by Richard Ferguson
Business Excellence Online – July 2010
Managing the disruptive upheaval to staff members that is frequently brought about by a merger or acquisition all too often gets forgotten as concerns such as maximising commercial synergies and re-defining processes take priority. But this approach can come at a cost…
In a recent series of the David Attenborough show Life there was a very interesting piece on baboons in Ethiopia that caught my attention for a number of reasons, not least because it parallels very well the spike in mergers and acquisitions (M&As) we are currently seeing.
The action followed one stronger baboon troop taking the opportunity to press home their advantage of acquiring a smaller troop from the same area of cliff, by killing the largest male and capturing the most alluring female. The desired outcome was a larger and more powerful pack that stood a better chance of acquiring more territory from neighbouring troops on neighbouring cliffs. The real outcome was a group of baboons with new family members, a new leader, a mixture of cultures and an underlying tension that showed itself with outbreaks of violence and skirmishes.
In short, a badly co-ordinated, poorly disciplined and clearly disunited troop of baboons. In real terms this false harmony is potentially the very undoing of the troop in the future as they seek to press home their advantages of numbers and scale with rival troops.
This is no different to the activity we see going on today, on the cliff tops of commerce: organizations taking advantage of the current commercial circumstances to press home their advantage by merging with or acquiring other organizations. The motives are invariably greater market share, competitive advantage and bolstering brand image and presence.
According to research published by BBC News, only 17 per cent of mergers add value to the combined company, while as many as 53 per cent actually destroy shareholder value. The remaining 30 per cent made hardly any difference to the performance of companies involved. Unsurprisingly, these results are in stark contrast to the perceptions of top managers, with more than 80 per cent of senior executives involved in M&As believing that their actions had in fact increased value for shareholders.
Yet again, the reality seems to be very similar to that experienced by the baboons: two organizations who go through a tremendously unsettling period as the prevailing culture, leadership, direction, power base and ways of working stabilise and become clear. Too often this period of stabilisation takes too long and the vulnerability, lack of alignment throughout the organization and uncertainty and fear that go hand in hand significantly compromise the
Organisations consistently underestimate the impact that uncertainty and competing cultural norms have on the morale, and therefore the performance
and productivity, of their staff.
As someone who worked through the M&A of PwC Consulting by IBM Global Services I have first hand experience of the negative impact that this has on teams. I had recently joined PwC so had no cultural allegiance, history or track record; it was like being a jungle referee. When threatened, exposed or uncertain, successful and competent professionals resorted to focusing on discrepancies, right down the Maslow hierarchy of needs. Arms were thrown up in anguish at the removal of the expensive coffee machines in offices around the country; emails written in their thousands to complain about the loss of first class travel and hundreds of hours lost in meetings establishing whether the assembled team one found oneself in was ‘deep blue’ or ‘light blue’.
The net result? A lot of unhappy, poorly focused, distracted and badly led individuals expected to go out and perform great client work while their uncertainties and anxieties were duly ignored. The new organization focused its transformation effort on crashing together the processes and order books to maximise the commercial synergies that were obvious. There was very little or no effort spent on trying to address some of the issues I have outlined above.
Five years on and IBM Business Consulting is a very successful consulting organization with some great quality people, processes and solutions and it’s a great place to work. However, like the Kubler-Ross model it shows that the change journey organizations and individuals go through is inevitable; so why do
organizations choose to ignore it?
In an M&A situation, organizations can choose to pretend that the people issues are not significant and will sort themselves out with little effort, or speeding up the journey along it. So what should a newly acquiring and / or acquired organization spend leadership time resolving?
Recognise and acknowledge the issues that will present themselves at the outset and create space for people to air their views.
I have yet to meet a member of staff in any organization who comes to work to do a poor job; we all strive to do a good job and are perceptive enough to identify the fears and concerns that arise in an M&A situation. Leaders should acknowledge these fears and create space for them to be discussed in a positive, supported and controlled way. The conversations will happen at the coffee machines, in smoking rooms and the canteen anyway—why not be part of the conversations and shape the discussion to speed the process up?
Build a single, clear, compelling and emotionally engaging picture of the future for the new organization.
No M&A activity is ever undertaken lightly and will always have very clearly defined commercial goals or associated benefits. Often this is the only yardstick or measure that gets talked about and it is often rational and emotionally unappealing and disconnected from the majority of staff in the business. Businesses need to create a compelling picture of the future that people can emotionally engage with, and create a common currency that can be used to fight the inevitable discrepancies and disagreements as the hygiene factors get shaken out and aligned.
Raise the leadership bar for all leaders in the organization.
Too often, managers and supervisors are promoted on their technical / transactional ability and when it comes to the tough challenge of leading through a significant organizational transformation, are found wanting. Leadership in an M&A is not the sole preserve of the board—the responsibility to actively lead, create direction and confidence, and energize and engage people is the responsibility of leaders throughout the organization.
It is the responsibility of the board to engage the new leadership cadre and task them with leading their people through the challenging times ahead. The kind of support that enables the leaders to grow and develop to be able to succeed in this demanding role is an investment that should be built into any merger and acquisition plan.