Post-merger integration. Expectations outside the organisation run sky high. Inside managers are getting ready for battle, staff is insecure, and operational problems mushroom. How can you see your organisation through?
Above is the C-Suite commercial that aired on Dutch radio. The 20-second commercial highlighted the key challenge in integration processes. If you’ve ever been in such a situation, you will surely recognise it.
Let´s look at the high expectations. Mergers or takeovers are usually presented as a leap forward, even if taken in defence. Listed companies may spend months talking to shareholders to get their approval for the transaction, promising them more and more synergies. Other organisations, too, feel the need to ‘sell’ their merger to stakeholders by pointing out the benefits.
Integration can be complicated
We have seen many cases where realising synergies hasn’t been easy and integration posed a problem. I’m not just referring to cultural clashes. Even without these problems it simply takes a lot of time and effort to merge two organisations into one at the most basic level: with one strategy and one management structure, and with processes and systems that are aligned.
This is mainly due to the fact that integration is not something organisations do on a day-to-day basis. Usually, only the first few steps are clear. These are the business case and financing, the positions on the board, the name or brand of the new combination and the legal merger. But then what? This is usually as far as the plans go, leaving organisation to improvise, sometimes with dire consequences. Such as unclear communication about timelines and impact. Or uncertainty about leadership, about who takes the lead or who is in a position to take decisions for the future. This drives political behaviour of managers and increases insecurity among staff.
Sparing the rod
Over the years we have learnt an important lesson about how to approach the integration process: select the key leaders before developing your plans.
In practice, this lesson mostly goes unheeded. Which is not surprising. Imagine you’re the CEO who has just announced a merger. There you are, facing your senior management to explain the deal. You know them all, they have always been loyal, and now they are worried about their position. They expect you to defend their interests during the upcoming integration. No doubt your initial response will be to reassure them. You will be thinking: “There will be victims, but we´ll see what happens along the way. I don´t want them to worry unnecessarily, what we need now is a united front.”
As a CEO you also have a practical argument for not making an initial selection. After all – how do you know who you will need if you don’t yet know the structure of the new organisation?
That means that the initial selection is postponed, while an army of consultants will set to work with large groups of managers to shape the integration. A Programme Office will provide the technical management, but not the leadership that is required. This will quickly result in a political process focused on defending specific interests and personal positions. People who are insecure tend to focus on what they have to lose, rather than the success of the new combination. The result: a long-term and frustrating decision-making process that brings nothing but weak compromises.
First the players, then the plan
You can avoid a battle from the trenches by appointing key figures before drafting any plans. This requires a two-step approach with a leading group:
- Before the announcement, select a small group of people you trust from both organisations who will definitely stay on board. While you may not yet have any positions for them, they should be able to count on an interesting role in the new organisation. This way you can rely on them to help shape the integration process.
- Once you have made the announcement, make retention agreements with the other senior managers, create clear expectations (transparency) and continue to actively involve them.
- Sketch the integration process with the leading group – which are the steps we will take in which order? This creates commitment within the group even before it becomes political/emotional.
- Draft a general vision and a high-level structure, and appoint the key figures in the structure.
- Together with the appointed managers, develop the strategy and/or business plans and flesh out the structure and integration plan.
The idea behind this approach is simple: the plans for the future organisation and the integration process are made by people who are responsible for their implementation. These are the basic conditions for a smooth and fast integration: credible plans and choices, strong leadership and transparent communication.
The approach demands directors with guts. From the start they will need to make it clear that they no longer represent the interests of the old organisation, but those of the new combination. And they should ignore the ‘sky high’ expectations in the outside world for a while, to be able to spend time on on getting the basic conditions right.