Organizational Design and Talent Planning is Key to M&A Success

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.

Three Principals 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.

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).

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 Manager^TM, 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.