How HR Can Be the Linchpin of M&A Success

Daimler and Chrysler. Novell and WordPerfect. AOL and Time Warner. Sprint and Nextel. And last but not least, HP and Compaq. What do these five corporate pairings have in common?

Most are household names, or at least they used to be. But these coupled companies share a more sinister distinction: all are legendary mergers that were killed by culture.

Cultural integration is the decisive factor in most mergers Click To Tweet

Matches Not Quite Made in Heaven

In each case, the two company cultures — internal milieu, level of formality, philosophy of workforce management, and operating style — diverged sharply, ignited conflict from the start, and ultimately doomed the deal. Unfortunate outcomes, all the more so because the right decisions and strategies could have averted them.

Research shows that cultural integration is the decisive factor in most mergers. As succinctly expressed at Forbes.com, “Get that wrong and nothing else matters.” It follows, then, that HR can and should play a pivotal part in merger deliberations. Yet HR leaders typically aren’t invited in, if at all, until it’s too late: after strategic decisions have been made.

HR’s Strategic Role: Solving the Human Equation

Among M&A experts, a consensus is emerging to involve HR as early as possible. As businesses begin to heed this advice, HR will be called upon to assume a strategic role. The best place to start is with an in-depth examination of key issues:

Ask the Right Questions

It’s imperative for HR to evaluate the cultural fit before the merger is concluded. Survey employees to identify synergies and shared strengths that can support the budding union and be developed over time. Even more critically, assess cultural gaps and differences. By identifying problems early, you can address them proactively before they can threaten the deal.

Develop an Internal Merger Communications Plan

No merger stands a chance without a high level of workforce buy-in. HR therefore needs to tell employees how the move benefits them as well as the business. Craft a compelling message and work hard to sell it. You may encounter skepticism along the way: major change inevitably triggers employee stress and disruption. But by actively promoting the positive side of the ledger, you can go a long way to quell fears and allay uncertainty.

Lack of trust plagues organizations with a disconnect from leadership and employees on the front lines and hinders everyone’s ability to learn and develop in an authentic manner.

Engage the target company’s leadership team to establish trust and develop a rapport. Solicit opinions as to potential challenges moving forward. Most newly-acquired executives are keen to prove their value and will readily offer advice.

After completion of the merger, keep your finger on the pulse of workforce sentiment. Conduct further employee surveys to acquire benchmark data, monitor progress and trends, and fine-tune the process of workforce integration. Dynamics to track include the pace of change, uniformity of company message across business units, employee perceptions of management, and — most critically — levels of employee motivation and engagement.

Help Shape External Communications

Collaborate with your marketing function on new company positioning to broadcast to customers, prospects, industry analysts, and potential hires. Then, take the initiative to ensure that all employees speak from this playbook in external interactions.

Apply Performance Management Early and Often

Merger success requires thorough integration of people and processes. This in turn takes active, healthy one-to-one communication between managers and their employees. The model for this has undergone considerable rethinking and revision over the last few years.

Employees adopt new tools at much higher rates when embedded in applications they already use Click To Tweet

Forward-looking companies are adopting a more agile, continuous, feedback-based approach to performance management. Today’s employees want frequent discussion of goals, the ability to share them with others, and regular manager check-ins. This kind of developmental, team-centric performance management has special relevance for merged companies — where success depends on identifying, developing, and retaining key contributors from both sides of the deal.

Take Advantage of Recent Innovations

New tools have emerged to enable this continuous, coaching-oriented approach. Post-merger organizations would be well-advised to look into them, rather than make do with outdated and often incompatible platforms inherited from the two sides.

Developmental, team-centric performance management has special relevance for merged companies — where success depends on identifying, developing, and retaining key contributors from both sides of the deal.

Follow this checklist of must-haves for a performance management solution: robust capabilities for frequent coaching, goal management, and real-time feedback; regular engagement touchpoints; and features for social recognition. Accessibility is another key point: employees adopt new tools at much higher rates when embedded in applications they already use, such as email and enterprise collaboration networks.

Success Hangs in the Balance

More often than not, the human equation determines whether a merger will thrive or take a nosedive. By acting strategically to engage, involve, and manage the workforce through a maze of change and uncertainty, HR can be the prime mover in steering a merger or acquisition toward achieving its business goals.

Learn why digital employee experience matters for HCM

Download Report