Change affects each of us differently. Some people thrive on it, some are unsettled by it, and others resist it entirely. And when it’s imposed on us, we often have our most extreme reactions.
In our working lives, going through a large-scale business transformation, like a merger or acquisition, is likely one of the most severe change environments that we will face. How it is handled by the leaders running the programme can have a significant impact on how well the employees react, and therefore how successful the process is.
Research from McKinsey has shown that successful transformations require strong communication, employee buy-in, and good people strategies. It is important for CEOs and transformation leaders to maintain a collectively positive workforce through the process; a workforce that is equally motivated and excited by the transition.
Mergers and acquisitions - focus on employees
There are many types of business transformations, but one that has historically been among the most disruptive is the transformation resulting from a large merger or acquisition, where the transition is bringing together complex organisations with different approaches and cultures.
Usually, the rationale for these transactions is about acquiring IP/product lines or customers/market share. Therefore, the focus of the transition programme is often on bringing together the systems, structures and processes. In many of these instances the workforce, especially of the junior partner or company being acquired, is an afterthought.
Too often the post-acquisition transition programme is focused on the merging of assets and activities (e.g. IT systems, finance functions, premises, sales and marketing) and don’t do enough to address the employee issues that can arise.
Undergoing large-scale organisational change can engender feelings of uncertainty, dissonance, threat, and distrust in employees, which can compromise retention. This can be true of employees from both the senior and junior partners in the transaction. But it is those employees who will undertake the post-acquisition activities; who will ship product, continue to service customers, send invoices, etc. So if they aren’t motivated, are confused, or they leave, the success of the transition is at risk.
Good communication and people strategies
As the McKinsey research indicates, successful transformations pay particular attention to the people involved. It should be a major responsibility of senior leaders to give employees reasons to embrace the change that is taking place. They should communicate the vision for the new, merged company, what it will stand for, how it will operate, and what will be different compared to today. This will help with employee buy-in, help them become excited and motivated by the prospect of the changes on the horizon.
But this communication must be relevant to the audience. Too often communications from leadership address the high-level strategic reasons for the merger when what employees want to know is why the organisation is merging, why it is the best course of action, in what way the company will be better after the merger, how it will affect their work, and what support they will receive if they are adversely affected.
In addition to good communication, transition leaders should consider establishing structures and processes to help them understand their new workforce. Pre-transaction due diligence generally doesn’t extend to people. But, it will be crucial for the new organisation to retain the right people going forward. So, it is a good idea to create a system that allows for the collection of information about employees, which can be accessed and contributed to by the transition programme team. Through this, leaders build up a picture of their new workforce, how they will fit into the new structure, how they will blend.
HR’s role in M&A business transformation
Because employees are so important to the success of the post-merger organisation, the human resource function should play a significant role in the transformation programme. HR can be the creator and facilitator of the system that collects employee information for the transformation team. And there should be an HR representative working across the business units and functional work streams to help transformation leaders address the people issues in each of those areas. The HR representative can advise them how or if employees will fit in the new structure.
The HR lead should have expertise and experience in managing change in large, complex organisations. People in different departments or divisions will have different challenges, skillsets and motivations, and anticipating the concerns of each is necessary to deliver a change process with as little disruption as possible. For example, it is not inconceivable to imagine that the priorities and concerns of the finance department are different from that of sales, marketing or IT.
Additionally, he or she should have HR content knowledge around transformation. Knowing the rules and regulations around transferring employees and employment law will be essential, especially if the merging entities have locations in more than one country. And harmonising benefits and pensions with technical knowledge as well as cultural sensitivity will help to ensure a smooth transition.
The HR lead should map out the new organisation from stakeholders down to part-time employees. What are the key motivations of various groups? What will they respond to? What will threaten them? This will help to mitigate the bumps and fallouts during the programme.
Keeping the workforce from feeling demoralised is paramount for the survival of the new organisation. To emerge from a post-merger or acquisition transformation stronger than before and to build on those strengths in the future, it is important to keep workers motivated, focused and on board during a period of uncertainty and change.