Mergers, acquisitions and restructures: Why they can fail

Coping with the merger or acquisition can also cause senior managers to spread themselves too thinly meaning that cracks begin to appear. As a result, issues, such as integrating the teams, can appear trivial when compared to the excitement of the big deal and the opportunities ahead.

Over the last 12 months I have worked with senior teams from a wide range of organisations post merger, acquisition or restructure. What I have found is that there are a number of key ‘team issues’ that inhibit performance and hold teams back.

In his book, “Your Brain at Work”, David Rock describes what the latest in neuroscience research is telling us about how our brains work, our motivation and ability to perform at optimum levels. He identified five domains of social experience that our brains treat in exactly the same way as survival issues. That is to say that in response to these five factors we receive either a strong reward response or an equally strong threat response. The five domains are status, certainty, autonomy, relatedness and fairness. Some of these “SCARF” elements have a more significant impact on the ability of teams to work together following a merger, acquisition or restructure than others.

Status

Those in the ‘acquired’ team are likely to feel the biggest status threat. Status going up, even in a small way, activates your reward circuits. With this in mind, consider the status threat to the CEO, General Manager or Senior Management Team of the acquired group. In their original company or team they will have had a strong sense of status due to their positions at the top of the organisational structure. 

Post acquisition they are likely to have new bosses or find themselves sitting a layer or two further down the organisational chart in the new business. Add into the mix thoughts about how their teams perceive them now that they are not the ultimate boss and you have a potentially debilitating cocktail of status threats. The net results of this is clouded judgment and a brain that cannot operate at full capacity.

Relatedness

As human beings we are fundamentally social animals with a hard wired need for connection, a need to be able to relate to others. However, our pre-historic survival instinct, from a world where we lived in small groups with scant resources, has left us with a default tendency to not trust strangers. Until we get to know them, connect with them and identify shared traits, we will view them as a foe.

Now consider the environment post merger or acquisition. There is a pressing need to collaborate with others outside of your team, function and parent business. On top of this is the pressure to collaborate quickly in order to make savings and deliver on all of the potential synergies identified pre-merger. This presents a real challenge and doing this quickly goes against our very biological make up. We naturally tend to form safe groups or ‘tribes’ with those we know and trust, and avoid those that we don’t trust. Being forced to collaborate and work closely with new people will trigger our primary threat response. What’s the result? A brain that cannot function at full capacity.

There is another important reason why relatedness is so important. At the heart of every great teams success is a deep level of trust between its members. Members of great teams trust one another on a fundamental and emotional level. They are comfortable sharing their weaknesses, fears, concerns, mistakes and shortcomings. In doing so they reach a point where they can be totally open and honest with each other.

This deep level of trust is essential because without it teams are not able to engage in constructive conflict around issues that are of critical importance to the organisations success. Things go unsaid and decisions are made whilst vital pieces of information are withheld – due to a lack of trust. So, without connection there can be no trust. And without trust team members are not able to challenge and question each other in the spirit of finding the best solutions.

Certainty

As with status and relatedness, certainty provides a primary threat or reward to the brain. As new teams are thrown together or forced to collaborate immediately after a merger, acquisition or restructure there are two things conspiring against them and hampering their performance. Firstly, they are still recovering from and attempting to make sense of the change. This change will have generated a huge amount of uncertainty and a strong threat response in many team members, if not all. Secondly, team members are also likely to be feeling uncertain about the future and what further changes may still be to come. It is not uncommon for team members to be thinking things like:

• “Will there be further restructures in the months ahead?”
• “Will they decide that someone else is doing the same job and get rid of me?”
• “Will my new boss/company be happy with the work that I/we do?” and
• “If we don’t achieve the goals quickly enough will they start cutting headcount?”

Again, the net result of all of this is a brain that operates below its full capacity.

Whilst culture and team dynamics are not the only factor that affects the successful outcome of any merger, acquisition or restructure, they are critically important. If they are allowed to de-prioritize into the trivial, easily fixed or ‘do later’ category then the chances are you will not achieve the results you want, or at best, you’ll not achieve them anywhere near as quickly as possible. 

Ben Morton is an international team development consultant and coach whose clients range from small and solo business owners to FTSE 100 companies and international brands.

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