An empathetic approach can make more M&A successful – Five Lessons from our experience
Do you know that the failure rate of mergers and acquisitions is somewhere between 70%-90%? Despite the promises of stimulus and growth synergies that acquisitions and merger anticipate, realizing the value of a transaction is typically not as easy as it sounds.
Why does this happen?
We bring you some of the lessons we learned while integrating the clients and processes of a billing company we acquired.
Most research papers consistently point out that the struggle to retain employees of the acquired organization and combining two different organizational cultures are the top reasons for the failure of mergers and acquisitions.
Keeping this in mind, our Human Resource team was ready for the challenges. With all the legal and financial issues to deal with in the process of acquisition, we were prepared to face the low morale and productivity of the team from the acquired business. Hence, we decided to be proactive and take the necessary steps even as the formalities and paperwork were being completed.
We share how we overcame these challenges in a short time.
Understand that a merger and acquisition can be tough on employees
When the rumor of a company being acquired floats, apprehension amongst employees is inevitable. We were cognizant that employees would see this change as dislocating and upsetting. And so, we visited them in their office and gave them a detailed and transparent introduction to our company's policies while they were still working with their parent company.
We explained the necessity for the change, and how it would benefit them. We tried our best to make them feel at ease and manage their stress by creating a welcoming environment for them before the integration. Our approach of focusing on the human side of the equation paid off as the dropout ratio was lower than anticipated.
Know what and who you are bringing before the acquisition
Every business focuses on the financial performance and potential of the acquired company. Nonetheless, it is crucial to understand and assess the corporate workplace culture. For example, innovation drives one entity, but a sales focus may have inspired the other entity. While one may have more of a participative decision-making process, but the decision in the other company may be top-down. And so, we made a deliberate attempt to learn the cultural challenges by spending some time in their offices before the commencement of the integration process. This approach helped us understand what we were bringing into our culture and how we needed to respond. More importantly, we were able to identify the key influencers in their team and evaluate how these influencers could enable or derail the morale of others.
Find how you can add value to each employee
In our case, we identified that the acquired company had hired most employees as fresh employees despite their years of experience in the industry. We detected that limitation, and so we offered benefits and compensations to these employees as per their expertise if they continued to manage their projects without any hindrances. This offer led to a smooth transition, as we were able to add value to their career paths. And once these employees joined our team, they efficiently adapted to our standardized procedures in handling projects.
As a risk mitigant, human resources leaders should plan for contingencies as the new workplace may create logistical as well as aspirational challenges that cannot be addressed. Plan for recruiting new team members based on your assessment and ensure that this does not create a disbalance.
Bring both existing and new employees on the same platform
While acquiring a new company, it is important to note that each team brings its unique culture and operating styles into your organization. For example, as we bought in a new team, we acquired their projects and clients too. The old team had a different way of handling projects. When our employees managed acquired projects, we focused on training them about streamlining our standardized process into the new plans. At the same time, we emphasized on guiding new employees to follow our operational process even though they were assigned to manage their old projects.
Focus on building rapport
We were sensitive about the cultural differences, and so our team leaders focused solely on the acquisition to foster the rapport between two groups. We took deliberate steps to create a clear and compelling vision of the cultural environment that enabled the newly formed team to thrive. We instructed team leaders to be respectful of new employees' insecurities and fears of the unknown while at the same time expecting that they worked through their concerns. In particular, our existing employees ensured that new members settled in our environment more comfortably.
Conclusion
The Human Resource team can and does play a vital role in making mergers and acquisitions successful by adopting an “empathetic approach” during the transition phase. And so, the company looking for a merger or acquisition must take the time and necessary steps to understand not only the scope of the economic change ahead but also the implications for individuals and teams.
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