Organizational Design and Talent Planning are Key to M&A Success
M&A deals are among the most challenging events a business can navigate. Effective organization design and talent planning are critical to ensure a smooth transition.
Key Takeaways
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A vital people-related workstream during a M&A deal is organizational design and talent planning.
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Since the process of assessing talent, preparing future leadership and monitoring cultural alignment is complex and time-consuming, companies should prepare early.
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By focusing on effective organization design and talent management, businesses can navigate the complexities of M&A and emerge as stronger, more competitive entities.
Mergers, acquisitions and divestitures are among the most challenging events for business leaders to navigate. People-related topics connected with the M&A deal need to be addressed quickly and effectively if business leaders are to avoid negative business consequences.
One of the most important ways to do so is to focus on organizational design and talent planning — including skills gaps and synergies among the combined or new workforce. Regardless of the size of the deal, planning touches all job functions, levels and geographic locations.
Companies that don’t look at how the skills and corporate culture of their own organization combine with the other company involved in the transaction risk jeopardizing the deal or its long-term success. For example, employees that perceive a lack of opportunities going forward or don’t understand the directional changes in corporate culture may eventually leave or become less productive while they adjust.
Preparing early and aligning with the business, such as creating a cross-functional talent management office, leads to better outcomes for designing the future state of the workforce and the talent needed to energize business results.
3 Principles for Effective Organizational Design and Talent Planning
Organizational design and talent planning can be daunting. Putting the work into three top priorities can help.
1. Establish a Governance Framework
Having clear business roles and responsibilities for addressing various areas of organizational design and talent planning will promote clarity and help prevent duplication and mixed messaging. Determine who will be responsible for the overall process or workstream, what tools will be used to manage data, who will make decisions and how employee communication will unfold throughout the process.
2. Create a Planning Framework and Infrastructure
It is important to think through the end-to-end process and ask the following questions to develop a framework:
- Are activities and deliverables planned and sequenced in a way that is realistic and likely to lead to success? For example, the entire process of interviewing and selecting candidates may take longer than expected.
- How will those involved get the information needed to make decisions?
- When does the work need to be completed? This may vary for multiple reasons. For instance, how long it takes to integrate systems or the fact that the combining companies share customers.
- How will changes be communicated to not only impacted employees, but also the workforce as a whole?
- What systems or processes will help facilitate and accelerate work? Leaders need current data on employees, but it is difficult to synthesize HR data with organizational and talent planning data.
3. Understand the Strategic Goals of the Deal and Relate that to Planning
The strategic imperatives driving a transaction will significantly influence the prioritization and planning approach needed. For example, combinations that necessitate higher levels of business integration will have a greater demand on planning resources.
How Business Goals Influence the Planning Process
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How Similar are the Combining Businesses?
If a deal combines two competitors in similar geographies, the impact on employees in certain roles — like finance — may be more significant. Potential results include shifts in responsibility or layoffs due to overlaps of capability.
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Improved Market Access
If the goal of the transaction is to obtain a bigger customer base by gaining access to customers or new markets, then key focus areas will be in onboarding the combined sales force and exploiting additional distribution channels and market opportunities.
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Future Intent on Divestments
If there is a chance that parts of merging businesses might later be divested, less integration is likely advisable to mitigate the impact of separating later. Consider the possibility of deploying employees with certain skillsets to other strategic initiatives. For example, application development teams can be used to help drive digital transformation initiatives in another part of the business.
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Acquiring Technologies, IT Specialists or IP
In these situations, the acquiring organization will pay special attention to retaining key roles involved in the technology or intellectual property. In addition, corporate cultural challenges might surface, especially if a larger organization is acquiring a smaller entrepreneurial company.
62%
of companies consider culture, employee value proposition and DE&I key to a successful talent strategy
Source: Aon’s 8th Global HR Pulse Survey, January 2022
Putting the Principles into Practice
With the three key principles in mind, it’s time to begin the actual work. Here are some practical tips for advancing this part of the planning process to close a successful transaction.
General Integration Approach. It is not always possible from a time and cost perspective to begin with a blank slate when designing organizations. Companies will often adopt a “best-of-both” approach and use the top methods of each legacy organization. In addition, the acquiring corporation might operate in a very specialized structure (e.g., highly matrixed) that needs to be maintained to operate a complex, global business. In this case, the acquired entity might need to be blended into the existing matrixed structure and guidance would be given around how integration should work.
