Winning at High-Stakes Change

Content

Mergers and acquisitions (M&A) represent a unique type of transformation. Many organizations experience an intense change journey that can undermine the value the deal is trying to capture if leaders don’t deeply embed the talent team in the M&A process and integration. I experienced a mismanaged acquisition, and it forever changed the way that I approached them from that point forward.

Mergers and acquisitions (M&A) represent a unique type of transformation. Many organizations experience an intense change journey that can undermine the value the deal is trying to capture if leaders don’t deeply embed the talent team in the M&A process and integration. I experienced a mismanaged acquisition, and it forever changed the way that I approached them from that point forward.

Content

Like in many companies, the leadership of this 10,000-employee technology organization (Company ABC) wanted to expand. They identified a specific acquisition (Company XYZ) that would enable them to offer a new set of services to clients, strengthening Company ABC’s market position against potential competitors. I worked on the talent team of Company XYZ, where the founders had built a positive brand and a unique best-in-class service with 500 talented employees.

Like in many companies, the leadership of this 10,000-employee technology organization (Company ABC) wanted to expand. They identified a specific acquisition (Company XYZ) that would enable them to offer a new set of services to clients, strengthening Company ABC’s market position against potential competitors. I worked on the talent team of Company XYZ, where the founders had built a positive brand and a unique best-in-class service with 500 talented employees.

Content

M&As are high-stakes change journeys, with specific strategic goals the acquiring organization hopes achieve. In this case, Company ABC sought to add the new service, and Company XYZ expected to come in and remain whole, carrying on with its work as an industry leader.

M&As are high-stakes change journeys, with specific strategic goals the acquiring organization hopes achieve. In this case, Company ABC sought to add the new service, and Company XYZ expected to come in and remain whole, carrying on with its work as an industry leader.

Content

Sadly, 50 percent to 90 percent of M&A deals don’t meet expectations because the business goal fails, or the deal value erodes. While this deal went ahead, several key mistakes early after the deal closed threatened its long-term success through the loss of top talent and the erosion of trust with ABC’s leaders.

Sadly, 50 percent to 90 percent of M&A deals don’t meet expectations because the business goal fails, or the deal value erodes. While this deal went ahead, several key mistakes early after the deal closed threatened its long-term success through the loss of top talent and the erosion of trust with ABC’s leaders.

Content

First, would-be supervisors at ABC did not know that executives of both organizations identified specific people at XYZ as essential to the deal. At the deal’s signing, senior leaders promised those employees equivalent roles or projects that failed to materialize when the teams integrated.

First, would-be supervisors at ABC did not know that executives of both organizations identified specific people at XYZ as essential to the deal. At the deal’s signing, senior leaders promised those employees equivalent roles or projects that failed to materialize when the teams integrated.

Content

Although staff members tried to push back, they faced an “oh well” attitude by ABC supervisors and HR business partners alike. As a result, competitors quickly recruited some talented XYZ workers away. Worse, the trend remained largely invisible until it hit critical mass.

Although staff members tried to push back, they faced an “oh well” attitude by ABC supervisors and HR business partners alike. As a result, competitors quickly recruited some talented XYZ workers away. Worse, the trend remained largely invisible until it hit critical mass.

Content

Second, there were redundant functions between the two companies, such as HR, facilities, and sales. Most of XYZ’s senior leaders in those functions had years of experience, and yet nearly all found themselves assigned to managers at ABC who were their junior in both experience and expertise. Many of those XYZ leaders saw that as a message that ABC’s executives either did not understand or value their contributions. Despite each receiving a 10 percent raise, many sought jobs elsewhere, where they were not reporting to someone they believed they should be supervising.

Second, there were redundant functions between the two companies, such as HR, facilities, and sales. Most of XYZ’s senior leaders in those functions had years of experience, and yet nearly all found themselves assigned to managers at ABC who were their junior in both experience and expertise. Many of those XYZ leaders saw that as a message that ABC’s executives either did not understand or value their contributions. Despite each receiving a 10 percent raise, many sought jobs elsewhere, where they were not reporting to someone they believed they should be supervising.

Content

Third, ABC off boarded XYZ’s founders, who believed they would stay on and play a pivotal role in the merged company’s evolution, quickly after the deal closed. XYZ’s employees were fiercely loyal to the founders and started perceiving the deal as a hostile takeover.

Third, ABC off boarded XYZ’s founders, who believed they would stay on and play a pivotal role in the merged company’s evolution, quickly after the deal closed. XYZ’s employees were fiercely loyal to the founders and started perceiving the deal as a hostile takeover.

