The Talent Imperative: M&A Success Through Integration

In today's business environment, mergers and acquisitions (M&A) have become essential strategies for growth and enterprise reinvention. The business headlines regularly report large transactions such as the $35 billion acquisition of Discover Financial by Capital One, and the trend of companies venturing cross border, embracing new technologies, and considering Environmental, Social, and Governance (ESG) criteria.

That said, the M&A landscape is increasingly complex, with regulatory scrutiny at an all-time high. For business leaders, particularly CHROs, managing the people agenda, talent transition and subsequent integration is a critical success factor.

Like Bryan Ferry's iconic song "Let's Stick Together," the success of an M&A depends on unity and collaboration.

With deal timelines stretching to 12-18 months, a strategic approach to talent management is vital to achieving deal synergies.

Deal Type Matters – It Impacts How You Transition People

Each M&A is unique, with different goals and pathways. CHROs need to understand the deal construct to grasp the talent implications through to deal close and beyond. For example, is it a merger or acquisition? Are you integrating to expand products and services or to control another entity at arm's length?

Additionally, deal milestone timing, such as Legal Day 1, Employee Day 1, and Customer Day 1, are critical ‘moments that matter’ for shaping the right talent strategy. For instance, a decision for a ‘close conversion’ where these moments take place at the same time brings implications around what, when, and how you engage new employees, as well as the HR technology timeline to support onboarding, infrastructure deployment, and making sure people get paid on time.

Leading Through Integration – Buckle Up, It's an Action-Packed Journey

M&A transactions typically operate under significant regulatory scrutiny, along with public commitments and fixed timelines to meet. Deals fail if they are not carefully managed and selecting the right leaders to ‘navigate’ through the integration is critical. In our experience, there are four attributes that set these ‘navigators’ apart:

• They Enforce Top-Down Decision-Making: Leaders must get comfortable in making swift decisions, with clear communication and adherence to program governance and timelines.
• They Drive Simplification of Plans: Leaders need to navigate the 'spaghetti’ of activity by radically simplifying plans and stopping or postponing other initiatives to ensure deal timelines are met - Integration is the number one priority. They need to be open to using AI to accelerate consolidation of large amounts of data and use critical thinking to solve for problems in a pragmatic way.
• They are Prepared to Adjust Risk Tolerance: Flexibility and a willingness to accept lower criteria, for example, in customer and employee call center service levels, are necessary to navigate deal complexity. The key thing is to deliver the ‘basics’ well, for example making sure people are paid on time.
• They go High and Deep: Reporting regularly at executive levels and diving deep into detailed workstream plans on others.

Managing Talent Risks – Mitigating Challenges for a Smooth Transition

The talent transition and integration process bring risks that require detailed planning and scenario modeling. Risks include disengagement, productivity decline, and voluntary attrition. The months after announcement and Legal Day 1 are crucial for ensuring employees and newly integrated teams become high performing quickly. CHROs need to ensure the following are in place as soon as possible:

• Critical Path Milestone Plan: This drives transparency and helps teams navigate through ambiguity, integrating enterprise and local-level HR, talent, HR technology, and change plans to avoid gaps and ensure dependencies are well-documented, understood, and tracked.
• Resourced Teams at Enterprise and Local Levels: The substantial effort required for M&A demands key roles, including the CHRO (as a Sponsor) and leaders that drive the Employee Experience (to join the dots), HR Function (HR Technology, Rewards, ER), Organization Design, Change Management and Culture, and change champions needed in impacted areas.
• Retention Strategy: Employee retention will fluctuate throughout transition, especially around the ‘moments that matter’ including the announcements around timelines, rewards, leadership appointments, structural changes, and budget. Leading practice retention strategies include both monetary and non-monetary incentives. Understand what motivates both transitioning and existing employees and design retention plans accordingly. Consider also how you determine critical talent for example, who is key for transition including the integration team and the people you need to keep both organizations running smoothly day to day, and knowledge transfer.

Radical Transparency - AI and Advanced Analytics are your Friends in Driving Insights and Decision Making

As a CHRO, you will face many questions during transition and integration. Being prepared to address them is important to instill broader team confidence in your plans. Given tight deal timelines and dependencies with other workstreams, providing radical transparency on progress allows stakeholders to say, “Great, you’ve got this,” or ask, “How can I help?” (and you will need a lot of help!).

Generative AI excels at streamlining communication with messages tailored for diverse audiences and cultures, while advanced analytics aids in organizational design, designing roles, identifying candidates, automating tasks, and analyzing workforce data.

