M&A transactions such as a merger of equals, platform add-on acquisitions, and divestitures can have profound and positive business impacts as well as achieve much-needed synergies when successful. As an experienced business leader, you know this. What you may forget while you are focused on these synergies is the importance of communicating what you know to your employees.
It is clear to us at West Monroe, through engagement in many post-close, M&A transformations, that a lack of sufficient communication to employees during post-merger integrations or divestitures is one of the primary reasons that business transformations of this sort struggle to succeed.
In our experience managing integrations and divestitures in various industries, we have found four key points to act on to ensure communication is not an issue during your next business transformation resulting from a transaction:
- Communicate Early and Often
It‘s easy to assume that the best thing for your employees is to keep them in the dark regarding certain aspects of a fundamental business change in the early planning stages of the change. You may tell yourself that giving employees too much information too soon will lead to unnecessary stress around the workplace. However, while this route may seem like the most simple, it is not the best for your employees, as it can lead to false information from untrustworthy sources, unwarranted unhappiness in the workplace, and even turnover.
From our experience, one aspect that executives consistently underestimate during an integration or divestiture is the ability of their employees to hear news before they are told. One recent example took place during a divestiture of a technology services provider, for which West Monroe acted as the Separation Management Office (SMO). Post-close, individuals in leadership positions were replaced, new professional services companies were appearing, and executive meetings were being held for extensive amounts of time behind closed doors, all before employees were told of the separation. This caused rumors to kick into high gear and unnecessary hearsay to become facts in the eyes of employees.
To prevent information, facts or otherwise, from spreading through the wrong avenues, leadership must ensure accurate and constant communication to its employees of the company’s primary vision as well as how this vision will impact employees directly.
- Communicate with a Clear Vision
Once you’ve made the decision to communicate important information to employees, this is where a clear and articulate vision comes in. All communications should reflect a desired message and reinforce the organization’s direction. West Monroe witnessed an example of how this can have unintended consequences when we were involved in an integration for a B2C retailer specialty retailer. While the company’s leadership did communicate the integration with employees, they did so on more tactical and administrative items, leaving employees confused about the real purpose of the transaction.
While intuitive, it’s good to be reminded that many employees seek fulfillment from the work they do. During an M&A transaction, most employees’ workload increases (this is especially true during a divestiture or integration) and often, more work does not equal more fun. However, working towards an exciting objective can be motivating and keep employees engaged through a stressful M&A period. Eliminating confusion can help keep employees satisfied and decrease unwanted attrition.
- Communicate By Level / Down the Pyramid
Once leadership communicates a clear and articulate vision and relevant information to theirpeople, the next step is to directly connect that information to each employee. When an organization hears “communicate”, the first reaction is often to write emails and send them from the CEO’s email or gather everyone around for a town hall with the CEO. Direct communication like this from the CEO is great – it’s like US citizens hearing from POTUS during a time of uncertainty – we like the reassurance from someone who is perceived as having all the power.
To take that a step further, leaders at all levels should be enlisted to communicate. Many times, employees feel closer to those right above them, versus a CEO they’ve spoken to once. Additionally, depending on the size of your organization, someone at the director level is often able to provide more specific information about an employee’s business area and job function. To do this, company-wide communication from the CEO can be completed first. She should then give consistent information to her direct reports, who will then do the same for her direct reports. This communication chain works like an emergency call chain and results in employees who have heard a consistent and clear message from everyone around them.
West Monroe combatted this challenge during a recent internal acquisition. The acquired firm enlisted change agents at each office and at various levels to act as a liaison between leadership making decisions and employees being affected by those decisions. This allowed those involved to feel well-informed about the transaction from strategic and individual perspectives.
- Communication is a Two-Way Street
The last important aspect of communication during an M&A transaction is being mindful that your employees are not robots; they do not exist purely to complete their responsibilities. They have frustrations, opinions, and questions just like managers do.
Simply vocalizing your businesses plans for integration / divestiture is not enough. You must pass the mic to your employees and give them a chance to ask you questions and express their thoughts. To draw from an example, we recently program managed a large-scale integration in the Healthcare space. During the integration, management made several decisions regarding the organizational structure and business operations without having cross-functional discussions with all impacted workstreams. This resulted in rework due to insightful feedback, which was contradictory to original plans, coming from employees after planning phases had closed.
Allowing employees to share their thoughts and worries will ensure they feel involved and engaged during the transaction, and may also lead to a stronger and more efficient future-state for the organization due to well-rounded feedback from all workstreams and levels.
Do not minimize the possibility that proper communications can inform and motivate employees to push an M&A transaction through the finish line and into a well-functioning business. These communications are vital to the success of a business transformation.