When M&A stands for mindless and autocratic

Feb 08 2011 by Nic Paton Print This Article

We all know that in the current climate there are potential merger and acquisition bargains to be had out there. Yet no one wants to risk their hard-won reputation by being seen to be at the helm of an expensive, acquisitive failure.

So, when it's something leaders are warned about over and over and over again, why is it that firms remain all too happy to spend a small fortune swooping on a rival, only to "forget" somehow to bring front-line managers on either side along with them in the integration process?

Research by consultancy firm Towers Watson has argued that firms are still too often failing fully to use front-line managers during the integration process in corporate transactions.

And it's a basic oversight that can potentially cost a lot of money, not to mention create a pounding management headache right the way up and down both organisations.

While it has long been acknowledged managers are a crucial element in bringing employees successfully through a deal, somehow organisations develop a blind spot in this area when it comes to M&As and other corporate transactions, said Towers Watson.

Its survey of more than 700 managers revealed companies more often than not simply miss the opportunity to engage and mobilise their front-line managers as part of the process.

And the inevitable result? Managers who are insufficiently prepared or equipped to help employees through the integration process or who may not even believe in it themselves, ambiguity and confusion, an information vacuum into which rushes dire gossip and suspicion, disengagement, a mass exodus of key talent and, lo and behold, reduced productivity rather than synergies and plaudits all round. Drilling down, the Towers Watson study found that barely a third of the UK front-line managers polled indicated they were a member of any integration team, while another third suggested they did indeed have a formal communication role with their employee group.

More than a quarter said they were not involved at all in any integration activities. Furthermore, and most significantly Towers Watson argued, a massive 82% indicated employee engagement was not even measured as part of the integration process.

Steve Allan, M&A practice leader for Europe, said: "Maintaining the engagement of employees Ė their energy, focus and commitment, that is the engagement, of employees during the time of change and distraction that corporate transactions promote is a challenge for many employers.

"Amongst the most cited reasons for acquisition failures are the challenges around bringing workforces together as the businesses integrate to form one combined organisation. Front-line managers are a key driver in connecting with the workforce during these transactions. Although companies realise the importance of front-line managers, more could be done to utilise them in connecting with and engaging employees at such times," he added.

Tellingly, the leading reason for employees to leave the company during or after a transaction was that they were uncomfortable with the new organisational culture, with more than 70% of UK respondents citing this as a reason for other employees' departures. Allan said: "Line-managers are the route to clearing the obstacles in the way of employees doing their jobs. They will provide basic direction on how to work with new colleagues, clients and customers in a new environment and they will serve as the key communication channel for messages and direction from upper levels of management."

Fewer than half of managers polled had access to support tools from their companies to assist in their role during the transition.

While access was greater at more senior levels of management, still only half of mid-level managers indicated they had access to change management workshops.