Integrating two companies after a merger or acquisition is a tricky endeavor. How can skills management simplify your post-merger integration framework?
For small and mid-size enterprises, organic growth only goes so far. Many senior business leaders turn to a merger or acquisition to reach a size that truly scales. Yet, mergers and acquisitions (M&As) are risky. “According to multiple studies, 50-90% of mergers and acquisitions fail to achieve the expected value,” says consulting firm Loki Group, Inc. in this article. While analysts don’t all agree on when a transaction is a “failure” or what the success/failure rates are, they do agree that integrating the people, technologies, products and services, and customer base is a tricky endeavor that takes planning and skill. With that in mind, how can you use skills management to simplify your post-merger integration?
Sample Post-Merger Integration Framework
Most business consulting firms have M&A advisory practices, each with their own process for post-merger integration success. While the details vary from one to the next, it’s helpful to look at a sample framework, to understand what business leaders face when combining companies.
This example is from Boston Consulting Group, which outlines a three-phase approach:
Set the Direction
- Start by defining the basic objectives of the integration.
- Rigorously manage the integration as a discrete program, independent of its size.
- Organize integration teams around drivers of value and around target operation model and appoint leaders from both companies.
- Insist on senior leadership that is committed, credible, and highly visible.
Capture the Value
- Emphasize speed. Use the period before closing to start designing the future company and prepare to capture the value.
- Aggressively pursue synergies according to the integration’s objectives.
- Keep the current business strong by involving current customers in the integration process.
- Decide early and explicitly on IT for the integrated company.
Build the Organization
- Design the future operating model early in the process; it may differ from the day-one structure.
- Manage talent by selecting, retaining, and developing the best people.
- Rigorously manage cultural integration and change management.
- Communicate, communicate, communicate! It is better to have too much communication than too little.
Clearly, there are a lot of moving parts – and a range of people across the combined organization who have a role in the integration. When the leaders, integration teams, and combined workforce are aligned and have the skills needed for the new company to move through the inflection point, the M&A is more likely to succeed.
A Look at Skills Management
Skills management is just what it sounds like: an approach to workforce management and development that centers on skills. Skills management starts with company leaders defining the core skills and competencies the company needs to be successful. This competency model is the foundational reference for job descriptions.
Then, routine skills assessments help individual employees, their managers, and organization leaders understand proficiencies as well as skills gaps. Results of skills assessments can guide individual hiring decisions, performance reviews, development plans, succession planning, promotions, layoff decisions, and more. At the macro level, results of skills assessments provide insights into the strengths, skills gaps, and gains in skill proficiency across teams and enterprises.
We recently wrote about taking a business-oriented view of skills and competencies. Preparing for an M&A transaction is an excellent example of a business lens for viewing workforce capabilities. Whether your leadership team is searching for an acquisition target or positioning to be acquired, having a finger on the pulse of your workforce skills will help you step into – and through – an M&A from a position of strength.
Preventing and Addressing Post-Merger Issues with Skills
Just as the Boston Consulting Group (BCG) urges business leaders to prepare for a post-merger integration well before the transaction is complete, skills management before, during, and after M&A is a wise approach.
Before the M&A
Whether yours is the acquiring company or the one to be acquired, instituting skills management now will help you:
- Clearly define the skills your organization needs to thrive
- Establish your workforce and leadership baseline skill set – and monitor changes over time
- Develop current team members and hire skilled professionals to help close skills gaps
- Reap the many benefits of a skills-focused organization
During the M&A Process
As you move through the M&A process, a skills management program can help you:
- Articulate the value your company brings to the deal, highlighting the skills you have across your workforce
- “Aggressively pursue synergies according to the integration’s objectives,” as BCG suggests for company leaders. A skills management program can help you evaluate potential partner companies for complementary and overlapping skill sets
- Prepare leaders for all-important communications demands. When the transaction is announced, your CEO and other senior leaders will need to be able to communicate effectively with employees, customers, partners, investors, and the public – across email, in large-group meetings, on phone calls, and in person.
- Identify your integration team members. You’ll want people to lead or contribute to the technology, services, communications, HR/benefits, and other integration subcommittees that will manage the combination, once the transaction is complete
Post-Merger Integration
Some of the most common post-merger issues are disconnects around cultural integration and talent optimization. BCG calls out both variables as factors to manage as part of its last phase of integration, Build the Organization. Skills management can help:
- Minimize bias in assessing skills to identify skilled personnel to hire, retain, and develop
- Inform learning and development plans to help employees master the most important skills in their roles
- Monitor progress of skill development across the combined teams
- Identify individuals for reassignment to fill job openings with those who have needed skills for essential roles
- Support the use of rich workforce intelligence to make strategic business decisions
- Build and maintain an engaging culture, where employees are encouraged to learn and grow, to help retain key employees through and beyond the integration
Instead, an acquiring firm and a target company should have a clear integration plan, which specifies how the companies’ workforce, projects, products, and internal processes will be distributed and shared.
If you are planning to increase the chance of success for your future merger or acquisition with skills management, download our Competency Management Toolkit for inspiration and practical steps. Or contact us to see if Avilar’s WebMentor Skills™ can support your shift.
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