Content

Finally, ABC launched two rebranding efforts that came off as insensitive to both customers and employees, which exacerbated eroding trust. First, ABC took the same message it sent to XYZ’s employees—that business would go on as usual—and simply relayed it to customers, all of whom were used to high-touch and collaborative customer service. But then ABC executives immediately rebranded the service, causing major challenges for XYZ’s long-standing customers, who had worked hard to build XYZ brand recognition within their own organizations.

Finally, ABC launched two rebranding efforts that came off as insensitive to both customers and employees, which exacerbated eroding trust. First, ABC took the same message it sent to XYZ’s employees—that business would go on as usual—and simply relayed it to customers, all of whom were used to high-touch and collaborative customer service. But then ABC executives immediately rebranded the service, causing major challenges for XYZ’s long-standing customers, who had worked hard to build XYZ brand recognition within their own organizations.

Content

While XYZ’s leaders, especially in sales and customer service, tried to influence that decision, their ABC supervisors didn’t understand the potential consequences. Most of the customers pushed back, some even cancelling large contracts. ABC eventually backtracked and moved to a co-branding strategy, but customers had already lost trust in ABC.

While XYZ’s leaders, especially in sales and customer service, tried to influence that decision, their ABC supervisors didn’t understand the potential consequences. Most of the customers pushed back, some even cancelling large contracts. ABC eventually backtracked and moved to a co-branding strategy, but customers had already lost trust in ABC.

Content

Unfortunately, the second branding effort made things worse. As with previous acquisitions, leaders charged ABC’s facilities team with rebranding the newly acquired offices, which entailed going into the building over a weekend to paint walls with ABC’s brand colors, put up posters of ABC’s core values, and replace all branded items such as backpacks and coffee mugs.

Unfortunately, the second branding effort made things worse. As with previous acquisitions, leaders charged ABC’s facilities team with rebranding the newly acquired offices, which entailed going into the building over a weekend to paint walls with ABC’s brand colors, put up posters of ABC’s core values, and replace all branded items such as backpacks and coffee mugs.

Content

ABC’s team didn’t realize that XYZ gave designer backpacks and coffee mugs as coveted rewards, with unique designs each year. Employees treasured their personal collections of these expensive items. You can imagine staff’s anger when they arrived on a Monday to find all their belongings gone, even removed from their desk drawers, and not being able to get them back despite many attempts.

ABC’s team didn’t realize that XYZ gave designer backpacks and coffee mugs as coveted rewards, with unique designs each year. Employees treasured their personal collections of these expensive items. You can imagine staff’s anger when they arrived on a Monday to find all their belongings gone, even removed from their desk drawers, and not being able to get them back despite many attempts.

Content

In addition, XYZ’s employees had co-created an elaborate mural of the founders in the main building that had been a point of pride and collaboration. Unfortunately, ABC’s facilities team painted over it during the rebranding weekend. That just added fuel to the fire.

In addition, XYZ’s employees had co-created an elaborate mural of the founders in the main building that had been a point of pride and collaboration. Unfortunately, ABC’s facilities team painted over it during the rebranding weekend. That just added fuel to the fire.

Content

What’s more, the talent team, which now comprised people from both organizations, was dispersed across several departments and locations. That created another barrier because it took time for the issues to bubble up and for the talent team to convene and identify the real problems.

What’s more, the talent team, which now comprised people from both organizations, was dispersed across several departments and locations. That created another barrier because it took time for the issues to bubble up and for the talent team to convene and identify the real problems.

Content

While the organizations had a culture fit in terms of growth and product quality, there were major disconnects around relationships and how individuals perform their work. For instance, ABC’s talent team followed a decentralized model, which created gaps in communication and processes that prevented the M&A specialists from sharing critical messaging.

While the organizations had a culture fit in terms of growth and product quality, there were major disconnects around relationships and how individuals perform their work. For instance, ABC’s talent team followed a decentralized model, which created gaps in communication and processes that prevented the M&A specialists from sharing critical messaging.

Content

Although leaders could not undo some of the damage (such as losing top talent), the company made several steps to rectify the situation and rebuild trust.

Although leaders could not undo some of the damage (such as losing top talent), the company made several steps to rectify the situation and rebuild trust.

Content

Further, the combined talent teams met to conduct a postmortem. We identified that future deals should include a more thorough culture analysis and assimilation plan. In addition, we crafted a plan to ensure that decisions and communications cascade to the HR business partners, function leaders, and managers who must integrate acquired employees.

