The Painful Reorganization Stages

When most people not in leadership (or the PE/VC world) think about Mergers and Acquisitions, they think about people losing their jobs.

For nearly every M&A, there will be some redundancies -- two CEOs, CFOs, etc. And it only makes sense to eliminate these costly duplications as soon as there is no further value in having both roles within the organization.

Most folks see sense in this from a purely business perspective, but this does not make these changes any less painful for those losing their jobs, mentors, peers, and their anticipated career paths. Each of these changes ushers in a profound sense of insecurity and fear, undermining the psychological safety of the staff and bringing with it a potential for mistrust and reduced productivity.

Transparency and trustworthiness are the antidote to all this fear and insecurity and the salve for continued productivity. The first is achieved by open and honest communication, sharing what you know when you know it, and the latter by treating people well and standing by your word.

The following are some examples of what this looks like for each of the significant reorganization changes that are part of the M&A Integration Process.

Leadership Team Integration and Exits

While you know there will be a thinning of the leadership rank, be mindful of the loyalties and relationships these planned exits will impact. In order to ensure that people continue to trust you through the integration process, treat all of the exiting leaders well, providing them with an appropriate parachute so that they are comfortable in their exit, and not sowing seeds of mistrust as they leave the organization.

As part of your leadership change communications, you can share some early thoughts on how the strategy will change because of the merging of the two firms. In your messaging about these changes, use language that shows respect and deep appreciation for each departing leader's contributions, even as you foreshadow the objectives and significant opportunities ahead.

Reorganization

The inevitable reorganization comes right on the heels of exiting leaders, which only makes sense. As leaders leave, their people must now report to someone else. How you manage these changes with the people who will be directly impacted will have far-reaching implications on the continued loyalty and performance of the team.

As you craft your messaging, in the words of motivational business leadership expert Simon Sinek, start with WHY. Help these employees understand the transitions you are making in the organization – particularly the changes happening to them!

Uncertainty at this juncture can have the wrong people polishing up their resumes. That's why, in addition to broad messaging from senior leaders, it is important to provide talking points to functional leaders at all organizational levels to help keep messaging aligned.

When sharing talking points and FAQ documents with functional leadership, please take a moment to remind them not to guess when they are answering questions about future changes. While many specifics still need to be shared, the newly formed organization is in a 'discovery' period where its people are just getting to know each other, beginning to align to a new strategy, and assessing priorities given this new direction. It may be helpful to acknowledge that this period may feel uncertain but also to advise employees that this sense of uncertainty can best be viewed from the twin lenses of opportunity and adventure.

Not all organizational changes are bad; new strategies often bring new opportunities for most of the company's employees.

Do you have high-value talent who have been moved under a new leader? Schedule 1:1 meetings with these individuals and help them feel seen, heard, and valued.

Right-sizing / Layoffs

And finally, perhaps 3-5 months later…here it is – the moment everyone dreads. Leadership has had some time to identify which projects are strategic to the organization in the future and which are not.

At the same time, new leaders have had an opportunity to work with their new teams and determine whether they are right-sized, under-, or overstaffed for the new direction the company will take. Tough decisions will be made, and it will again be time to communicate changes to the organization.

Be careful about how you communicate with each impacted constituency -- those who are staying, those who are going, and the customers and suppliers each of these individuals engage with. As we suggested earlier, with the announcement of leadership changes, we would like to encourage you to be open with your team about the reasons behind these subsequent tough decisions.

To the degree possible, assess the entire organization in a single phase to ensure this challenging MOMENT stays just that…a moment. Take precautions to prevent this uncomfortable stage from being dragged out to multiple rounds. Each time you make organizational changes that impact people, you risk losing the hearts and minds of the people who are central to delivering your products, services, and customer experiences.

During your right-sizing announcements, discuss all people-related changes in a human, sensitive, respectful, transparent, logical, and on-strategy manner, making sure that those who are leaving -- and those who are staying -- understand why these changes align with where the company is headed. Treat people leaving the organization exceptionally well (they DO talk to their colleagues!), support their transition as generously as possible, and always recognize their contributions.

Help people who are staying to understand that having the right size staff for current revenue levels is the right decision for the company and everyone who works there. Here again, prepare talking points and FAQ documents for leaders up and down the org chart -- most people feel more comfortable saving their most challenging questions for their direct leader, so prepare these individuals with good information on how best to answer people's questions.

With layoffs behind you, allow the team to catch their breath and indulge in an appropriate ‘moment of silence.’

But don't wait too long. The best way to move past this uncomfortable period is to refocus the team. People will want to know if "this is it" and whether there will be further layoffs. To the degree possible, there is value in listening to and addressing their concerns.

While you can never promise there won’t be future changes, the best way to bounce back from a workforce reduction is to re-focus the entire organization on the new company strategy, growth and opportunities, and the exciting possibilities that come along with working for a growing company with a bright future that knows precisely where it is going.

For the following few issues of this newsletter, we will assume that, due to upfront strategy work, the decision has been made to consolidate and fully integrate the two firms. In the next issue, we will explore the other side of Internal Communications that moves the discipline from a monologue to a dialogue, as we explore the listening strategies that can help you navigate disruptive changes more effectively.

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