As consolidation continues to increase, companies are getting more intentional about the due diligence process, particularly within the roles of finance, legal, and business development leaders. However, many organizations still fail to recognize the importance of including people leaders at the earliest stages. As a result, crucial aspects of the company’s future structure are often overlooked.
This can lead to challenges integrating companies down the road.
Creating a Playbook
Involving people leaders during due diligence can help avoid this problem by changing the conversation and creating a holistic pre- and post-close mergers and acquisitions (M&A) playbook, which can enable understanding of how to leverage an organization’s greatest future-state asset: talent.
It is the overarching blueprint—the end-state design for how people will fit into the new company.
When the target’s human capital strategy is considered at the due diligence stage, the playbook will likely be written in the context of people, processes, and technology.
Asking the Right Questions
Here are some of the human capital strategy considerations that should be addressed when people leaders are involved from the start.
- Are the total rewards (compensation and benefits) plans set up in a way that promotes both standardization and the flexibility for growth? What are the guiding principles for this system?
- What does the anticipated future leadership structure look like?
- What was the result of the most recent culture assessment? How does this compare with the desired future-state culture?
- What are some areas of talent redundancy and gaps?
- How can role clarity be improved?
- Will the companies be fully integrated? How are we synergizing all processes?
- Does the organizational design and infrastructure facilitate adaptability?
- What documentation will define processes?
- How do teams communicate among themselves and with others?
- What is the process for cascading communication about change?
- What is the change management plan for transitioning to the new technology road map?
- Which intranet will be used (or will they be integrated)?
- Will payroll, timekeeping, and pay practices become fully integrated?
- What are the other internal communications tools being used in each company, and what will happen with them going forward?
When the right people are involved at the right time with the right questions, your M&A playbook may enable some of the following outputs:
Conduct Bench Strength Talent Analysis
It is essential to analyze employees’ talent before finalizing a deal or, at the latest, during integration in order to avoid problems with role clarity, culture, and operational confusion. This step will help identify the desired infrastructure of culture; titles; connectivity; integration vs. affiliation; and, most importantly, role clarity. Without this analysis, there is a risk of employee dissatisfaction due to the changes and new leadership.
Create a Flexible Title-Leveling System
A well-designed title-leveling system can help a company achieve its goals for compensation, benefits, and decision-making while remaining flexible enough to accommodate a variety of titles. This framework provides a way to encourage and reward “lateral” growth, which can be just as important as promotion in keeping employees engaged and committed to the company.
Ensure the Companies’ Collective Systems Will Enable a Seamless Employee Experience
Make sure that anything related to employees or candidates is smooth and seamless. For employees, it’s best to minimize disruptions to their daily tools and technology. Also, keep in mind how your tools can support a great candidate experience for those in the middle of onboarding.
Erika Duncan is a cofounder and human capital advisor for People on Point. As a former CHRO and CPO for a variety of companies and systems, she brings 20 years of experience in HR strategy, organizational design, M&A/integration, and talent acquisition.
Aaron Olman is also a cofounder and human capital advisor for People on Point. Olman is an expert in HR systems, HR analytics, compensation design, and operational efficiency. With 10 years in progressive HR leadership in HR for health care, home health, and other industries, he brings insight, expertise, and value to workforce planning and due diligence and has the unique ability to analyze people data and dashboards.