Fair Treatment of Employees. It’s human nature to select talent that you know versus looking across legacy organizations to find the best candidate for each role. However, insisting on a fair selection process is imperative. It will uphold a commitment to diversity, equity and inclusion, reduce risk of unconscious or conscious bias and increase the likelihood of retaining key talent that might not otherwise wait for the process to complete. Not addressing this topic properly will negatively impact employee engagement, leading to other productivity and performance issues down the road. In a worst-case scenario, high performers from the acquired company might leave if they see limited opportunities going forward.
Design for the Need — Not the Person. It is tempting to develop an organizational structure based on a leader’s strengths, capabilities and weaknesses. Design a structure that is agnostic of who will fill the role. Companies should assess the skills and leadership qualities they need to run the new organization. Without assessing this for both entities in the case of M&A, companies might miss out on the talent they need.
Talent Pools. Companies often provide guidance on who can be included in a talent pool. This might relate to the inclusion of external candidates, what happens if an employee is not selected for their existing role or level, as well as other selection scenarios where comparative decision making is not required (e.g., one incumbent/one role or outright position elimination).
Case Study: Supporting a Fortune 500 Client With a $40 Billion Acquisition
We recently worked with a Fortune 500 client to manage the full end-to-end organizational design and talent planning process of a $40 billion acquisition. Using Aon’s tool TransAction ManagerTM, along with data from numerous HR information systems, we were able to take the following actions:
- Workforce planning to quantify headcount synergy plans
- Use of analytics to support spans and layers optimization
- Organizational mapping and staffing analysis
- Talent selection, including managing over 1,500 employee pools for comparative decision-making
- Rewards harmonization preview and cost estimate
- Creation of offer letters and reduction in force (RIF) support
These tools and data analysis ensured a smooth and efficient completion of the transaction process, helping our primary day-to-day contact to win the Chairman’s Award for the project’s positive impact on business results. Seeing the benefits, the client asked us back for several additional projects including two other major acquisitions and a restructuring.
Making Progress During Regulatory Approval Period
Organizations tend to defer major HR decisions, such as talent planning, until the final closing of the transaction. But doing so wastes precious time. In many larger transactions, there is often a protracted period between announcement and final regulatory approval. During this timeframe, it is advisable to accelerate integration planning so that once regulatory approval is received, the business is positioned to quickly close and begin the process of integration. It is also important that the top leadership structure is put into place and employees understand the new structure.
In deals that receive a high degree of regulatory scrutiny, so-called “clean rooms” or “clean teams” may be necessary. These are separate entities, consisting of (external) advisors and/or representatives from both companies involved in the transaction. Using an external partner is a good strategy for embarking on the planning progress while avoiding the sharing of sensitive information too early in the process. Doing the analyses and preparing the integration planning during the sign-to-close period may speed up the process by months.
Focusing on these key areas for organizational design and talent planning, coupled with solutions like Aon TransAction ManagerTM, allows companies to effectively navigate the complexities of M&A. Ultimately, they will emerge as stronger, more competitive entities, significantly accelerating value creation for the deal.
400M
employee records processed with Aon TransAction ManagerTM
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Climate change adaptation and the transition to net zero present huge premium growth opportunities for insurers. The key question is how to get started.
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Article 7 mins
How to Navigate the EMEA Cyber Risk Insurance Market
As the cyber insurance landscape continues to evolve in EMEA, companies need actionable insights and solutions to strengthen their cyber risk strategies.
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Article 9 mins
Insurers Seek Risk Transfer Solutions to Offset Higher Retentions and Resume Growth
The challenges of 2023 eroded the buffers that many insurers had previously enjoyed, bringing an increased focus on capital management and a variety of capital sources according to Aon’s capital poll.
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Report 18 mins
Evolving Technologies Are Driving Firms to Harness Opportunities and Defend Against Threats
While advancements in AI, cyber and data technology are helping companies operating in an increasingly digital world gain a significant competitive edge, they also introduce new and evolving risks.
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Article 6 mins
How to Make the Most of Voluntary Benefit Plans in the U.S.
As healthcare costs rise, voluntary benefits are a critical component of engaging employees, while also helping to manage direct and indirect medical expenses. Here are three strategies for employers to make the most of their voluntary benefits.
