How to successfully manage business mergers: Lessons from PwC

Between 70% to 90% of mergers and acquisitions will ultimately fail. Managing a business merger requires a delicate and experienced hand. Not only do you need to consider the direction and fundamentals of both organisations, but you also need to consider culture, strategy, and vision. Mergers tend to be particularly hard on staff members, both because it is a tumultuous time and because the future may feel uncertain — and this is where true leadership becomes essential.

Here’s how Rob Ashley, advisory principal with PricewaterhouseCoopers and a member of TEC, has been able to counter these challenges and achieve tremendous success.

Understand the importance of decision-making

A business, at its core, is really just a series of decisions. Not every decision must be perfect — what is important is that the decision is made. It’s estimated that the average adult makes approximately 35,000 decisions per day, and each of these decisions carry with them consequences and direction.

Business owners will be called upon to make a tremendous number of decisions throughout the business acquisitions process. These range from the dissolution of certain corporate assets to the retention of human resources. Each of these decisions impact the business itself, its employees, and its clientele. And with thousands upon thousands of decisions occurring, it’s important that a leader not get bogged down.

Rob Ashley was able to create a comprehensive planning process, which covered both an internal focus on the organisation and an external client engagement strategy. Through this planning process, Ashley was able to control all elements of the merger and facilitate decision-making processes. Though not every decision may have been perfect, they were made quickly and competently, running like a well-oiled machine.

Alignment of strategy

Why do mergers so frequently fail? If it was just about financial due diligence, one would expect most business mergers to be a success. But businesses are more than just what they appear to be on paper: they are a collection of strategies and goals. A business has its own direction and culture, and compatibility is very important. When polled, 33% to 50% of respondents cited cultural differences as the leading issue with a merger.

When businesses are aligned in terms of strategies, goals, and culture, they can readily work towards a singular destination. When businesses are not aligned, they begin to pull apart at the seams — and it is the human element that is lost. Companies need to be prepared to align their goals in terms of their values and their client base if they are to work together.

Recognising this, Rob Ashley placed a premium on communication and collaboration. He understood the need to engage staff members of both teams, alongside their client base, and to ensure that everyone involved was working together towards the same goals.

Maintain a consistency of service

Most mergers will lead to an increase in services. But though this may sound like a benefit, it can actually be detrimental. Ultimately, it will lead to the dilution of the company’s branding. In order to support a company culture and the comfort of both employees and clientele, it’s important to maintain consistency of service. That means that as services are added, they also need to be folded into the new company mission that both businesses now share.

In order to improve upon employee alignment, maintain happiness, and motivate employees, it is necessary to ensure that as much of the business as possible remain consistent. But it’s also important not to overestimate the value of synergies; 70% of business mergers overestimate the amount of revenue synergy they can expect.

Rob Ashley found that the increase in services was not only a benefit to the company’s clientele, but also the company’s own access to their now expanded talent pool. At the same time, conscientious work had to be done to ensure that the company’s offerings remained consistent with its mission statement and that the value of these benefits was not overestimated.

Enhance your personal life

As exciting as a merger may be, it is equally mentally and emotionally taxing. As a leader, it’s easy to become absorbed by your work and lose touch with the outside world. Though you may not feel it, those around you do; everything you do affects your end work product. Diet, sleep, and exercise can all have an adverse impact on your decision-making skills. You are the foundation of your brand — and because of this, you need to take care of yourself first.

Harvard Business Review explored why good leaders can sometimes make bad decisions. HBR found that bad judgments often occur due to red flag conditions, such as ‘the presence of inappropriate self-interest’, ‘the presence of distorting attachments’, and the ‘presence of misleading memories’. All of these are emotionally influenced conditions that can occur when mood is not properly managed.

As an experienced business professional, Rob Ashley realised that his personal health and mood could impact the way that he handled his merger. So Rob Ashley sought TEC. Since joining TEC, Rob Ashley was able to find a community of like-minded people that he could connect with.

Managing mergers successfully

Mergers and acquisitions involve a lot of moving parts. Decision-making, strategies, services, and even your personal health all need to be combined into a sum that is greater than each part. When anything is out of sync, things can fall apart — and they often do. But your business doesn’t have to be one of the 90% of businesses that fail through a merger; it can be one of the 10% that ascends to far greater heights. All you need to do is be able to properly manage those four key aspects of the transition.

Managing mergers is not a skill that you can develop overnight. It’s something that requires experience, expertise, and guidance. If you want to learn more about how businesses such as PricewaterhouseCoopers (and experts such as Rob Ashley) have been able to build their vision and grow, get in touch with TEC today.

