Dear leader… Integration after a merger

Integrating after a merger or acquisition: first the players, then the game

Dear leader, you are facing an integration process after a merger or acquisition. The expectations from outside your organisation are sky-high. On the inside, managers are sharpening their knives, employees are uncertain and operational problems are piling up. How do you get your organisation through this?

I think that everyone who has ever experienced such a process can recognize this situation. Starting with the high expectations. Most mergers and acquisitions are announced as a radical step forward, even if they stem from defensive considerations. In listed companies, shareholders are often consulted for months to get their approval for a transaction, typically with increasingly greater synergy benefits being promised. But other organizations also often feel the need to ‘sell’ a merger to their stakeholders by promising significant benefits.

Integration is harder than expected

In practice, we can see that realizing those benefits is not easy and that the integration becomes a more tedious process than expected. I am not necessarily talking about clashes between different groups, bubbles, and cultures. Even without such problems, it simply takes a lot of time and effort to make two organisations into one on the most basic level – one strategy, one management structure, and processes and systems that align neatly.

This is primarily because integration is not a routine task for most organisations. Often, only the first steps are clear: the business case and financing, filling the board positions, the name and/or brand of the new combination, and the legal unification. But what then? In many cases, this is where the playbook ends and improvisation begins, with all its consequences. Such consequences could be unclear communication about timelines and impact. But also uncertainty about leadership—about who takes the lead and who is in a position to make decisions for the future. An ideal breeding ground for political behaviour and uncertainty among managers and employees.

Soft healers

Over the years, we have learned one important lesson about how to approach an integration process: Select the key players first and only then make further plans. This has to do with the need for strong leadership and a smooth integration.

In practice, this lesson is rarely followed. Not surprising, though, if you consider how the announcement of a merger or acquisition goes. You stand in front of your people to explain your decision. They are people you know, who are always loyal, and who now are concerned about their own positions. They expect you to consider and defend their interests in the upcoming integration. And your first instinct is to reassure them. You think: “There will be casualties, but that will become clear in the process. I do not want unnecessary unrest, we need to stick together now.” Moreover, the new structure has not been designed yet, so how do you know who you need?

So, an army of consultants along with a large group of managers gets to work shaping the integration process. A program office provides the technical direction. However real leadership in the process is lacking, resulting in political behaviour surrounding partial interests and personal positions. People who feel uncertain tend to focus more on what they have to lose than on the success of the new combination. Consequences: a long and frustrating decision-making process with weak compromises as a result.

First the players, then the game

This trench warfare can be avoided by first naming key figures before working out the plans. This requires a two-step approach via a ‘core team’:

1. Before the announcement, select a small core team of confidants from both organisations who are sure to stay. They must be able to count on a good role within the new organisation. This makes them available to guide to integration process smoothly from the beginning on.
2. Immediately after the announcement, make retention agreements with the other senior managers, create clear expectations (transparency) and keep them involved.
3. Together with the core team, decide upon and establish the integration process – which steps have to be followed in which order? This creates commitment from this group before things start becoming political/emotional.
4. Work on a global vision and a main structure, and also name the key players in the structure.
5. Together with the appointed managers, develop further strategies and/or business plans and fill in the structure and the integration plan in detail.

The idea behind this approach is simple: the plans for the future organisation and the integration process are made by the people who are also responsible for implementing them. Therefore, the basic conditions for a smooth and fast integration are ensured: credible plans and choices, strong leadership and clear communication.

This approach asks for some courage from the directors. Right from the start they have to make clear that they no longer stand for the interests of their old organisation but for those of the new organisation. And they have to ignore the sky-high expectations for a while in order to work on the basic conditions first.

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Dear leader… 
Under this title, we are reissuing a series of 10 classic blogs on leadership communication and change. Michiel van Delden wrote them over the last few years, translating key lessons from these two disciplines to the world of managers.