Further, the combined talent teams met to conduct a postmortem. We identified that future deals should include a more thorough culture analysis and assimilation plan. In addition, we crafted a plan to ensure that decisions and communications cascade to the HR business partners, function leaders, and managers who must integrate acquired employees.

Content

Since then, most members of that talent team and I have gone on to other organizations and have built high-caliber M&A playbooks at companies such as Cisco, Amazon, Nestlé, and Starbucks. I recently interviewed several of them, and collectively, we identified the following best practices for M&A success.

Since then, most members of that talent team and I have gone on to other organizations and have built high-caliber M&A playbooks at companies such as Cisco, Amazon, Nestlé, and Starbucks. I recently interviewed several of them, and collectively, we identified the following best practices for M&A success.

Content

Conduct a deep strategic-fit analysis. All stakeholders must agree on a clearly defined rationale for the deal: Is it about scale; entering a new market; or acquiring technology, talent, or intellectual property? Test alignment across dimensions such as market goals, operations, product strategy, risk appetite, and long-term vision. Be sure to engage in realistic scenario planning, considering what-ifs around future industry shifts or performance misses.

Conduct a deep strategic-fit analysis. All stakeholders must agree on a clearly defined rationale for the deal: Is it about scale; entering a new market; or acquiring technology, talent, or intellectual property? Test alignment across dimensions such as market goals, operations, product strategy, risk appetite, and long-term vision. Be sure to engage in realistic scenario planning, considering what-ifs around future industry shifts or performance misses.

Content

Do your cultural due diligence. During the pre-deal phase, assess cultural values and norms. Use surveys, focus groups, and leadership interviews to understand how organizations make decisions, how teams operate, and what employees value. Explore employee engagement, decision hierarchy, and preferences regarding speed versus stability. Surface potential red flags and friction points—for example, one company may be hierarchical while the other is highly autonomous and collaborative. Realistically evaluate how you will overcome red flags and friction points.

Do your cultural due diligence. During the pre-deal phase, assess cultural values and norms. Use surveys, focus groups, and leadership interviews to understand how organizations make decisions, how teams operate, and what employees value. Explore employee engagement, decision hierarchy, and preferences regarding speed versus stability. Surface potential red flags and friction points—for example, one company may be hierarchical while the other is highly autonomous and collaborative. Realistically evaluate how you will overcome red flags and friction points.

Content

Involve and align both companies’ leaders early in the M&A process. Misalignment or mistrust at the top often spreads throughout an organization. Establish a joint steering committee to focus on decision-making cadence, trust building, and shared goals throughout the process and beyond the deal’s implementation.

Involve and align both companies’ leaders early in the M&A process. Misalignment or mistrust at the top often spreads throughout an organization. Establish a joint steering committee to focus on decision-making cadence, trust building, and shared goals throughout the process and beyond the deal’s implementation.

Content

Align on metrics and key performance indicators. Develop joint success metrics tied to the deal rationale, such as revenue synergies, product road maps, supply efficiencies, and customer bases. Track leading indicators (for example, customer satisfaction, adoption rates, and employee engagement) alongside lagging metrics (for example, sales, churn, productivity, and employee or customer attrition). Include cultural KPIs alongside financial ones. Use pulse surveys, retention data, and sentiment analysis to monitor progress.

Align on metrics and key performance indicators. Develop joint success metrics tied to the deal rationale, such as revenue synergies, product road maps, supply efficiencies, and customer bases. Track leading indicators (for example, customer satisfaction, adoption rates, and employee engagement) alongside lagging metrics (for example, sales, churn, productivity, and employee or customer attrition). Include cultural KPIs alongside financial ones. Use pulse surveys, retention data, and sentiment analysis to monitor progress.

Content

Create a shared integration playbook. Successful M&As use playbooks that outline such elements as deal priorities, brand and go-to-market strategy, and cultural integration. Design the integration in phases and build in flexibility to adjust if certain assumptions don’t hold postdeal. Establish a dedicated integration team with decision-making authority and empower it to surface misalignments quickly and course correct as needed. Include cross-functional leaders from both organizations, and not just those in finance or operations.

Create a shared integration playbook. Successful M&As use playbooks that outline such elements as deal priorities, brand and go-to-market strategy, and cultural integration. Design the integration in phases and build in flexibility to adjust if certain assumptions don’t hold postdeal. Establish a dedicated integration team with decision-making authority and empower it to surface misalignments quickly and course correct as needed. Include cross-functional leaders from both organizations, and not just those in finance or operations.

