Mergers And Acquisitions: Must There Be A Crisis For Leaders To Act?

Mergers And Acquisitions: Must There Be A Crisis For Leaders To Act? by Lee Eisenstaedt an ESOP Advisor.

 

"In case of emergency, break glass."

You've seen that warning many times. But when it comes to addressing leadership challenges, is it really necessary to wait to act until there's a full-blown emergency?

All too often, we see people in positions of authority leading as if change can only come from extreme circumstances such as:

• Ten employees walk out the door on a Friday and nobody knows why.

• A large, long-term client whom you thought liked you moves their business to your biggest competitor.

• Your most profitable product needs to be recalled.

• Your CEO is accused of sexual harassment.

Events like these represent key moments which could prompt a leader to say, "We have to address this issue and it's long overdue." Yet, incredibly, there's no guarantee any action will be taken, and this leader's lack of response may be more dangerous to the business than any single event. 

Think about it like this: You just had knee replacement surgery and your physician prescribes a regime of physical therapy. But you don't follow your doctor's advice because you don't like the exercises that are prescribed -- they're boring, and the rehab facility is far away. The promise of a full, pain-free recovery might get some people to make a change. But there are others who say, "You know what? I survived the surgery and the chronic pain I'm in isn't too bad." They may feel that the pain in their knee that they'll have to suffer for the rest of their life is less of a burden than the inconvenience of doing 10 minutes of daily exercise for six months.

Avoiding Versus Achieving An Outcome

The root cause of why change does and doesn't happen is likely not about the actual change as much as the steps, time and investment involved with making the change occur. The very idea of change may feel daunting or cause stress, making it much easier to run away from until you absolutely have to deal with it.

Even when the decision is made to change, many times we are not taking actions to achieve an outcome. We're taking actions to avoid an outcome. We think we're doing something to get rich when in reality, we're doing it to avoid being poor. We're doing something not to make friends but to avoid not having any friends. This dwelling upon what we're trying to avoid is ever present.

This becomes even more relevant when two companies are going through a merger or acquisition. As you bring two cultures together, it's easy to look at one set of people, then the other, and say, "Well, we have these principles and they have other principles, but for the most part, we're the same. I'm sure it'll be fine."

You soon see how you're coming into this transition from a different place than the other company. Your people and their people likely have different skill sets, personalities and values. Processes and decision making likely aren't entirely as smooth as they should be. Above all, the prevalence of "us versus them" thinking makes it obvious that something is wrong.

Still, in the eyes of some leaders, "wrong" isn't the same as "crisis." You can keep hoping that things will work out. Hope is your strategy. It's certainly easier. Plus, the possibilities of "hope" are limited only by your imagination.

Unfortunately, hope as a strategy can't be relied upon. You can hope that putting dozens, hundreds or thousands of people together who don't know each other is going to create a foundation for a new, higher-performing organization all by itself. But it's rarely the case. 

Deal Insurance As A Strategy

When you engage in a merger or acquisition, one of your primary objectives should be to retain your best people and keep them focused and energized. You may think, "Well, some people are bound to leave in deals like these." That may be true. However, when culture clashes occur and dysfunctional behaviors are tolerated, it's likely that "some" people leaving will be more than you expected -- and they could be the high-performers who aren't easy to replace.

This is why buy-side merger and acquisition (M&A) transactions, where the leadership does nothing, have as much as a 70-90% chance to fall short of achieving their full potential. Here's something else that should get your attention: As many as 50% of all leaders and managers will also fall short of their full potential in an environment of high dysfunction.

So, if nothing else changes after a merger or acquisition and you're just hoping for the best, what do you think it will mean for your job security, your ability to attract and retain employees, your relationship with your board and your overall respect from others?

I see many leaders wait until this worst-case scenario is a reality before addressing the components of their newly combined team and culture. Yes, you're in a leadership role, but that doesn't mean you're also equipped to seamlessly meld two cultures into one. Since all M&A deals come with a "no return" policy, be honest with yourself about your capacity for integrating them by answering these four questions:

1. Do you have the time, interest and expertise to deal with cultural integration yourself?

2. What happened the last time you tried to handle this yourself?

3. Are you committed to seeing the mission of cultural integration through to the end?

4. What's your alternative to doing nothing?

High-performing companies don't wait until the last moment to deal with these issues or pretend they will fix themselves. They don't take shortcuts or look for the cheapest option. They meet the challenges of creating an engaged organization head on, before and after the deal is signed. Just as you don't wait until your house is on fire to think about insurance, don't wait until your culture is a dysfunctional mess to develop and implement action plans for building a higher-performing organization.

(This article has previously been published on Forbes.com)