A Global Bank has pioneered with an ‘Outside-In’ Organization Fit review that provides insights into culture, ways of working and experiences across the talent lifecycle. This AI-enabled review leverages machine learning and publicly available information on organizational levers such as structure, leadership, and rewards-related data. These insights have informed tailored change journeys and helped get ahead of potential culture clash risk.

Ensuring oversight, reporting on key metrics during transition (readiness) and hyper care after conversion can be challenging. AI accelerates reporting by integrating data sets that may also have different timings, enhancing accuracy, and preparing insights. For example, it can provide real-time employee sentiment, HR technology testing and deployment, call center volumes, benefits sign-up, and training completion.

Tackling Culture Integration – Creating a Cohesive Employee Experience

Culture remains a buzzword in M&A discussions but often lacks tangible actions. Instead, focus on creating an integrated ‘employee experience’ that happens at both the enterprise and local levels. CHROs need to be ready to address the question, what are we doing about the overall employee experience? To complicate matters, remember that employees are often also customers.

• Enterprise-Level Consistency: Align policies, organization design principles, onboarding processes, and set communication guardrails to ensure a consistent foundational experience for incoming employees.
• Local-Level Engagement: Foster relationships through welcome activities and training initiatives specific to the business units impacted. Conduct high-performing teaming workshops to introduce team members, align on goals, and provide clarity around governance, including decision-making.
• Mind the Gap - and keep watching it: Appreciating cultural (or ways of working) differences is critical. Start with proactive discovery using publicly available data pre-close and then leadership interviews. Maturing analytics and insights over time though employee listening activities to understand their experiences in the near, mid, and long term. Combining these methods, like focus groups, with AI-enabled assessments allows real-time engagement. This helps create the organizations' cultural aspirations and identify barriers or enablers to achieve deal synergies

Setting Up for Success: Key Questions for CHROs

Here are a few questions to keep asking throughout the transition:

1. Does your team understand the overall deal pathway? Understanding whether it is a merger, or an acquisition is essential. Are you building products and services together, or seeking to control another entity at arm’s length? These and more distinctions, drive the design of your talent strategy.
2. How are we integrating teams? Designing and rewiring the organization to manage the transition effectively is key. Focus on retaining top talent, fulfilling employment commitments, and achieving synergies across all business lines.
3. How will we know if we are ready? Understanding readiness criteria and knowing who will be supporting the conversion events (Legal Day 1, Employee Day 1, Customer Day 1) is critical for a successful transition.
4. How are we making culture integration tangible? Retaining the right leaders through to looking in detail at business practices that may drive a 'culture clash' is vital. Enable long-term cultural integration to drive synergies, supported by high performing teaming development, HR Hypercare operating models and data-driven insights to pivot quickly. Anchoring integration with data and analytics accelerates decisions and interventions needed.
5. What does seamless onboarding look like? How you holistically welcome and onboard employees smoothly ensuring they acclimatize quickly and can serve customers from Day 1 is crucial for maintaining productivity and morale. Ask about the 'missing middle' in plans where enterprise meets technology and local business plans. You will need a clear picture of this.

A Last Note: Reflecting back to Brian Ferry

The words in the song '... We made a vow to leave one another never’ are pertinent. Mergers and acquisitions present unique, once-in-a-lifetime opportunities for CHROs and their teams, offering exponential growth and development. The intense, roller-coaster nature of these integration programs fosters a very strong sense of unity among team members, making it challenging to transition back to previous roles.

The key is to leverage these experiences to future enterprise strategic programs, accelerating speed to value while maintaining the 'thrill of the ride.'

If you’re interested in learning more about the talent elements that drive M&A synergy and performance, let me know.

M&A Talent Strategy Advisors and Co-Authors; Eric Lam Alison Grenier Lisa Gertie Megan Chapman

About Karen Forward:

Karen is a senior advisor specializing in talent and organization strategy, based in Toronto. She is open to speaking engagements and promises to bring an interactive, insightful session anchored in real world experiences.

The views expressed in this post are Karen’s own and do not represent the opinions or views of any organization or entity. She is a big sharer, so if you would like to quote of use snippets from this post for other purposes, please let her know.

References

A new playbook for today’s M&A deals | Accenture

M&A: Does Your Talent Approach Fit Your Deal | Accenture

Mergers & Acquisitions (M&A) Analytics | Accenture

Powering Up M&A Activity: What Will It Take? (forbes.com)

Trends And Predictions For The M&A Sector In 2024 (forbes.com)

Reinventing M&A With Generative AI | Accenture