Mergers and acquisitions are playing an increasing role in business strategy, as 56 percent of CEOs expect their companies to pursue an acquisition over the next 12 months, according to EY’s Global Capital Confidence Barometer.
If anything underscores the executive-level interest in M&A, it’s this: While political landscapes are shifting around the world, “we may be witnessing a new kind of M&A market, where these geopolitical concerns might not derail deals, unlike in previous cycles,” EY said, adding: “More than ever, companies that hold back from inorganic growth strategies could struggle to remain relevant in a fast-moving environment.”
M&As can provide the ideal opportunity to overhaul broken, ineffective or antiquated processes. Yet despite their strategic importance, few things make workers more nervous than acquisitions, since newly joined companies often look for opportunities to cut costs or spin off certain subsidiaries. Plus, at least two workforces must be integrated as the organizations restructure and reassign roles.
This nervousness isn’t unfounded, as countless statistics can be widely cited about the disappointing success rates of M&As, and experts have struggled to pinpoint the root of the problem. One thing is clear: The HR team plays an important role throughout an M&A. “Human talent and leadership are at the very crux of what makes some M&As successful and others not,” Dennis C. Carey and Dayton Ogden write in The Human Side of M&A: How CEOs Leverage the Most Important Asset in Deal Making.
While Learning & Development may not be the end-all and be-all of a successful M&A, it can play a vital role. Effective L&D can help foster confidence in new leadership, assuage employees’ fears about the future, ease transitions among teams and help discordant workforces find synergies.
Why Knowledge Sharing is Critical in Acquisition
The seemingly at-odds trends mentioned above — that M&As are highly intriguing to executives even though they frequently fail to meet anticipated goals — makes it worth considering where the key areas of failure occur. In a 2016 webcast, J. Keith Dunbar, founder of Potentious, a boutique M&A consulting firm, explains that these root causes tend to fall into three buckets: strategy/valuation, people and due diligence/integration.
The last two buckets — people and due diligence/deal integration — are where L&D can play a vital role.
Mergers or acquisitions bring pain points related to cultural dissonance in the workplace (a large part of the “people” failure bucket). For one thing, if the deal creates a significantly larger organization, it’s sure to face scaling processes and growing pain. Culture clashes, confusion over roles and power struggles may also arise, especially when the merging organizations are significantly different in size, involve international offices or combine an established corporation with a startup. Amid the tensions that usually form during the M&A process, employee morale can be tenuous.
Such uncertainty can make the M&A process a trying time for employee retention, according to Deloitte. Turnover rates can skyrocket. Yahoo’s acquisition of Tumblr offers one such example: Barely two years after the deal, one source with knowledge of the company’s internal turmoil told Business Insider that close to half of Tumblr’s sales team had quit. The exodus, which included the Tumblr sales team’s Global Head of Brand Partnerships Lee Brown (now the CRO at Buzzfeed), occurred after Yahoo decided to combine the two sales teams.
For the “integration” part of the M&A process, common sense dictates that an updated system be put in place to share knowledge. Updating L&D around a common strategy not only helps employees thrive in their new roles, it also showcases leadership’s commitment to employees’ well-being.
An L&D environment customized to address the new organization’s challenges allows individuals to pool their skills and core competencies. These assets become knowledge powerhouses for the entire company. Fostering collaborative environments also encourages new colleagues to bond through shared learning.
Using L&D to Retain Top Talent
A strategic L&D game plan can help companies retain their most valuable employees, subject matter experts and leaders in their field. An L&D ecosystem that encourages employees to act as thought leaders — while sharing their own arsenal of knowledge and learning resources — nurtures both relationship-building and leadership development among and across teams.
Furthermore, Dunbar explained, effective L&D programs can detect potential problems in an M&A’s early stages: They can be used as “early warning systems” to determine areas of potential discord — a poor skills-fit for an employee moved to a new team, for example.
An organization that emerges from an M&A contains a hodgepodge of skills, talents and opinions — and will demand its own unique L&D formula. What a newly merged company’s L&D overhaul will look like depends upon internal dynamics, the deal’s goals and what the current learning processes look like.
Here’s where a decentralized L&D approach can play a key role: A mixture of e-learning, experiential tactics, quality content and collaborative social learning taps into shared values and helps lay the foundation for a smooth transition.
It’s a mistake to let L&D strategy become stuck in the bottleneck of priorities that forms during a merger or acquisition. By spreading the concept of L&D organically, companies can eliminate some of the uncertainty that may drive a wedge between employees, their new colleagues and their new management team — and improve the chances of an M&A’s success.