by Kalle Kilpi
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M&A is an apparent “must-do” for success but a 70-90% deal failure rate can keep M&A stakeholders up at night. Leaders have acknowledged being unprepared to navigate people, culture, change management and communication issues.
With M&A playing an even bigger role in strategic growth plans, how can you increase your chances of success? The answer starts and ends with people.
Why People-Centric Change Management Matters
Leaders will often talk about making people and changing cultures the top priority when a deal is imminent. Then the practical realities of M&A due diligence, valuation, negotiation and post-merger integration implementation around financial, legal, HR, IT or sales and marketing overwhelm the people and culture sentiments. These feel less relevant, less immediately critical and – to the detriment of a project’s return – get de-prioritized or ignored.
It is within the human workforce where integration, adoption and execution around deal priorities and new initiatives take place. And while organizations once enjoyed the luxury of time to test and roll out new initiatives, they must now do so in compressed periods while competing with tens or hundreds of new existing projects.
In this fast-paced dynamic, McKinsey advises, is where competitive advantage accrues to companies with the ability to set priorities and implement their processes quicker than their rivals. And this ability is primarily people-driven.
There is no argument around the data: the better change management principles are applied, the higher likelihood that project objectives will be achieved.
Three Key Steps to Successful People and Culture Integration
An oft-cited statistic is that when people are truly invested in change, it is 30% more likely to stick for the long term. Effective change management efforts mature beyond just simply trying to integrate processes and tasks and extend to those managing these. You can achieve fuller project potential through people-centricity.
Danish human resource consulting company Proacteur offers a helpful post-merger integration framework for thinking about the basics of change management practices. This framework supports the basis of Midaxo’s view around simplifying organization of change management around three key steps for integration success.
Step 1: Preparing for Change – Providing clarity to set a proper stage
From the outset, before creating a post-merger integration checklist or anything of the sort, companies need to set an effective stage for supporting cultural change. A clear definition is critical; this includes – defining desired behaviors, propping up role models or examples and providing meaningful incentives.
- Ask questions to clearly define culture change, who it impacts and implementation guidelines.
- Perform a situational awareness inventory. An example target output during this step would be an organization attributes profile – a profile of teams impacted and any attributes that may cause issues during implementation.
Step 2: Managing Change – Organizing efforts and creating plans
In this step, organizational change management efforts take shape and custom plans tailored to the targeted groups and activities – and integrated with the overarching deal plan – are built and rolled out.
- Start a communication plan
- Map the sponsor roadmap
- Analyze system changes and process updates
- Assign integration owners
- Develop a training and coaching plan
Step 3: Reinforcing the ‘Change’ in Change Management – Create lasting change
This third phase of change management is about reinforcing the change initiatives. Here is where the target synergies and value-creation opportunities identified early in the deal making actually materialize.
- Measure changes and take corrective actions
- Reinforce with recognition
- Perform the post-mortem
The scorecard for change management success isn’t how quickly or fully the implementation plan was executed, but how sustained the change actually is. People revert to old norms and customs unless there are mechanisms in place to ensure the new prescribed way of doing business is being done.
Companies that build value over the long term from their deal making have built a differentiating competency: effective change management. These companies recognize the outsized role of people in delivering deal returns and ensure culture, fit, and human-centered transition issues are prioritized and executed repeatedly and effectively.
For more detailed information on how to implement effective change management, read “Fight M&A Failure with The Three Building Blocks Of Great Change Management.”