Mergers & Acquisitions have been on the rise in recent years, with big players across industries teaming up to get a larger share of the market. The surge is partly due to industry growth and a subsequent increase in entrepreneurial opportunities. Start-ups and smaller firms are entering the market and challenging industry incumbents and legacy brands. Larger companies often hit a wall when it comes to innovation, making acquisition their only option to grow. M&As were trending upward in 2020 and hit a record high in 2021, with a total global value of $5.7 trillion. While these numbers dipped in 2022, following a rise in interest rates and the looming risk of a recession, many companies still managed to join forces by reaching strategic agreements that circumvented market volatility and minimized transaction costs.
While an M&A might be unequivocally good for a company’s future and bottom line, it can mean all kinds of uncertainty for employees. M&As often come with layoffs and organizational restructuring, creating new teams and different chains of command. Beyond changing who you work with and, potentially, what you do, a merger can also bring a dramatic shift in company culture. Without a clear plan for moving forward, employees can be left with very basic questions about the norms, trends and expected behavior at their new workplace. This ambiguity about their new company, and the role they play within it, can have a negative impact on employee productivity and satisfaction, while decreasing the company’s overall profitability. If an M&A fails it can be catastrophic for the acquiring company, resulting in mass layoffs, a hit to the brand’s reputation, a decrease in brand loyalty and even bankruptcy.
Company merger or culture clash?
ExperiencePoint recently worked with a large telecommunications and media company that had acquired a small but growing internet reseller. The deal brought critical and exciting new digital capabilities to the organization, in the form of both talent and systems. It also gave the company a catchy flanker brand with which they could target next-generation and/or price-conscious customers, both within and outside their existing footprint.
But the acquisition joined two organizations with very different cultures, and the purchaser was concerned that their new colleagues wouldn’t take to their way of doing business. The acquired company was young, small and progressive; they defined themselves by a desire to challenge traditional network providers and operated with the access and flexibility that’s typical of start-ups. The purchaser wanted to find a way to support their new colleagues’ way of working, while ensuring they were hitting targeted sales and growth. Their biggest priority–and biggest challenge–was employee retention; the skills and knowledge the new employees brought were a big part of the value of the acquisition and the purchaser felt they had a lot to learn and adopt from their new teams.
ExperiencePoint took the sponsors involved in the acquisition through ExperienceChange™, our change management simulation. Together, we identified key stakeholders in the acquisition and uncovered driving and restraining forces, considering these forces from both a rational and emotional point of view. We helped the sponsors understand the challenges implicit with making their new colleagues feel satisfied and empowered and identified key actions for a culture shift.
From ambiguity to agency
ExperiencePoint has done extensive work over the past few years with a leading multinational technology company. When the company acquired a major computer storage enterprise, they used ExperiencePoint’s training and workshops to make the acquisition an unmitigated success that recognized more than $50 million of unanticipated value beyond projections.
Acquisitions typically bring an agonizing amount of ambiguity, as people across departments wait to understand their new teams and roles. To ease this period of uncertainty, the company used key tenets of design thinking to help both the purchaser and acquired company feel a degree of agency. The newly merged workforce began by delving into the first phase of this human-centered process: empathy. Employees conducted research to understand the breadth of offers, processes and perspectives available to them. By empathizing with the singularities of each other’s perspectives, needs and priorities, people from both companies developed a genuine understanding of their new colleagues’ concerns, pain points and capabilities.
Once this sensitivity was established, participants began working through techniques to increase collaboration and experimentation. They learned tools for increasing communication, such as diverging and converging through the ideation process, and were supported in the development of creativity-enhancing skills, such as analogous thinking and brainstorming. The result was that, rather than feel ambiguous about their position and responsibilities, employees felt they had agency to define their new culture and help establish the organization's long term goals. The process also extracted practical ideas for new operations, such as an improved procurement practice and an approach for processing returns that could be scaled across the merged organization.
Aligning on shared values and the customer
Sometimes, an opportunity for improvement is also an opportunity for aligning on culture and goals. ExperiencePoint recently worked with a leading American tax and accounting firm that had undergone significant growth after acquiring several smaller companies. The acquisition had created new teams with unacquainted people. The company hadn’t hosted an in-person event since before the pandemic and was eager to get people together to align on shared values for success. Leaders realized that their organizational goal of improving customer-centricity was also an opportunity for new teams to align on a common vision. They established three micro-goals that would help them realize the full value of their acquisitions. The first was to marshal the “best” of the company’s values and skills to address a range of client needs. The second was to create deeper and more enduring client relationships with multiple touchpoints. The final goal was to design new and innovative offerings that could provide differentiation in the market and set the company apart.
The company hosted a three-day 3000-person event that brought together a wide range of new employees and cross-functional teams. Leaders identified winning behaviors that would enable everyone to coalesce around shared goals. On the first day, teams were introduced to these goals and participated in various episodes of Spark by ExperiencePoint™, an interactive series that provides thought-provoking ways of learning and practicing the tools and techniques of human-centered design and change. On the second day, participants applied these newly acquired tools to their real client work. Specific objectives included deepening their understanding of customer needs, key industry drivers and the company’s existing offerings. Leaders also wanted teams to identify opportunities for new offerings and ways of working and to become better communicators of specific value the company delivers.
Participants were surprised to learn that their understanding of customer-centricity was miles away from real customer needs. By experiencing this discovery together, as a newly formed team, employees had a shared understanding of how to move forward with customer-centricity as their focal point. This blueprint became a guiding light for the merged company’s fledgling culture and values.
M&As are expected to be on the rise in 2023. The spotlight could be on the tech industry, as companies look to enhance their Artificial Intelligence, cybersecurity and cloud computing capabilities. Sustainability and environmental issues will also be on everyone’s radar. With companies trying to reduce their carbon footprints and embrace eco-friendly practices, we’ll likely see M&As driven by the desire to acquire sustainable technologies and expertise. Regardless of the rationale behind the deal, no M&A will be successful without a clear plan for aligning everyone on culture, values and the customer. By empowering people with the tools of empathy, collaboration and experimentation, design thinking is uniquely poised to get everyone on the same page, ready to face the future as a team.
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