Common “HR-M&A” Challenges
In the U.S. alone, January 2023 saw 1,278 M&A deals announced. While aggregate M&A spending decreased by 28.8% compared with the previous month, these 1,278 deals in just one region of the world didn’t only have major consequences for shareholders and investors but also had an immediate and longer-term impact on millions of employees, both current and former.
It’s also no secret that M&A deals underperform or fall under the category of outright failures, with percentages cited over the years ranging from forty to seventy percent (the latter number associated with results below expectations).
Nevertheless, M&A’s are just one type of very significant event – or “pivotal moment” – for an organization that can easily change its trajectory for years to come.
Others include corporate restructurings, sweeping digital transformations, significant shifts in business strategy such as globalization, or changing other aspects of the operating model. That said, M&A’s and their subsequent business and culture integration would fall on the right side of the “execution risk continuum”.
There are many reasons for this, but a commonly highlighted one is that key deal value drivers leave the merged entity early on. A recent study found that 33 percent of the acquired workers of a startup or early-stage business left in the first year of their company’s purchase and, more often than not, voluntarily.
Culture clashes don’t just hinder successful integration when small entities get subsumed into larger ones. Incompatible cultures, and even more specifically, the perceived loss (or dilution) of a culture that employees grew quite comfortable with, have also been the culprit in many of the largest M&A deals in history.
This post will tap into my HR-M&A background to briefly overview a few ways to prevent or lessen M&A failure rates and the major challenges accompanying other pivotal moments for the enterprise. Outside of the unplanned loss of staff who are major value drivers, two other typical reasons for poor M&A outcomes are productivity dips or more material drops and leaving key initiatives derailed or delayed.
Some Personal Context
I took on the opportunity to navigate M&As early in my career when a Fortune 50 stepped in to acquire the financial services (Wall Street) firm where I led the HR Systems group. Shortly after that, I was in the middle of two more M&A events during my four years as a global HR / HR technology leader at a Swiss Bank in Zurich.
Upon repatriating to the States, I took up shop as the VP-HR M&A for American industrialist Wayne Huizenga (founder of Blockbuster Video, Waste Management, and AutoNation), during a period when Wayne was acquiring 500 companies.
This experience provided me with following insights:
Navigating Pivotal Moments (for the Enterprise): 3 Proven Strategies
Tailor Communications to Each Impacted Group: After an M&A deal is announced (or any other very consequential event for the organization), there is a period of “de-stabilization” that must be compressed as operational and financial risks will increase with each passing month. I have represented this using the following graphic:
During the de-stabilization period, large swaths of the organization will have started networking for their next job, some casually, some as a matter of urgency. It stems from their natural intent to remain in control of their future, despite having no valid reasons.
Employees can have their productivity grind to a halt, and on a more macro level, significant initiatives backed with large budget outlays can easily stall as well.
The height of the de-stabilization curve, or “amplitude,” can be viewed as the degree of disruption at both the micro (individual) and macro levels; and the “duration” of the curve is basically how long this disruption might last.
Within the scope of targeted communications is visibility into the most mission-critical projects, teams (since most work gets done in teams, many of which are informal or not on an org chart), and individuals. It leads me to the next mitigation strategy: “know thy organization” – or a process that would uncover the underlying tendencies, which brings us to the next step.
Make the Invisible Visible: There are several aspects to making the invisible visible, such as one of the universal endeavors in all change management programs: knowing who influences whom.
The realm of “influence” can range from colleagues that influence attitudes toward the pivotal moment or event (e.g., support and buy-in or not) to influencers on personal stability (e.g., a trusted friend or support system) to influencers on individual productivity (e.g., job-specific mentors and coaches or others who are (relevant) project-knowledgeable – whether in one’s social circle at work or not.
The important point is that while surveys or even AI-powered “sentiment analysis” tools can pick up on prevailing opinions, they do not provide insight into what and who might be affecting those.
Have the Right Perspective on “Key” Employees: Many organizations define “key” employees based on levels down from the CEO. This approach represents dangerously narrow thinking.
Why? I’ll answer with a rhetorical question: If there is only one employee left in the organization that truly knows a legacy system with millions invested in it, isn’t that person “key?” Obviously, they are, and all well-designed retention programs and strategies should account for these individuals whose potential departure would cause significant operational disruption, financial loss, or both.
All three of the above steps will help organizations navigate pivotal moments after the M&A announcement, whether by reducing key staff departures, avoiding productivity dips, or maintaining continuity on strategic initiatives.
In that context, it is essential to note that any technology tool or platform (likely underpinned by AI/ML) that allows a more profound knowledge of the organization and its connections and relationships … thereby making the invisible visible … is worth considering and implementing.
The Author Steve Goldberg’s 30+ year career on all sides of HR process & technology includes HR exec roles on 3 continents, serving as HCM product strategy leader and spokesperson at PeopleSoft, and co-founding boutique Recruiting Tech and Change Management firms. Steve’s uniquely diverse perspectives have been leveraged by both HCM solution vendors and corporate HR teams, and in practice leader roles at Bersin and Ventana Research. He holds an MBA in HR, is widely published and is a feature speaker around the globe. He’s been recognized as a Top 100 HRTech Influencer.