“Once a Merger/Acquisition has been announced, what is considered “best practice” with respect to completing the organizational design and subsequent staffing of the combined organization? “
Recently two HR Consultants at Metagnosis were asked about “best practices” related to the HR work required for a successful merger or acquisition. We have taken the time to summarize some of the advice we provided.
Organizational Integration
Generally, it is best to move as quickly as possible with the integration from both an operational and organizational perspective. However, not so quickly that the quality of the outcome is compromised. From an M&A perspective, speed of integration is always a key objective and expectation, particularly from the perspective of the Board and shareholders. There are three immediate reasons why moving quickly is important:
- M&A Objectives: Speed helps ensure that the strategic, financial, operational and organizational objectives of the M&A are achieved as soon as possible. Setting a near-term integration date and moving quickly to meet that date can also help avoid integration cost over runs.
- Culture/Engagement/Morale: Speed helps manage common people risks associated with M&As – for example, retaining key personnel and avoiding employee disengagement during integration.
- Customer: As much as an organization may try to ensure “business as usual”, customers are almost always affected directly or indirectly during integration. Moving as quickly as possible to achieve the intended benefits for customers is almost always the best plan.
Integration Project Plan
Developing a project plan for the HR integration work is essential. A plan with a target “NewCo” integration completion date will help drive the required sense of urgency and give people confidence, clarity and structure during a time of change and uncertainty. A structured plan makes the significant workload and effort associated with an integration seem more achievable and is essential for providing confidence and reporting progress to the Executive Team and to the Board.
Project plans organize work in terms of priority and ensure people are working on the right work, at the right time. For integration team members, it also helps ensure they are not juggling too much HR work at once and provide a disciplined way to demonstrate and measure progress – particularly in the beginning when emotions are running high. A project plan with milestone reporting can be important to maintaining engagement and morale.
Staffing Spreadsheet
For both integration projects as well as massive re-organizations, a master staffing spreadsheet is a must. Initially, you load current employees (e.g., role, title, compensation, job grade, location, manager) and note “at risk employees”. You then note employee placements and departures via your staffing process, as well as when and how staffing decisions will be communicated and to whom.
This one repository becomes an invaluable “single source of truth” for staffing decisions, compliance requirements and facilitates tracking of talent, costs and benefits in one place. Ensuring centralized management and restricted access to this information is critical for the confidentiality and integrity of your HR process.
Organizational Design
Many organizations use an M&A situation as an opportunity to rethink their organization design, beyond the basic requirements of merging teams and placing talent.
While there are traditional or standard organizational designs that can be used, often more than one design model is required during an M&A re-organization. Structures that work well for operations may or may not work equally as well for back office functions. However, what makes organizational design work well is the thoughtful consideration of the specific needs of the organization (see Table 1 below).
There is never one perfect or “best” for any organization because the Strategic Plan changes over time, senior leaders come and go, and, when that is not happening, market forces will drive change! Organizational design discussions can be easily facilitated with presentation material designed to support both the best process and the overall outcome within the time required.
Once the CEO has been appointed, they will confirm their executive team structure and confirm their direct reports from existing and/or external talent. HR’s role is to support this process and help drive the cascading org design according to best practice and/or applicable industry standards.
A key consideration is that the initial vertical organizational design only needs to be 60%-80% mapped out in terms design and levels, because the final structure is developed once senior portfolio leaders are selected and take ownership of the final structures below them. HR’s role is to help drive this process in a consistent, disciplined way through to completion.
| Examples of Standard Designs | Layered with Consideration for: |
| Functional Product Market Geographic Process | Key organizational and/or executive team member strategic goals and objectives Recommended levels of management and spans of control based on best practice Unique skills and experience of the current executive team and senior leadership teams Succession planning and leadership development opportunities Centralization/decentralization – pros and cons for both can be identified/discussed Regulatory and reporting requirements and best practices Diversity and inclusion goals |
Titles
The organizations involved in the M&A usually have different job titling and classification structures. Developing and applying standard job titles (you can look to industry best practice for actual titles) is highly recommended because it provides a fresh start for the newly integrated organization and teams. This external touch point can also help ensure reasonable benchmarking for compensation, career pathing and engagement.
Staffing Principles/Other Considerations:
If we had to pick two things to achieve the best organizational outcome possible it would be to:
- Identify the most skilled suitable qualified candidate for each role in the new organization, and
- Develop the best possible process based on an agreed-upon set of staffing principles to support this outcome.
Developing, communicating and applying a set of staffing principles is essential to obtaining buy-in and avoiding challenges or dissatisfaction with staffing decisions.
While employees may not always agree with decisions relating specifically to them, ensuring that fair and consistent processes are followed with respect to values and integrity is key to maintaining and building employee engagement and morale in the “NewCo”. HR’s role in working with executives to prevent exceptions to the design processes or principles is extremely important for morale and engagement.
M&A staffing processes are the ideal time to identify and address as many historical exceptions with respect to job titles, roles, responsibilities and pay etc. as possible. Although it may seem hard to tackle historical exceptions at the time when you are dealing with so many moving parts in the organization, the more you can address historical exceptions and avoid creating new ones will help ensure employee confidence and support for the outcome.
Succession Planning and the Benefit of Senior Leadership Profiles
As the organization executes its post-M&A strategic plan, there will be a greater need for stronger succession planning to support future “mini-reorganizations” and filling of key vacancies as existing leaders grow in their new roles and new leaders come into the organization.
Compiling leader talent information as part of a M&A integration process helps facilitate reorganization decisions and will support the organization’s long-term succession plans. Brief profiles that can be shared with the Board can create confidence and line of sight to the talent placement process and provide awareness of current organizational succession planning strengths and as well as future risks and gaps.
While HR-related organizational integration is hard work, you will have a better chance of success if you move quickly using a comprehensive project plan that is driven by integrity and values-based processes designed to achieve the best organizational outcome and ensure optimal employee engagement and morale.
