106 Communications

6th Sense

Mergers & Acquisitions, and the cost to culture

June 2019 | Change Comms, Employee Engagement

On average, organizational changes such as an M&A cost companies an estimated 12% –15% of revenue, largely due to leadership failing to consider the impact of cultural changes on employees.*

Why?

When we join an employer, we enter into a psychological contract with our employer. It’s not like a real contract; it’s unwritten.  It is in essence the ‘deal’ between employer and employee, and our mutual expectations of each other – everything from the way we work together to expectations around pay, promotion and career development.

Too often, in the process of a merger or acquisition, companies breach the psychological contract with employees, in particular:

  • Pay rises
  • Promotion
  • Career Development
  • Bonuses
  • Job Security
  • Job Responsibilities

In essence, the landscape changes.  A business comes together with new leadership. The new leadership set out a strategy, put in a new operating model and of course shape the team to meet their requirements.

This is logical – and of course critical to the future of the organisation.  But it takes time, it means some tough questions, and while the leadership is setting out its strategy (typically in the first 100 days), it is natural for people to wonder what will happen – and build that trust in the new leadership.

How do I know if I will be doing what I’m doing, in the future?  Will I get that pay rise or promotion?  Will I have the same opportunities as I thought I did?  Is it going to be the same as I thought it would be?

Leaders often look down the lens of mergers and acquisitions and only perceive advantages – more scale, greater opportunities.  But behavioural science teaches us that most people are more likely to focus on what we are potentially losing than what we might gain.  Loss aversion is likely to be primary driver of our perception of any merger and acquisition.

So here are 7 key steps to succeeding with your people:

Beware of vacuums– if you don’t communicate what is happening (even if that means not much), people will start to fill the vacuum with their own fears and assumptions.

Leaders, get out there– okay, so you’ve got a new strategy to focus on, but now’s not the time to sit in meetings all day; people want to see and hear from you.

You don’t have all the answers– leaders, managers, communicators, you don’t need to have all the answers.  Be clear that answers will come in time; just keep the conversation going.

Be wary of OneCompany programmes– leaders love to announce a new OneCompany programme following a merger.  These rarely deliver results because they don’t address the fundamental issues people have – about their role, prospects, pay, trust.

Find your cultural alignment– two cultures coming together can create a collision.  Focus on the shared values and characteristics and involve your people to help shape the new company.

Communicate, sleep and repeat– you just can’t communicate enough in these circumstances.  Find the balance between showpiece communications that showcase the new company and the more discrete engagement opportunities that matter to individuals.

Feedback is everything– encourage feedback at every opportunity and make sure you respond, whether in person, through a dedicated Q&A through the merger process or by empowering managers to discuss the issues and opportunities.

If you’re going through a merger or acquisition, and you’d like to know more about how to succeed, do get in touch.

 

 

*The Hidden Cost of Mergers and Acquisitions By Kristie M. Young, DBA; William W. Stammerjohan, Ph.D.; Rebecca J. Bennett, Ph.D.; and Andrea R. Drake, Ph.D.

 

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