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Article 8 mins
NIS2 Compliance Readiness for Organizations across the European Union
The expansive scope, stringent sanctions and pivotal role of management related to the new NIS2 Directive provide a strong foundation to protect against evolving cyber risks.
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Article 8 mins
London Insurance Market: Unveiling Demands for New Skills in 2024
The London insurance market seeks a generation of game-changers who can navigate uncertainties and drive innovation to ensure the industry’s future success in a digitalised world.
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Article 3 mins
Better Decisions in Trade, Technology, Weather and Workforce
From global supply chain risks to climate insecurity, organizations face challenges and complexities on a scale rarely seen before.
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Article 15 mins
How Artificial Intelligence is Transforming Human Resources and the Workforce
Artificial intelligence is having a measurable impact across all aspects of HR — from talent management to compensation, health and benefits, and retirement planning. To effectively harness the technology, HR leaders must ensure both their own teams and the wider workforce are prepared.
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Article 3 mins
Risk Capital and Human Capital Perspectives
Risk Capital CEO Andy Marcell and Human Capital CEO Lambros Lambrou discuss how innovations in Risk Capital and Human Capital can help organizations boost resilience and navigate volatility.
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Report 15 mins
Wide-Ranging Trade Issues Confront Global Businesses on Multiple Fronts
Global business leaders highlight risks linked to trade as some of their top concerns — both physical and financial. While the topic is complex and broad, there are opportunities that business leaders can pursue to stay ahead of emerging trade dynamics.
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Report 16 mins
Climate Analytics Unlock Capital to Protect People and Property
Extreme weather and a changing climate are impacting many of the risks businesses face today. To address future exposures, organizations will need advanced climate and natural catastrophe models and expertise that can assess chronic and acute risks.
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Report 14 mins
A Workforce in Transition Prepares to Meet a Host of Challenges
Engaging a changing workforce requires data and innovation. Workers increasingly expect more than just a paycheck. In response, organizations are balancing costs with the ability to provide a compelling employee experience.
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Case Study 3 mins
How Aon Helped M&G Wealth Develop New Advisor Skills
Aon partnered with UK financial advice firm M&G Wealth to help the firm better understand the make-up of a highly successful advisor of the future, including the skills needed given shifts in societal needs, technology and regulation.
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Article 8 mins
Energy Transition Investments: How Advanced Analytics Can Empower Organizations
Advanced analytics can empower organizations with deeper insights into the risks and opportunities surrounding renewables, while also supporting energy transition investment.
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Article 17 mins
Q1 2024: Global Insurance Market Overview
Positive performance in 2023 fueled insurer growth ambitions but underwriting remained disciplined in the first quarter of 2024.
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Article 12 mins
How Life Sciences Build Robust Talent Pipelines in the Age of Digitalization
While digitalization is delivering transformational change to R&D across the sector, it is also rapidly reshaping recruitment and retention strategies.
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Alert 6 mins
U.S. Federal Trade Commission Bans Employee Noncompete Agreements; Here’s What Employers Should Know
The FTC has announced a rule that bans noncompetes and clauses that have a similar effect. While the rule will face legal challenges, employers should take steps now to prepare for an environment where they cannot use noncompete agreements.
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Article 7 mins
Managing Construction Risks: 7 Risk Advisory Steps
Risk advisory services can help construction stakeholders navigate uncertainties, optimize performance and drive growth in their projects.
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Article 9 mins
Floating Offshore Wind Unlocks New Opportunities and Challenges
While there are similarities in the risk profile of floating offshore wind and bottom-fixed offshore wind, challenges like unproven technology and tow-to-port strategies for maintenance require a collaborative approach between owners/developers and their insurance partners.
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Article 4 mins
Parametrics Unlock Solutions For Future Risks
Macrotrends are transforming our world and creating emerging property-casualty exposures, which will have profound implications for the insurance industry.
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Article 7 mins
U.S. Cyber Insurance: Market Trends and Opportunities
Understanding market trends and future projections in an evolving cyber insurance market is paramount to strengthening risk mitigation and transfer strategies.
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Article 5 mins
How Climate Modeling Can Mitigate Risks and Improve Resilience in the Construction Industry
In an era of escalating climate-related challenges, the construction industry is turning to advanced climate modeling to fortify its risk management strategies.
