Mergers and acquisitions are more and more common in this changing business environment. So, you’ve got your financial and legal stuff all sorted out and are ready to roll, but then it all collapses – productivity drops and your (new) people are leaving. What is it that you need to look out for and plan in parallel to keep your company from falling in too deep?
The goal of mergers and acquisitions
…is to grow faster, penetrate new markets, cross-sell into new customer base, expand, avoid market foreclosure by suppliers, reduce taxes, reduce competition, improve access to capital, access new resources and technology, mitigate financial risks, acquire talented human capital etc. And getting all the legal and financial issues to place consumes a lot of time and energy. If during that time HR people are not involved in the process to deal with the human factor, then the planned success story will quite surely run short.
What happens if you don’t consider the human factor carefully enough?
Your employees will feel uncertainty and fear, dissatisfaction, distrust, suspicion and resistance. Relationships between employees and with managers may fail, performance will diminish, job satisfaction will drop, interpersonal and intergroup conflicts will rise and this all may lead to loss of human capital. For the organization it will mean a sharp decrease in productivity and reaching the goals of the merger will be substituted with dealing with conflict and high turnover.
What then is it about the human factor that you need to look out for?
The first questions that Shippee (2014) suggests to ask before you even start acquiring or merging:
- Is the acquisition prospect growing?
- Is the business profitable?
- Does it have high customer and employee-retention rates?
- Is employee morale strong?
- Does the management team share the same vision, values and dedication to corporate culture that we do?
If your answer to all the above questions is not ‘yes’, then you need to consider if the transaction would be worth it. These questions also focus clearly on the cultural fit, not only the profitability of the company, as the cultural misfit will quickly reduce the profitability.
Other things to consider:
- Distributive, procedural and interactional justice – see, that people in the merging companies are treated equally in terms of work environment, conditions, ways of working and communication.
- If organizational and management cultures differ considerably, then you need to invest time and money into getting them aligned. Cultural clash is inevitable if both parties expect each other to behave in a way that only corresponds to their own norms of acting.
- See that your company’s management practices are effective and directed towards finding the common grounds between employees.
- And most importantly, understand, that either all merging partners or the one being acquired will lose its organizational identity. They will need time to “mourn” the corporate death and deal with all the stress and rumors (if there are any), the role conflicts, the ambiguity, the contrasting norms, values and beliefs, the incompatible interests, the haphazard and sometimes flawed decisions, the changes in job security and career prospects.
Take time to understand what your employees fear and what they need, be open and decide which path you want to take:
- preserve the way organizations operated till now and change nothing, let them continue operating independently
- impose the culture, structure, systems, policies, management practices and work processes on the smaller company
- combine the two companies into one and implement the best structure, system, policies etc from both sides or building on both
This will help you define your next steps.
- Bingöl, H. B. (2017). Conflict Management Strategies in Mergers and Acquisitions: A Comparative Case Study of Industry-specific Human Diligence. Ileti-s-Im, 26, 203–245.
- Febriani, D. M., & Yancey, G. B. (2019). The Effect of Integration Approaches and Human Resources Initiatives on Changes in Organizational Culture and Employee Attitudes During a Merger. Psychologist-Manager Journal (American Psychological Association), 22(2), 108–131.
- Hyder, A. S., & Osarenkhoe, A. (2018). Partial or total integration in a cross‐border merger? Building a Nordic bank culture. Thunderbird International Business Review, 60(4), 477–488.
- Rebner, S., & Yeganeh, B. (2019). Mindful Mergers & Acquisitions. Organization Development Review, 51(1), 11–16.
- Renneboog, L., & Vansteenkiste, C. (2019). Failure and success in mergers and acquisitions. Journal of Corporate Finance, 58, 650–699.
- SHIPPEE, S. W. (2014). The X Factor In Successful Acquisitions: Getting the Human Side Right. MWorld, 13(3), 14–16.