive greater success. Such strategies include:
- Establishing an Organizational Structure. Clearly identifying reporting lines, roles, and responsibilities gives employees clarity, minimizes confusion, and drives accountability.
- Aligning Leadership. Ensuring leadership teams from both organizations are aligned on company goals, vision and the execution plan is essential. This unified front provides clear guidance and stability to the rest of the organization.
- Communication Strategy. This goes well beyond initial day-one announcements. It should include FAQ’s with a “what’s in it for me” point of view, a cadence for on-going updates and a means for employees to have concerns heard and addressed.
- Talent Retention and Development. Identifying key employees within both organizations and strategies for retaining and developing them post-merger is more important than providing “stay bonuses.” Opportunities for advancement, cross-team projects, and professional development are additional ways to motivate and engage team members.
- Define Processes. Address common questions and be receptive to changes along the way. This will save employees time and reduce frustrations.
An effective integration strategy also includes clear objectives, timelines, responsibilities, and a roadmap for the integration process. Even with the best plan, leaders may still need further support. Providing training on change management and cultural integration equips them with additional tools to succeed.
Engaging employees and fostering inclusion is a key element of any change management process, especially during an M&A integration. Forming cross-functional integration teams with members from both organizations promotes collaboration and mutual understanding. Celebrating milestones and achievements, even small wins, throughout the integration process helps boost morale and reinforce a sense of progress.
Finally, integration requires ongoing monitoring and adaptability. Hold regular check-ins to assess progress, gather feedback, and adjust strategies as needed to build trust.
Successful M&A integration is not just about combining assets and operations; it’s about harmonizing the people and cultures that make each organization unique. With the right approach, businesses can achieve a seamless integration that drives success and paves the way for a prosperous, integrated future.
Karen Brieger is founder and CEO of Pinnacle Connection HR, an HR fractional and advisory services firm based in NH. She can be reached at 603-553-2208 or karen@pinnacleconnections.com.
For more information, visit pinnacleconnectionshr.com.