Why Do Mergers Fail?
In a Bain Survey of executives who have managed through an acquisition, cultural clash was listed as the #1 cause of failure.
Acquirers have well-developed toolkits for managing the financial and operational aspects of a deal; they track results closely and they hold executives accountable for hitting their targets on schedule. Integrating two disparate cultures, by contrast, typically seems “soft”— both difficult to measure and almost impossible to manage directly. As a result, few organizations apply the same rigor to managing and steering cultural integration that they apply to a conventional, hard-dollar synergy. No one is on point; no one is accountable. Senior leaders can find themselves in the uncomfortable position of watching the problem unfold without knowing what to do about it.
Bain & Company, Insights, 12/11/13
Cornell Global can help alleviate the failure rate by engaging us from the Due Diligence phase of a prospective acquisition through the post-merger integration.
Acquisition Due Diligence
The typical due diligence assessment and valuation of a company focuses on the tangible assets and liabilities of the company. The Human Capital part of the due diligence tends to focus also on the tangible…employee compensation, benefit and pension plans, pending legal liabilities. Intangible Human Capital assets such as culture, leadership and employee talent, organizational effectiveness, employee engagement, etc. are often overlooked or given minimal attention. Cornell Global conducts the “deeper dive” into a company’s true valuation relative to its leadership, culture, structure and people.
Our “toolkit” includes:
- Organizational Assessment(structure, alignment, employee capabilities, employee engagement)
- Cultural Assessment(mission, values, beliefs, behavior, communication, etc.). Will the people in the two companies be able to work together? Will acquiring the company, or merging with it, destroy the properties or drive away the talent that made it worth having?
- Leadership Assessment
- Talent Assessment
- Compensation plan(s) review
- Benefit and Pension Plan(s)review
- Legal Liabilities(history of employee vs. company litigation, current cases, etc.)
Pre-Merger/Acquisition Human Capital Issues to be Addressed
The goal of the Pre-Merger/Acquisition stage is to:
- Develop a constant, consistent and honest communication plan for leaders to take the mystery out of why the merger/acquisition took place and what to expect going forward.
- Form an M&A Integration Team and identify its leader.
- Conduct a SWOT Analysis (strengths, weaknesses, opportunities, threats) to identify differences in Corporate Culture and Organizational Capabilities providing a road map toward merging the cultures.
- Identify and bring to surface possible power conflicts.
- Identify who is to go and who is to stay if need be.
- Compare benefit plans, compensation plans, HR policies, practices, and systems and develop a plan for integration.
Cornell Global can facilitate each of the above critical activities. By doin so, a foundation is established for the new corporate culture that must emerge once the merger/acquisition has closed.
Post-Merger/Acquisition Human Capital Integration Activities
The goal of the post-acquisition/merger stage is to finalize the plans for the new business operation, flow and culture as quickly as possible.
- Continue following the Communication Plan…cannot stop now!
- Employee Attitude Monitoring via formal and informal surveys
- The New Norms: Developing the processes needed to build the new corporate culture and engaged workforce
- Compensation and Benefits Integration and Alignment
- Team Building, “C” suite and below
- Executive Coaching (focus on emotional intelligence)
- Talent Acquisition as needed.
Cornell Global will be with you throughout!