Regardless of the financial and market analysis, once the deal is done, M&A becomes a people issue. It is the ‘human capital’ that must work together to make the deal work.

To improve the odds of a successful integration, people and culture matters must be dealt with early, quickly, and respectfully.

During due diligence, most buyers get out their HR checklist and look at the organisation chart, headcount, executive profiles, compensation plans, employee turnover – and often, not much more. They then do a comparison and make some assumptions about structure and synergies.

Time and again, it is the ‘human capital’ that is the blind spot of mergers and acquisitions. Early in the deal-making process, leaders should have a vision for the business and what it will look like post-transaction. Only when they’ve considered their endgame can they determine what human capital is needed.

Re-recruit and incentivise key talent

In M&A, the advice is always to ‘re-recruit’ and incentivise key people as a top priority. For the unknowns, and for key roles, it is in the organisation’s best interests to get an objective professional appraisal of competencies and potential. Different times call for different leaders, and people who have been successful prior to the merger may not be as effective in the new regime. Without objective assessment, organisations run the risk of miscasting people and potentially setting them up for failure.

When it comes to the plum jobs, I have witnessed senior leaders deliberately trying to sabotage the progress of their direct reports, presumably because they felt threatened. In other cases, despite evidence to the contrary, ‘mates’ are portrayed as nothing short of outstanding. Buyer beware! Conducting talent reviews with leaders on the selling side of the equation is not necessarily to be relied upon, for many reasons.

While some make rash decisions, other organisations make selecting and investing in talent a top priority. As a minimum, it is a fast and cost-effective process to get role-specific psychometric testing done that improves the likelihood of a successful fit.

Recruit for the future, not the past

Without careful attention to the people side of things, organisations can end up struggling with the people they’ve got instead of progressing with the people they need. For those with a growth agenda, or when gaps open up, there is likely to be a need to recruit. A culture of hiring from within or advertising internally first can be a help or a hindrance when focusing on a new direction. In M&A, re-recruitment and new recruitment can be a monumental and time-consuming exercise that must be done efficiently and effectively, with a focus on the future, not the past. One HR leader made the point that they are “looking for talent our clients don’t even know they want yet.”

Don’t leave it to chance

M&A is an opportunity to exit marginal employees and those who don’t fit the culture. But instead of making the hard calls, sometimes managers announce that staff reductions will occur through natural attrition. They think it’s the considerate or least-cost option, but why leave staffing to chance? In a stressful M&A situation, natural attrition often leads to a loss of the best players. They quickly dust off their CVs. If they don’t like what they see, it is easier for the top performers to find new jobs. When a company loses key people, it’s often a double blow. It’s a loss for them and again for the competitors. Sometimes, in a specialist service business, the whole value of the deal walks out the door.  Click here to find out more.

To your success,

Linley Watson
Australasia’s Authority on M&A Culture Integration