"Are You My Boss?"

Mark Herndon headshot
By Mark Herndon
President, M&A Partners
Aug 2, 2016

Those words in a big, bold font literally jumped out at me from the bright yellow lapel buttons in the town hall meeting. There were dozens of them, and probably dozens more posted in cubicles throughout the building. That phrase, “Are you my boss?” was now, officially, a flashpoint of the worst sort.

This is a true story from one of the toughest integrations I’ve been associated with. Not that we hadn’t tried. We’d been pushing the boulder uphill for weeks. But the leadership team just couldn’t seem to get their heads around the extreme importance of making the big, tough decisions on organization design, selection of key leadership roles and overall NewCo staffing in a timely, objective and strategic way. Now the chickens had come home to roost!

"That phrase, 'Are you my boss?' was now, officially, a flashpoint of the worst sort."

To be sure, there were plenty of selection and staffing actions going on during the period leading up to this flashpoint, and pretty much all of them were awful. First, there was clandestine, behind-the-scenes positioning of certain job candidates and the arbitrary elimination of other highly qualified candidates who weren’t on the “favored list.”

Then there was the horse-trading. If you’ve ever seen “bartering for key executives,” you know what I mean, (e.g. “You can have that function head, but we’ll never give this one up!”). Finally, there was the outright refusal to use the staffing process based on the rationale frequently expressed by key managers saying, “I already know who I want in that job anyway.”

At least the lapel buttons validated our viewpoint explained in Setting the Organization Cures Many Ills. But enough was enough, and now the lack of job certainty; ambiguity in reporting relationships with multiple “bosses” from both acquirer and acquired company; and lengthy delays had wrapped this organization around the axle and inflicted real value erosion and credibility damage to the leadership team.

In our view, acquirers have to get good at three essential and highly interrelated processes to consistently get the organization and talent equation right during M&A. Generally speaking, these include: organization design; selection and staffing; and employment transition on-boarding. At a practical level, we believe the responsibility for success at these core M&A processes rests squarely with the senior leadership team, with strategic direction and hands-on management by an experienced HR and legal team.

Given the importance of this topic, and the extremely low success rate (74% of acquirers consider themselves to be very poor, poor or average at this!), let’s build on Rapid Assessment Tool for Post-Merger Organization Structure & Staffing with some additional insights and suggestions to help you overcome these common challenges.

  • Due diligence:  Update your target screening and due diligence processes to specifically address organization and talent issues. Make more extensive use of online and social media sources to build early intelligence about “critical keeps.” Conduct structured interviews with the deal team and executive staff specifically designed to identify and validate potential opportunities and synergies.
  • Business model:  Get at the target company’s “secret sauce” by understanding the key elements of how they uniquely deliver their value proposition. The key principle is: The farther the target company is from your core expertise and business model, the more you will be dependent on their talent base in the near-term.
  • Use pre-close integration planning as a talent lab:  As you maximize pre-close integration planning with participation from key leaders from both target and acquirer, establish specific events to build relationships, conduct informal discussions, watch key people in action, and accomplish the basic “as-is” assessment and function mapping to compare specific business processes and sub-processes between the two organizations.
  • Build organization design into your game-day strategy summit:  For a refresher on our viewpoint about the importance of providing strong “directional guidance” on the big strategic integration issues pre-announcement, see Game Day Strategy Summit. Admittedly, your guidance at this stage will still be “broad-brush,” but it is essential to get this high-level mapping exercise, selection /staffing process alignment and timeline expectations all under way now if you are to hit important best-practice milestones. This week’s downloadable resource, Sample Organization Design Parameters, provides a few basic reminders to think about as you start the high-level design and mapping process.
  • Announce key leadership roles and reporting relationships on Day 1:  Your objectives are to quickly stabilize the organization and eliminate potential value erosion (and to avoid lapel buttons like I saw on the deal mentioned above). Your goal should be to announce the post-closing leadership team, the new executive appointments from the target company and a transitional reporting (“mapping”) structure for each unit and function in the acquired company.
  • Establish and operate a robust selection & staffing process: Don’t wait until the deal is in flight to develop and approve a solid process with teeth. Get multiple inputs or assessments. Maximize interviews instead of relying exclusively on slotting exercises. Provide oversight and accountability to ensure the process is used as intended and all compliance requirements are strictly observed. Train all managers who will be involved in the process or communicating its results. Publish a schedule describing what will happen and when, then zealously manage the process to do what you say. Help candidates use the process to their full advantage. And, of course, “over-communicate.”  The key principle is: Fairness of the process, e.g., as defined by being robust and objective, is as important to mitigating post-merger value erosion and achieving positive outcomes as the decisions themselves.

 

To learn how to master HR issues like staffing, culture and benefits in the context of mergers and acquisitions, please join us for The Art of M&A for HR Leaders. Hosted by the M&A Leadership Council, this unique M&A training program includes real-world case studies, breakout sessions, panel discussions and much more. Register now to get the Early Bird discount! 

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