As M&A activity continues to increase within the industry, it’s vital to look beyond the numbers and focus on the people and process aspects of integration to help ensure success. While tangible, positive financial outcomes and economies of scale may be driving factors behind two similarly sized organizations joining forces, intangibles can easily delay or even derail such benefits. For example, members may decide to vote in favor of a merger so their credit union can offer bigger and better things including more career growth opportunities for existing employees. However, managing big changes, including team members’ perceptions, emotions and expectations, is key to ensuring these friendly faces stay put and members remain happy.
If the people-side of the equation is not given adequate time and attention, fatigue, and worse yet – attrition, may begin to impact member service and the key back-office integration work that is necessary to achieve the efficiency gains that drove the merger forward.
Here are just a few do’s and don’ts to help avoid common mistakes:
Don’t let your North Star degrade. The guiding principle of a North Star is to set the aspiration and inspiration of the merger integration work. Defining your North Star is not performative. That is a statement worth repeating. Therefore, it is the duty of your leadership to reinforce and reiterate the value of the North Star across all levels of the organization, consistently. For example, we bake into member newsletters, employee portals, and even bathroom signage that we are working to be a unified credit union, and every day is our North Star to be better together.
Don’t send mixed messages. Both of the soon-to-be combined organizations should begin singing the same tune well before Legal Day 1. Ensure CEOs, boards and other leaders are on the same page in terms of the culture they plan to create and the key messages needed. Clear, consistent and empathetic communication that begins early in the process can prevent chaos down the road by reducing uncertainty and building trust.
Don’t take your foot off the accelerator. Once all approvals are received (including a signed definitive merger agreement, regulatory approval and a positive membership vote), some leaders may feel they can take a breather or take their foot off the gas pedal. However, this is the time to accelerate communications internally to gain traction. Employees on both sides need to clearly understand the new organization’s guiding operating principles along with the specific changes ahead, why such changes are happening and how their day-to-day work will be impacted.
Don’t make promises. Instead of making promises the combined organization may not be able to keep down the road, focus on your goals and commitments. For example, “We want to retain talent – that’s the goal.” Simply wording in this way can help avoid hiccups in the future if natural attrition happens or market factors change and branch locations need to be re-evaluated. Even when things happen that are not directly connected to the merger, they may still be perceived that way for some time.
Do plan launch events. There will likely be several events, including an integration team launch event, which brings together all the key participants (typically heads of certain departments) for a full day. This is an opportunity to officially kick-off the post-merger integration management work, define the operating model and set expectations for the upcoming months. In addition, boards will likely meet during due diligence and marketing/communications teams may meet pre-announcement.
Do celebrate quick wins. Launch events are a great first step, but it’s important to continue celebrating, communicating and inspiring the team throughout your post-merger integration journey, which may last 18-24 months. As major milestones are achieved or major decisions are made, integration management teams have an opportunity to recalibrate and celebrate their successes. It will reinforce your North Star – the unified purpose, values and cultural identity that’s been crafted for the new organization – and help retain focus moving forward. Additionally, the celebrations mitigate integration fatigue, which is real and debilitating if not seen.
Do choose the change management approach that aligns with your North Star. There are different approaches to cultural integration, but the one you select should align with the unified purpose, values and cultural identity of the newly combined organization.
For example, Lightweight (traditional integration) requires simple alignment on key behaviors and processes. In this approach, communications focus on clarity, brevity and reducing noise. Incubation, or deferring integration for select areas, requires communications that focus on transparency about timing, expectations and evaluation criteria. While Best-of-Breed, or co-creating future culture, requires communication to focus on involvement, listening, feedback loops, and working groups that emphasize shared ownership and joint identity formation.
Remember to look beyond the numbers and focus on the people and process aspects of integration to ensure success. If the people-side of the equation is not given adequate time and attention, achieving the efficiency gains and other potential benefits that drove the merger forward may prove elusive.
Regardless of the approach you choose, strategic, transparent communication is the glue that holds any integration together. With consistent messaging and empathetic leadership, cultural assimilation becomes achievable and sustainable.
John Morada is Managing Director, M&A Advisory for ALM First in Dallas, Texas.
Jessica Richardson-Isenegger is Managing Director, Strategic Solutions Group for ALM First.
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