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Why M&As go wrong

If two management executives — the CHRO and the head of the business — are colliding, the matter must be escalated to the CEO
Culture-informed M&As stand the test of volatile global markets. Having a strong organizational culture counts. Shutterstock


By Suanne Nielsen

In 2017, Ford bought Argo AI, Hewlitt Packard bought Nimble Storage, Google bought HTC’s pixel smart phones, Cisco bought Broadsoft and App Dynamics, Verizon bought Yahoo, Intel bought Mobileye. Disney bought Fox and could own Sky soon too.

Most recently, Canadian tech company Appnovation, headed by a millennial CEO, acquired two established European tech companies to expand the company’s global footprint.

Speaking of a year-in-review, this was one of the most memorable ones for mergers and acquisitions (M&As).

Digital disruptions in the marketplace have been key enablers for these acquisitions, in addition to the content war between the online and physical space. And 2018’s business climate looks “robust” for many more, according to economic pundits.

Acquisitions happen for many reasons, most often because a business is trying to scale up in its market or enter a new market. Increasingly, it’s also because business is trying to buy talent or technology. It could also be because a business is trying to buy a competitive process or make an investment in an innovation.

What needs to be remembered is that for each reason why, there’s one critical challenge that all M&As face – achieving a seamless employee experience.

At Foresters, we’ve done them all.

In 2008, we acquired a life insurance company in Canada and have since fully integrated it into our organization. The acquisition gave us more scale and distribution capacity in the Canadian marketplace where we are very small. We were able to also generate expense synergies out of this deal.

This merger was very different from the acquisition we made in 2011, when we bought an asset management company in the United States. The U.S is Foresters’ biggest geographic market, and the deal doubled our U.S. footprint. There, we were primarily a life insurance business, but by acquiring an asset management business, we diversified our product offering and gained access to wider distribution. This M&A was done for strategic reasons.

But in both cases, particularly, when you’re buying something that you don’t intend to drive expenses out of (such as a scale operation), or you’re investing in getting into a different market (such as an expansion), one of the biggest issues to tackle is culture. In my experience, successful acquisitions are those where business leaders have a clear strategy to deliver one employee experience across all major entities after the acquisition.

In 2013, Foresters Financial made another major acquisition in the United Kingdom.  

In other words, within an abbreviated period of time, we made three big acquisitions — one in each of our markets.

What became evident very quickly was that we could no longer operate separately running businesses with diverse cultures, different policies, different employment practices, and different work place environments, without driving a common employee experience.

When I was relocating people from Toronto to New York, I had to consider that the workplace experience in Toronto is entirely different from the other organizations in New York. You can’t operate with employees in three different countries and have three different human capital management systems. For business leaders to have a global view of all the varied talent becomes problematic in global M&As.

Geography is another key factor that determines how long it takes for M&As to complete.

In 2017, we decided to create a shared services model so that corporate areas such as HR would report through to the corporate centre in Toronto for all our entities. Prior to this, I’d go into battle with our business head in the U.S. to install one severance policy for everyone across the organization.

We had life insurance employees in the U.S. with different severance policies from our U.S. asset management employees. I was confronted with a president of business who’s running an asset management company in the U.S. and saying that he didn’t need a strategic HR function before, so why did he need it now? For him, this step would add to his business costs, and therefore was unnecessary. What he didn’t realize was that he had his functional business hat on, instead of an enterprise hat.

It’s important for leaders, during acquisitions, to recognize that they now have an enterprise to run. It’s vital, therefore, to adopt consistent policies across the board that befit an enterprise operation.

The tone of alignment comes from the top. The CEO sets the tone of wanting to align the organizational culture. We accomplished this challenge by getting our entire group together and agreeing on a leadership team that included business heads from each of our strategic business units (SBUs), myself, and the CEO.

As a collective, we identified our mode of operation going forward. Before this session, the SBUs held on to the belief that what got them there would sustain them going forward. So, we made a conscious intervention in the process because we strongly believed in “What got you here, won’t get you there” — an idea proliferated by Marshall Goldsmith.

Successful M&As have CEOs who set the mandate of one seamless culture and employee experience, so talent can be moved across the enterprise effortlessly.

A CEO who isn’t interested in integrating and adapting one culture is a short-sighted one. It serves for a time. It won’t cause failure, but it will derail a long-term talent strategy. Additionally, and after an acquisition, leaders tend to forget why they bought an organization in the first place. They might have bought the organization to change their existing culture and adopt a more entrepreneurial one. It’s important to follow through with the initial commitment.

This is when accountability and decision-making come into the equation. Who’s really making the decisions? In cases where you have two management executives — the CHRO and the head of the business — who are colliding, the matter must be escalated to the CEO. Without such escalation processes, attaining synergies in cost and culture will become onerous very quickly.

Culture-informed M&As stand the test of volatile global markets. Having a strong organizational culture counts. I’ve written about it here.

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Suanne Nielsen

Suanne Nielsen is president of the Strategic Capability Network and global chief administration officer at Foresters Financial in Toronto. The views and opinions expressed in this article are those of Suanne and do not necessarily reflect the official position(s) or opinion(s) of SCNetwork members or Foresters. For more information about the SCNetwork, visit www.scnetwork.ca.
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