Why do mergers and acquisitions fail?

My name is Emma McHugh, and I’m the Director of Service Delivery at Gloat. Throughout my career in project management, operations, and HR leadership, I’ve been through mergers and acquisitions at almost every company I’ve worked at. Without a doubt, the times I’ve spent navigating M&As have been some of the most challenging experiences of my career.

And I’m not alone in this.

According to Harvard Business Review, 70-90% of M&A efforts fail to accomplish the strategic business objectives they set out to. When post-deal integration efforts center around the intersection of employee experience and business goals, mergers and acquisitions can open up doors of opportunity. Unfortunately, they rarely do. I’ve watched many businesses lay off talented employees due to a lack of insight into workforce skills, causing their colleagues to resign voluntarily as morale plummets. While the first all-hands meeting when a deal is announced is often met with enthusiasm, this excitement quickly dissipates as uncertainty sets in. Soon, everyone starts asking themselves, “What does this change mean for me?”

4 common M&A pitfalls HR leaders must avoid

#1. Lack of engagement fosters distrust

For most employees, the primary concern during M&As is job security. Will you still have a job by the time the merger is completed? Will your skills be relevant to this new organization? How will you make these capabilities known to a new network of colleagues?

It’s up to HR leaders to put these fears to rest before they snowball into high churn rates. Addressing these doubts requires a consistent and comprehensive communications strategy, with carefully crafted email campaigns, town halls, and committee updates. Without detailed communications on what changes mean for individuals, the additional workload and lack of clarity will push people to look for opportunities outside of your company.

#2. An incomplete skills inventory

One of the biggest challenges leaders face during mergers and acquisitions is that most don’t have a single source of truth for workforce skills. Executives need a full picture of the capabilities their newly-formed workforce has so they can make smart hiring decisions, craft strategic upskilling and reskilling initiatives, and ensure their people are empowered to achieve their full potential.

A comprehensive skills inventory can also minimize or even eliminate the need for lay-offs. Rather than immediately reducing headcount, leaders can use their skills inventory to identify employees who have the knowledge and capabilities needed to transition to new roles within the business. Existing employees have invaluable organizational knowledge, so it’s often a smarter move to reallocate internal talent, especially given the devastating toll that lay-offs take on workplace morale.

#3. Culture shocks spur subpar engagement rates

Instead of just focusing on operational challenges, HR leaders must be mindful of the cultural changes that come with mergers and acquisitions as well. Defining new cultural norms and communicating them may be less technical, but it’s even harder to pull off than combining operational systems. It entails helping employees navigate changes to the ways they’ve been working for months or years.

To make transitions more seamless, select a committee with members from both organizations to create a new culture code that represents the ethos of each company. Host feedback sessions and community-building activities so that everyone can play a role in shaping the culture of your new organization.

#4. Organizational quicksand

The ultimate goal of every M&A initiative is to transform the business while maintaining employee investment in the desired objectives. Without comprehensive skills inventories and systems to deploy those skills towards business goals, engagement and morale are likely to wane. This leads to burnout and frustration, which in turn takes a toll on everything from output levels to customer experience to innovation.

Given these challenges, it should come as no surprise that up to 9 out of 10 M&A efforts fail. Yet, it’s possible to set your organization up for success post-deal. It requires a strategic approach that looks beyond targeting symptoms like employee engagement, communication, and operational efficiencies, and instead gets to the root of the challenges that mergers and acquisitions cause.

A better approach to mergers and acquisitions

All too often, individuals might feel like they don’t have a voice in the M&A process. Employees might not be aware of the changes coming their way and they’re likely to be unsure about what the deal means for their future.

Rather than letting uncertainty build, businesses are increasingly harnessing workforce agility platforms to empower people to play an active role in their career development. The technology’s talent marketplace aligns employees to projects, gigs, and full-time roles based on their skills and ambitions, in turn providing full visibility into all of the opportunities within the business.

At the same time, leaders can leverage the platform’s Workforce Intelligence to gain insight into the talent needs they must prioritize, and predict and address future skills gaps. Equipped with these insights, HR teams can make strategic talent management decisions that minimize the need for lay-offs while maximizing employee potential.