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Article 14 mins
How Technology Will Transform Employee Benefits in the Next Five Years
Advances in technology will not only transform healthcare and treatment outcomes — benefit offerings, access to care, diagnosis, treatment and affordability challenges will also be radically changed. Here is what to expect as these efforts take shape globally.
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Article 10 mins
Key Trends in U.S. Benefits for 2024 and Beyond
As healthcare costs continue to rise, employers are struggling to balance cost control with attracting and retaining talent. The results of Aon's 2024 U.S. Health Survey point to key strategies organizations are using to help.
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Article 11 mins
Capturing Carbon on the Critical Pathway to Net Zero
As the world races to reduce climate risks and limit CO<sub>2</sub> emissions, the demand for scalable and cost-effective decarbonization technologies is increasing. Carbon capture projects form an important part of the low carbon energy transition, bringing both challenges and opportunities.
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Article 7 mins
Protecting North American Contractors from Extreme Heat Risks with Parametric
Growing extreme heat conditions have escalated risks, delays and costs for the construction industry in North America. Parametric insurance can help protect against such risks, offering contractors and building owners agility, efficiency and flexibility.
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Article 9 mins
How Insurance Can Help Hedge Potential Exposures Under the New Unified Patent Court System
The launch of the Unified Patent Court allows for a new patent filing process across Europe using a centralized system. While this brings significant financial and operational benefits, navigating these changes will demand a robust litigation risk management strategy.
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Article 8 mins
Parametric Can Help Mitigate Extreme Heat Risks for Contractors in EMEA
Construction projects in EMEA are often impacted by extreme heat, leading to project delays and increased costs. Many heat exposures are excluded by traditional markets, however, parametric is a flexible solution that can help mitigate these risks.
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Article 12 mins
Understanding and Preparing for the Rise in Pay Transparency
New regulations in the U.S. and Europe will require companies to be more transparent about their pay practices. Combined with willingness among workers to talk about salary, the era of pay transparency is here.
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Article 11 mins
Advancing Women’s Health and Equity Through Benefits and Support
As companies tailor their health and benefits to meet the needs of their employees, vital areas for support include family building and menopause.
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Article 7 mins
Unlocking Capacity and Capital in a Challenging Construction Risk Market
Complex market dynamics in the construction industry are pushing organizations to proactively explore alternative risk transfer solutions, including parametric insurance and captives.
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Article 11 mins
Securing Human Capital in Natural Resources
As new job roles and technologies emerge in the natural resources industry, employee expectations are also shifting. Leaders must rise to the challenge of securing talent to meet the world’s future energy needs.
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Article 5 mins
Navigating Cybersecurity Risk Under New U.S. Rules
Rulemaking from the Securities and Exchange Commission (SEC) highlights the importance of company transparency with investors and regulators around risk management and the impact of cyber events.
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Article 13 mins
Building Growth From Uncertainty in Financial Institutions
Five ways financial institutions can balance investment with prudence in an uncertain economic climate.
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Article 12 mins
Q4 2023: Global Insurance Market Overview
An increasingly interconnected and complex risk landscape continues to shape risk strategies and market responses.
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Article 13 mins
Top Risk Trends to Watch in 2024
To be successful, business leaders must keep pace with the key trends that will impact the risk and insurance landscape in 2024.
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Article 9 mins
How to Navigate Contractor Shortages in the Energy and Power Industries
Taking a new approach to talent management and planning for worker shortages can help businesses in the energy and power industries build greater operational resilience.
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Article 8 mins
Driving Inclusion and Diversity with Employee Benefits
As organizations build diversity, equity, inclusion and belonging in the workplace, they must also ensure benefit plans are designed and customized to meet the needs of a diverse workforce.
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Article 11 mins
How Investors are Making Better Decisions Amid a Changing Climate
For investors, climate change means navigating uncertainties and understanding a wide range of potential outcomes.
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Article 8 mins
Understanding Freeze Risk in a Changing Climate
Extreme cold and freeze were responsible for $15 billion worth of structural damage in recent years, as well as business interruption and supply chain impacts. We explore the threat chronic hazards pose and consider the influence of climate change on business.
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Article 7 mins
4 Steps to Help Take Advantage of a Buyer-Friendly Directors' & Officers' Market
The global D&O market remains soft, creating a favorable environment for buyers. With abundant capacity and increased competition, capitalizing on conditions now is critical as rates are showing signs of moderating.
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Article 17 mins
Five Big Human Resources Trends to Watch in 2024