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Getting the Talent Piece Right When Merging Two or More Companies

When most merger strategies are conceived, the architects are focused most on business synergies, economies of scale, and the cost savings, where most underperform is in the areas of organizational effectiveness and talent management.  In this piece, we’ll explore six key challenges in executing a merger of two or more companies and what to do about each.

Design the Combined Organization. 

The critical first step is to define the combined organization.  Doing this work requires an in depth understanding of the roles and responsibilities for each of the acquired companies and then the creative work of deciding how the pieces fit together.  The easy work is looking for the redundancies and recommending those to be eliminated.  What is harder is reconciling the product and operational roles, which requires a deeper understanding of the work of the different functions.  Getting the organizational structure right is crucial to getting the rest of the organizational, team, and talent sorted.

Assess the Senior Leaders and Key Talent. 

In order to decide between individuals in similar roles, you need to do an in-depth assessment of the capabilities and limitations of each.  What are the person’s strengths and where are the gaps?  Can they scale into the substantially larger company?  An assessment should seek to understand where the loser in a head to head contest might add value in a different role.  Assessments should recommend how strong is the recommended candidate compared with external talent.  While continuity is important, you want to ensure that your key roles are staffed with strong performers. 

Assess Both Executive Teams. 

This is a piece that is often overlooked.  In order to predict how the individuals from two or more companies will combine as a team, it is important to understand how their teams were functioning independently.  This tells you about the culture the team from the top is creating and it reveals the degree of alignment and teamwork.  The best assessments include both interviews and a team survey to ascertain how each team is functioning.  Sometimes the team assessments provide pivotal information about which executive should be selected in each role.

Identify the Top Talent.

While the executives are certainly an importance piece of the puzzle, oftentimes the most important talent rests deeper in the company.  Perhaps it is a star salesperson or an exceptional engineer.  Mapping out the top talent throughout the companies is crucial.  You want to identify each mission-critical employee and develop a plan to retain them.  While market attractive compensation is necessary as is the messaging and treatment of them.

Assess the Two Cultures.

Assessing and shaping the culture of the combined company is the piece least understood and addressed.  Each company has basic assumptions, espoused values, and artifacts that make up its culture.  Too often acquirers compared the value statements of the companies and move on.  What matters more are the norms of behavior and the taken for granted beliefs that govern how employees behave.  Putting the companies together without culture shaping invites a collision resulting in post-roll up pain.  

Form the New Executive Team.

Once the organization is designed and the assessment work completed, it is time to form the new executive team.  The work here is to lay the groundwork for alignment and effective teamwork.  The team needs to get to know each other fast in order to build familiarity and trust.  Meeting structures and processes need to be put in place so valuable time is not wasted. 

When you consider the talent pieces above, it is no surprise why many mergers fail.  Focusing on strategic alignment, cost savings, and operational integration are insufficient.  The leadership, organizational design, talent, and culture pieces are the keys to mitigating combination risk and unlocking the full value of the merger.

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Michael Krot

Michael Quoia

Michael Quoia is the Co-Founder and Chief Executive Officer of KSE Leadership, a boutique leadership consulting firm with global reach. He works with CEOs, CHROs, and heads of business units to accelerate talent readiness, team performance, and profitable growth. He brings distinctive expertise in executive assessment as an enabler of succession planning, executive development, and talent management.