 

 

The guide to organisation structures (flat vs hierarchical)

Is it time to redesign your organisational structure? Though many companies can benefit from a restructuring, fewer than a quarter of organisational redesigns actually succeed. But it doesn’t have to be this way. Organisations can undergo successful restructuring as long as they understand the differences between organisational structures (flat, hierarchical, matrix etc)— namely, their benefits and their drawbacks.

Why structure?

An organisation’s structure forms the very basis of its operations. Not only does it inform employees regarding who they answer to, but it also identifies core decision makers and defines the company culture. Without structure – even a loose structure – there can be no decision-making and no accountability.

However, the type of structure is often up for debate. Most businesses either operate on a flat structure or a hierarchical structure, depending on their needs.

Flat organisational structures

Flat organisational structures forego the concept of middle management entirely. Instead, staff members exist directly under executives, often working in teams rather than independently. Flat organisational structures may still include ‘team leaders,’ but these leaders will generally shift on a per project basis. During times of business growth, these teams may change substantially.

Ideally, a flat organisational structure is designed to empower individual staff members. As they must take on a greater role within the business, they become personally motivated to succeed. Without middle managers, there also exists no additional layer between the executive level and the staff level – making it easier to communicate and adapt.

Valve Corporation, a leading video game developer and digital distribution system, is one of the best-known examples of a large organisation that operates on the flat hierarchical model. Rather than assigning permanent managerial staff, Valve rotates its leaders on a per-project, per-team basis. Rather than creating permanent departments, Valve allows its employees to choose the type of work that they want to do.

With approximately 250 employees and an estimated worth of $2 to $4 billion, Valve is considered one of the most successful companies within its industry. CEO Gabe Newell reports that the company is more profitable per employee than either Google or Apple. At the same time, its flat management hierarchy has been the target of intense and widely publicised criticism in the past. It is also possible its structure is so successful because the company is comparatively small.

Many of the criticisms levied upon Valve are the same criticisms levied against flat organisational structures in general. Failing the development of an official management structure, an unofficial management structure will often arise. Instead of being told who to report to, employees may begin looking towards arbitrarily selected authorities for their cues. These authority figures are often selected due to their seniority or connections within the company, and may not necessarily be those best suited to the role.

Hierarchical organisational structures

In a hierarchical structure, an organisation is comprised of multiple layers. Every employee within the organisation answers to someone, with the CEO generally being at the very top. At the very bottom, entry-level staff members may answer to multiple managers, supervisors, and executives.

Hierarchical structures have several advantages. In a hierarchical structure, employees know where to look for in terms of direction and they know whom they report to. Employees can focus on simpler tasks, rather than having to self-motivate and self-organise. Employees also have something to work towards, as they may be able to climb the hierarchy in time. This type of organisation is highly structured, so that business growth provides very limited disruption.

With over 1.5 million employees in the United States alone, Walmart has been able to leverage its hierarchical structure to create consistency and efficiency throughout thousands of branches. At the bottom of the hierarchy are cashiers, stockers, and sales associates. At a level above them are customer service supervisors and merchandise supervisors.

These supervisors fall under a management trainee, which in turn falls under the assistant manager, co-manager, and general manager. On a regional level there will be a market manager, operations manager, or state general manager. And all of this falls under the existing executive-level hierarchy for the corporation itself.

It’s understandable that this type of organisational structure could be seen as quite unwieldy, especially for smaller businesses. A hierarchical structure is often slower to react and adapt than a flat structure, and departments are often forced to operate independently. The increased administrative time may also lead to substantially higher overhead.

Other types of organisational structures

Though flat and hierarchical organisational structures are the most popular, there are other alternatives. One such model is the “holacracy” model, developed by HolacracyOne, LLC and famously adopted by Zappos. Holacracy operates through teams rather than a management hierarchy, putting an emphasis on self-management on an individual level.

This model is designed to empower employees to advance their own goals in the ways that they see fit. However, with this much emphasis on personal responsibility and motivation, holacracy is a structural model that depends highly on the individuals within it.

What’s your structure?

What type of organisational structure does your business use? Is it as effective as you hoped? Organisation restructuring is common as a business goes through periods of growth. Often, when inefficiencies begin to arise in the usual business process, it’s time to reconsider how business-as-usual is run.

It’s important to note, however, that there isn’t a ‘perfect’ structure to fit each company. It’s about understanding your business strategy, the direction and the overall vision of your business. The structure chosen needs to be a cultural fit, but also allows facilitates the growth trajectory desired by the business.

If you’d like to learn more about organisational structures, or want to share your thoughts on this topic, contact us here.