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Mergers and Acquisitions – Five steps to a Successful Organizational Integration

Mergers and Acquisitions – Five steps to a Successful Organizational Integration

If you like me have worked for a decade or more with or for small or mid-sized companies/clients, it is quite likely that you have experienced that sinking feeling that comes with the announcement of yet another merger or acquisition quite a few times. Whether you are acquiring or getting acquired, merging or get merged, it involves uncertainty and change at all levels. Mergers and Acquisitions (M&A) are done to integrate two entities for achieving rapid inorganic growth (Wiki definitions). But though the goal is performance improvement, results from mergers and acquisitions are often disappointing compared with results predicted or expected. Numerous empirical studies show high failure rates of M & A deals. As Irwin Stelzer, US economist and writer said –

When it comes to mergers, hope triumphs over experience.

I think the major reason that post-merger integrations are not successful in the long-term is the lack of systematic planning and the haste in which “a one size fits all” approach is implemented. Sufficient time, thought and effort needs to be put in. It takes time to understand and establish a vision for the integrated company and then align people, processes and technology to create an ecosystem that allows both the merged entities to adapt to the best from each other and become a collaborative, high-performance organization.

The steps of integration can vary from company to company based on the nature of the business and the complexity of the merger. The goal of a merger is business performance improvement and performance is all about people – collectively and individually. Hence, what works is to consider this as the top priority while defining the integration plan. Here are five steps that I have seen worked well for some of the more successful mergers that I have been associated with:

Step 1: A clear and realistic shared Vision – In the pre-merger diligence and evaluation phase, the reasons behind why a merger makes sense for both entities would have emerged. The details from this phase should be used to create a strong, realistic and well-articulated vision statement. This is what would drive integration by giving the organization a strategic direction. It is not easy to create a shared vision but I have seen that through the endless meetings and details in the pre-merger phase, if we are able to find an answer for this question – how will the customer benefit in future from the joint capabilities of each entity ? – it serves as a good starting point to create a vision statement. It helps identify the best features of both companies and ensures that these remain intact post-merger. Once the vision statement is created, it should be used a clarion call to inspire and motivate both teams to work together and communicated through every medium and at every opportunity possible.

Step 2: Understand the differences – Even though most mergers are done because both organizations “fit” each other, the integration will only be successful if you take time to understand the differences. The differences commonly are in the corporate culture and value systems, levels of staff qualifications and competencies, leadership styles, operational processes and systems and tools. The rationale here should not be to just impose one common way of functioning but rather to identify and evaluate the uniqueness in each organization and what needs to be done to preserve the successful business models while creating a platform of commonality that allows the organizations to leverage each other in a way that performance is boosted.

Step 3: Know the people – It is important to identify the key stakeholders/leaders/influencers within the new entity quickly and also listen and address their fears and concerns. Announce an integration core team drawn from multiple functions of  both entities that would be responsible for creating, monitoring and tracking the integration plan with tasks and timelines till all post-merger actions are completed.  If staff in the company being acquired see that their managers have bought into the integration process, they are more likely to get engaged and buy-in as well. The “Us” vs. “Them” mentality soon gets neutralized if people see that the integration is being driven by a joint team. The new organization structure should also be drawn up quickly so that priorities are identified and set by the leadership and the middle management and the staff knows who their leaders and what the long and short-term goals are. This brings in stability and helps quell the normal fears that such changes bring in the minds of people.

Step 4: Define and implement the processes and tools – This is related to step 2. Sufficient attention should be given to identify the best practices in operational and service processes and tools in each organization and to ensure that they become the standard procedure of BOTH the organizations. A merger gives us an opportunity to view our processes with a fresh eye and pick and implement more efficient systems and processes. Set transformation timelines, training programs and workshops to bring the organization up to speed on the changes. A data strategy is also important for data migration and creating a common database to provide the necessary reports for the merged entity.  It is also important to not attempt too many changes in these areas at the same time – initiative overload sets in then derailing the integration process and you also run the risk of hampering the regular business operations.

Step 5: Engage, Engage and Engage : Of all the HR aspects that determine the success or failure of a merger, communication has been found to be the biggest factor that has the power to make or break the post-merger integration. There needs to be a communication strategy within the integration plan so that there is strong leadership communication from day one. It has to be honest, transparent and candid to win the trust and credibility of the employees. Quick wins in the integration process need to be celebrated and a sense of positive urgency needs to be created. A regular two-way feedback mechanism needs to be set up so that there is sufficient input from the organization to measure how well the integration strategy is working. Connect leaders and employees with counterparts or supervisors within both organizations, organize networking events and set up an online social-networking portal or collaboration workspace.

Financials are important in deciding on a merger but after that, it is the softer issues like providing a purpose behind all the change, understanding the cultural nuances and having a well-defined plan that can help make mergers work to achieve the successful outcomes that were intended.

Have you gone through a merger or acquisition or department integration? What was your experience – what worked and what didn’t and how would you have done things differently? I would love to hear back and learn from you.

Five Secret Killers of Company Growth – Business Operations Performance Management

Five Secret Killers of Company Growth – Business Operations Performance Management

I have been a part of and have observed many start ups and big organizations on their growth trajectories. It is interesting to see how some businesses outperform themselves year on year while others suddenly start declining and eventually die. How and why does this happen ? What are the major Killers of Company Growth ?

Here are some of my thoughts and supporting images from Tom Fishburne, THE Marketoonist :

Growth Killer # 1 : Goals (or Lack of) – A company needs a clearly defined goal to bind the team together for consistent efforts towards success. This may be an obvious fact, but very few companies drum the goal into the hearts and minds of their people every opportunity they get – Vision is important but not as important as the Mission. State your mission, define it clearly and revisit it every chance you get.

Growth Killer # 2 : Hierarchy (or too much of) – While organization charts are important to set a structure to the company, it becomes very limiting when bureaucracy sets in and meritocracy is overlooked especially in today’s dynamic business environment. If every new idea or initiative has to go through ten layers of approval and justification, people just stop having bright ideas and acting on them.

Growth Killer # 3 : Square pegs in Round holes (or vice versa) – You land into this performance killer when you start a dangerous trend of creating positions for people and not finding people for positions (right fits). You then have great people in completely wrong roles – is it a wonder that they are not great contributors to your growth trajectories anymore ?

Growth Killer # 4 : Fear (or Risk Averseness) : Where there is a culture of fear, no matter how much you motivate or engage your people, they definitely will not step up or out of their comfort zones. It is as important to encourage “mistakes” as it is to reward successes. Companies need to create an environment where people are not afraid to give and be their best and to challenge the status quo else you can just say bye-bye to growth.

Growth Killer # 5 : Metrics (or the wrong ones) : As often said, what cannot be measured cannot be improved. But it is critical to keep figuring out the right metrics for your company (derived from your Goal). Are you measuring your sales opening ratios or just your closing ratios, your investment in R&D/new offering or only your profitability ? Measuring the “Right” Metrics is critical so that the long-term growth goals are not sacrificed at the altar of short-term profitability.

What do you think matters most for a company to keep growing ? What are your views on the Killers of Company Growth ? What goals are you planning for your company in the year ahead  ? Would love to hear your take.