Applying Talent Mapping and Business Intelligence in the Acquisition Process

Although acquisitions are generally accepted as having enormous potential for growth that would not have otherwise been achieved through gradual organic development, their rate of success is low and they are a risky and expensive method of growing a business. With high staff attrition rates, differences in decision-making and difficulty integrating disparate cultures, it is no surprise that studies have shown that nearly 66% of companies lose market share in the first quarter after a merger. By the third quarter post-merger, the figure rises to 90%.

Companies considering entering into an acquisition must not underestimate the value of addressing the challenges that occur within the human side of transactions. This includes the post-acquisition gaps in headcount, skills or knowledge; the unforeseen requirements that may appear due to business growth or change in corporate strategy; the shifting level of engagement or loyalty of the acquired company’s staff; the eventual loss, or attrition, of certain critical individuals within the organisation. The assessment and management of these risks are often deferred or ignored by deal makers either because they are unsure of how best to approach the process or are simply unaware that such pre-emptive action can be taken in the first place.

In this article, we look into the human capital challenges that appear during M&A transactions that could prove debilitating to the strength of the merged organisation.

M&A Challenges: Examples

• Bank One and First Chicago NBD Corporation – This aimed to create the 8th largest bank in the U.S. Three years after the deal, none of the top 16 executives chosen to run the company remained in their jobs.

Attrition, especially long-term attrition, has been shown to be a prevailing result of mergers in which a disproportionate number of executives leave years after the merger deals have been closed.

Employers need to plan for the eventuality that attrition will take place by setting in place a working talent pipeline and succession plan for critical employees that can tap into passive pools of talent before the loss of talent occurs.

• Daimler-Benz and Chrysler - This seemed to be an ideal opportunity to bring together the strengths of the two organizations. The reality fell short, resulting in the fall of the company’s share price, a class action investor lawsuit and the resignation of the merger’s architect and the then-CEO.

There was an inherent cultural difference between the two companies. Some employees saw the new relationship as temporary and showed little commitment to the merged company. Employees were dissatisfied and felt a lack of vision amongst the leadership to merge the existing cultural differences and to encourage mutual cooperation. Leadership had failed to communicate a sense of vision and direction throughout the organisation.

Cultural differences are inescapable in the acquisition process but should not be treated as a bitter medicine to be swallowed and subsequently ignored. Gaps in perception between employees and those at the top are a leading cause of dissatisfaction and demotivation, affecting levels of productivity and employee engagement.

Leaders of the merged company need to be aware of their employees’ perception of the deal and devise methods to improve their organisational image, increase communication between the top and the rest of the organisation and create a viable employee value proposition (EVP) that would engage and motivate employees to transcend cultural differences and work together as one merged identity.

Human-related challenges are expected in any acquisition and these challenges have the risk of occurring during critical stages of the acquisition process. Deal-makers need to be prepared for these eventualities by having the business intelligence that would keep them informed on the human challenges in their organisation. Proper intelligence that is unbiased and impartial would uncover areas of dissatisfaction, assess employees’ level of engagement and shed light on employees’ perception of the deal and of management. This would provide the kind of transparency that can aid leaders in developing a viable EVP and a talent acquisition and development plan. It is the ability to foresee areas that are vulnerable to the changes brought about by the merger and to take measures to mitigate those risks that is a powerful tool to leaders and organisations and cannot be underestimated.

(Sources: Auto Observer, Harvard Business Review)

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