Content

Properly value the people you’re acquiring. Accurately identify the key people at every level in the organization, not only senior leadership. Honor their expertise with appropriate titles and compensation and be mindful of the psychological impact of perceived demotions or reduced influence. Be sure that leaders from both companies end up in similar roles with influence that reflect their contributions.

Properly value the people you’re acquiring. Accurately identify the key people at every level in the organization, not only senior leadership. Honor their expertise with appropriate titles and compensation and be mindful of the psychological impact of perceived demotions or reduced influence. Be sure that leaders from both companies end up in similar roles with influence that reflect their contributions.

Content

Appoint culture champions from both sides. Instead of imposing one company’s culture, co-create new norms that reflect the strengths of both. Keep the best elements from each company, such as one’s innovation process and the other’s customer service rituals. Select respected, credible employees from both organizations to serve as culture ambassadors who will encourage open dialogue and support change at the grassroots level. Use facilitated workshops or off-site meetings to develop a joint culture charter or guiding principles.

Appoint culture champions from both sides. Instead of imposing one company’s culture, co-create new norms that reflect the strengths of both. Keep the best elements from each company, such as one’s innovation process and the other’s customer service rituals. Select respected, credible employees from both organizations to serve as culture ambassadors who will encourage open dialogue and support change at the grassroots level. Use facilitated workshops or off-site meetings to develop a joint culture charter or guiding principles.

Content

Communicate transparently and often. Communicate the why behind the deal to employees, investors, and customers, with specific messaging for each group about the benefits. Be clear about what will change and what won’t, how the integrated organization will measure success, and the timeline. Use several channels and formats to create multiple opportunities for people to hear important information, and provide frequent updates throughout the integration process. Intentionally and directly address fears and unknowns—particularly around layoffs, reporting lines, and day-to-day norms. Don’t overlook middle managers; equip them with tools, messaging, and training to lead their teams through change. Provide platforms for employees to ask questions, give feedback, and share their concerns.

Communicate transparently and often. Communicate the why behind the deal to employees, investors, and customers, with specific messaging for each group about the benefits. Be clear about what will change and what won’t, how the integrated organization will measure success, and the timeline. Use several channels and formats to create multiple opportunities for people to hear important information, and provide frequent updates throughout the integration process. Intentionally and directly address fears and unknowns—particularly around layoffs, reporting lines, and day-to-day norms. Don’t overlook middle managers; equip them with tools, messaging, and training to lead their teams through change. Provide platforms for employees to ask questions, give feedback, and share their concerns.

Content

Execute the plan in phases. Use a step-by-step approach that respects the pace of change for every team. Some areas may benefit from quick alignment; others may need a slower, more consultative approach. Approach high-risk areas or issues with deliberate planning, involving those who will be most affected. Preserve autonomy where needed—sometimes called “light-touch integration.”

Execute the plan in phases. Use a step-by-step approach that respects the pace of change for every team. Some areas may benefit from quick alignment; others may need a slower, more consultative approach. Approach high-risk areas or issues with deliberate planning, involving those who will be most affected. Preserve autonomy where needed—sometimes called “light-touch integration.”

Content

Monitor progress to ensure success. Realizing the value of the deal may take months or even years. Postclose, continue to review strategic goals and metrics every quarter. Conduct postdeal reviews of key elements or groups. Acknowledge and reward teams or individuals who demonstrate integration success. Share stories of collaboration, innovation, and new cultural rituals that are emerging.

Monitor progress to ensure success. Realizing the value of the deal may take months or even years. Postclose, continue to review strategic goals and metrics every quarter. Conduct postdeal reviews of key elements or groups. Acknowledge and reward teams or individuals who demonstrate integration success. Share stories of collaboration, innovation, and new cultural rituals that are emerging.

Content

Although the acquisition my team went through was difficult and we learned many hard lessons, the deal more than delivered on its promise over time. More importantly, it represents that when something fails, it’s important to diagnose what is happening, do what you can to remedy the situation, and take those lessons forward to build a healthy future.

Although the acquisition my team went through was difficult and we learned many hard lessons, the deal more than delivered on its promise over time. More importantly, it represents that when something fails, it’s important to diagnose what is happening, do what you can to remedy the situation, and take those lessons forward to build a healthy future.

Content

Read more from Talent Development Leader.

Read more from Talent Development Leader.