A tale of two mergers
Getting A CORPORATE MERGER RIGHT THE 2ND TIME AROUND
ACQUISITION 1: COMPANY A BUYS COMPANY B
Company A was a buoyant financial services firm. Their leadership team had been clever in devising strategies to develop new products, streamline internal processes and provide customer service excellence which had delivered profits and growth over four consecutive years. Company A was now ready to further expand via acquisition.
Given its success the most obvious option was to acquire a smaller company that was competitive or superior in a niche market. Enter Company B to our tale - a small, successful niche player that was receptive to a ‘friendly’ takeover.
Due diligence reported that the skilled advisors, quality financial products and high value customers of Company B would be an attractive and profitable addition to Company A’s operations. And so the acquisition went ahead.
Whilst Company A employees only outnumbered Company B employees 2:1, their representation on the post-acquisition leadership team was a dominating 7:1.
MERGE STRATEGY (HOPE) WE ARE ONE
Aware that there might be integration problems the executive team believed they would prevent any cultural or operational fallout by the adoption of a ‘one company’ communication policy. This program was intended to send a message of unity and equality and overcome any feelings of concern from employees as well as customers.
Two years after the acquisition and operational merger the leaders were convinced that their approach had been a success and that ‘one company’ had been delivered. However, business performance and profitability was not as high as expected, and the human resources department reported annual employee turnover of 27%, well above the industry average of 10%.
WHAT’S GOING ON?
A Peoplepie employee survey was used to measure motivation and drivers across the merged business with a simple analysis to show results split by employees originally from Company A and Company B.
The results came as a nasty surprise to leadership. The two cultures, even after 2 years of operating as one company, had simply not merged and the claim of ‘one company, one culture’ was false.
Employees of the original Company B reported very low motivation levels and engagement driver scores on job, employer, development and manager. This was in sharp contrast to the experience of employees from the purchaser Company A, whose managers and employees reported very high scores on employee motivation and excellent scores on the drivers job, employer, development and manager.
Further, it was apparent that the turnover issues were isolated to employees originally from Company B.
Their operations, which had been so buoyant prior to the acquisition, were now far less profitable and beginning to drag down overall business profits and success.
Whilst the leadership had ‘hoped’ the merger had delivered a unified company and culture, it hadn’t.
Significant efforts from leadership, human resources and managers to rectify the situation. Actions taken focussed on raising driver scores - particularly for employees originally from Company B.
ACQUISITION 2: COMPANY A BUYS COMPANY C
Six years later, Company A is looking at another acquisition. This time, as part of the due diligence process they run a Peoplepie survey through a new acquisition target, Company C.
Company A is now much larger than before and Company C is small and would only increase current staffing levels by 10%. There was a real danger that Company C’s strengths would be swamped by the merger so this time the leadership team want to manage the merger differently.
MERGE STRATEGY: KNOWLEDGE DRIVEN ACTION
Using data about Company C from a Peoplepie survey, the leaders ensured that attention was paid to supporting and maintain Company C strengths. Eighteen months after the merger another Peoplepie survey showed what had happened.
This time the acquired company was more motivated than the purchasing company!
Using important knowledge about Company C employee motivation and drivers, leaders were better equipped to manage the merger so that integrity and strengths of the acquired teams were maintained.
Targeted actions plus unity communications ensured this small group of important people did not get lost in the wider culture.
KNOWLEDGE TRUMPS HOPE
The most inspiring or well-designed communication strategy is not enough to successfully bed down a corporate merger. Hoping employees and managers will embrace a new vision and way of operating is less likely to succeed than action and change strategies based on real insight and knowledge.
If you know a team’s motivation and driver performance - you can better guide those people through complex, disruptive change. Rather than waiting until after the merger is complete, the optimal time to survey is prior to acquisition. Measuring employee motivation and drivers should therefore be an integral part of every due diligence investigation.
© 2016 Louisa Vanderkruk www.peoplepie.com