By Scott Weighart, Director of Learning and Development

Most companies underestimate how long it will take to realize the value from a merger or acquisition.  Senior executives enter into deals seeking to make their companies more competitive, expand their markets, build new offerings, and evolve with changing needs of their customers – all in the service of driving growth.  Most appreciate that the integration phase will be lengthy and challenging.  They don’t necessarily realize that the work has just begun when the ink dries on the deal.

As the pace of M&A hastens, the urgency around figuring out how to create value in the newly combined organization accelerates.  When acquisitions fail, it’s almost never because the strategy was wrong; it’s because the execution was poor.  Bringing different organizations together requires a different kind of leadership than leading organic growth.

What does your team need to know going into a deal to make it a success?  We have researched the execution side of mergers and acquisitions and learned a lot about what differentiates leadership teams who do it well from those who don’t.  Through our work with integration teams, we’ve developed a view on how to beat the odds.

Tackling the Confounding Challenge of Delivering Value in a Merger or Acquisition

Communication during the pre-deal stages is naturally limited because of regulation and prudent deal management.  However, during that time, tension builds in the respective organizations.  Leaders busy working out the details and mechanics of a deal may not always appreciate the depth of angst during this period.   

Stress caused by uncertainty and anticipation is simply a reality until a deal is done.  The result is people can be demotivated, paralyzed, and wrung out.  Even A-players who are on board and working to help you know that behind closed doors, deliberations between senior management could have a significant impact on their careers.

Once the deal is complete and communication less constrained, senior leaders can begin cascading the plan for the new organization.  At this stage though, the decisions may still not be made.  In addition, many leaders believe they are communicating more information than they are.  The result can be that people experience what they get as “dribs and drabs” of information.  For example, an announcement about organizational structure changes, or leader changes may not be accompanied by the “why.” 

All this is to say that, in our experience, even when a communication plan is in place, leadership needs to act in ways that are different than when they are leading a company through organic growth.  They may see it as sufficient to send out email announcements and conduct town hall meetings or videos that highlight a plan.

While these steps are an important part of the process, they’re only the beginning.  What is required is a full-out, sustained effort to create a productive, positive dialogue with the organization, one that acknowledges the people side of the equation.  Leaders need to dial up engagement, excite people about a vision for the future, and ignite an above-and-beyond effort to realize the value of the new entity.

Targeting the Right Leadership Qualities

Our research shows that there are specific qualities of leadership that make or break organizations in times of radical change such as a merger.  The qualities often most important, and least exercised, are the social-emotional qualities of leadership.  We have done extensive research in a leadership model that defines executive presence, one that includes these qualities.

What are a few of the qualities we know from research that are likely to determine the success of the leadership team in driving the value of a merger?

  • Composure: In times of change and challenge, people look to the leader as a source of stability.  The leader can better direct people’s energies by reacting calmly when there is ambiguity or uncertainty.  This aligns with the wisdom of slowing down to speed up – not reacting, but rather, thoughtfully contemplating issues as they arise and encouraging the team to do the same.  Interestingly, our research shows this is among the lowest-rated qualities of leaders.
  • Inclusiveness: Getting the right people meaningfully involved in deliberations and decision making is essential. You will not surface issues that can derail initiatives if the right people are not at the table.  By at the table, we include the informal dialogue that occurs at all levels.  When people feel part of the process, they own it, they engage in it and become part of the solution.
  • Resonance: The leader’s ability to be attuned to the thoughts and feelings of others may be one of the most important drivers of a successful merger.  Leaders need to be able to read the room, understand people’s thoughts and feelings, anticipate how various stakeholders will react, and make them feel heard.  Checking in with others helps you allay fears related to the change, and communicate clearly about the things that matter most.

How do you know whether your leadership team is exhibiting the behaviors that will drive value post M&A?  Click here to learn more about how we measure these qualities and others through the Bates ExPI™ Assessment. 

Readiness, Awareness, Action

In assessing your team’s capability to lead post-acquisition, there are three phases to be aware of:

Readiness

We assess leaders and teams using the Bates ExPI™ and through analysis of this as well as stakeholder interviews, we find there is always good news.  Typically, leaders already have many of the qualities that will predict success.  We measure the perceptions of their manager, peers, direct reports, and any others who have an important stake in success.  Along with encouraging news, we are also able to discover perceptions of gaps that show that these leaders are not as ready as they could be to lead through the effort to combine organizations.  We have found that providing a map of the team’s strengths and gaps opens their eyes to what they need to do as a group, and as individuals, to enhance the potential for a successful merger or acquisition.

Awareness

Once leaders and teams realize what may help or hinder their progress, they can develop new awareness of how it applies in specific situations.  They can ask those around them to give them feedback, as they work to demonstrate greater levels of composure, inclusiveness, and resonance.  For example, a leader assigned to run a newly integrated team may learn that by being more inclusive, he or she can surface a perception that people in the new organization feel left out of the major decisions or initiatives.  By taking time to listen and develop resonance with new direct reports, they may discover that they have some real value to add in problem solving.  Our coaches encourage leaders to work closely with those who participated in assessing them, so that they continue the conversation and learn through experience what works best. 

Action

As leaders experiment with new behaviors and see people respond, they begin to incorporate new ways of leading and form new habits.  For example, they may start communicating more frequently and with more purpose and intent.  They can become better listeners, enabling them to anticipate issues before they arise.  They may be more thoughtful about getting the right people around the table to problem solve.  When others begin to notice the effort the leadership team is making to engage them, they begin to trust the leaders’ intentions, get engaged in the effort, and work hard to build the systems, processes, and approaches necessary to make the newly formed entity work.

Final Thoughts

Every organization contemplating M&A needs two roadmaps – the strategy roadmap, and the leadership roadmap that will enable execution.  It’s important to expect the entire leadership team to get behind the effort.  They need to learn how to influence others and drive execution.   

When is the best time to assess your leadership team’s capabilities?  Ideally, before you enter into deal talks, so that your team is ready when the time comes.  You can do this work post-merger with a newly formed team as well.  It’s important to do teamwork early on, before communication becomes constrained and people are at odds.  Earlier development of the team ensures you don’t lose valuable time post-merger.

When you’re bringing together leadership teams with their own histories and proven ways of running the business, you need to establish early on the protocols for how they will work together.  They need to learn a “third way” of problem solving together that honors both company cultures and takes the best practices of both.

In our work with teams that are integrating, we’ve learned that the combination of individual feedback, coaching, and facilitated group sessions is highly effective.  It accelerates shared skill building, deepens understanding, creates shared objectives, and motivates teams to succeed collectively. 

Mergers and acquisitions often start with high hopes, only to sputter over time.  But getting better data on a handful of key qualities – such as composure, inclusiveness, and resonance – and helping teams to focus on developing them can make all the difference between hoping for the best versus making it happen.




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