About 80 percent of mergers and acquisitions fail. Despite that poor record — and signs that the failure is often a part of poor talent integration — HR is still rarely involved in most transactions and their processes up front. The world needs a new way to make deals succeed, and increased contributions from HR could provide that leverage.
It’s in my DNA to explore ways to find success where there are too many options that lead to failure. If I’ve learned anything after 25 years of involvement with 300 M&A transactions, it has been that, when integrating two distinct organizations, successful organizational planning and change rely on the strategic involvement of the HR team. Yet according to the Global Leadership Forecast 2018, a collaborative study by The Conference Board, DDI and EY, only one in four HR professionals are involved in strategic planning from its inception.
Let’s start with a question of culture. If cultural fit and sense of purpose are misaligned before selecting future leaders or designing future operating models and environments, the new organization risks harming the output and outcome.
That’s why they fail. The failure isn’t new.
In the run-up to a deal, companies nearly always fail to address culture and leadership — key elements that drive merger success. HR can help: the odds of creating a unified corporation that earns future success improves substantially if HR works with executives to establish a joint vision and sense of purpose. Together, they can define what the culture will be, and develop workable systems for all employees and contingent workers in the new structure.
Some of the most notorious deals in the last two decades stemmed from cultural differences that led to leadership turnover that trickled down to management turnover, which created deterioration in customer services when the two companies didn’t become integrated.
That’s why companies need an innovative way to integrate purpose into its DNA. At the very beginning of the integration planning process, HR can manage the development of a specific combined culture, known as the targeted culture. HR professionals help management develop a concept of why the new company exists and use culture as the activation of that purpose, i.e., the underlying cultural attributes represent the decision criteria for leadership.
They inform how the post-transaction company leadership will live by that common purpose. By assuring a unified strategic orientation, they lay the groundwork for the new work environment and the direction of how leaders will operate.
Using this new way, defining the target culture becomes a key element of the governance and decision-making when two companies come together as one. HR leaders who guide the establishment of the target culture can work toward creating a successful deal well before other decisions are made and the transaction is completed.