Leading through uncertainty to success

HP and Compaq are at it and even the UK and US stock markets are considering it. Wherever you look, Big Business M&A are continuing despite a deflated economy. But how would you lead during this time of significant change? What approaches would you take and which skills would you need to develop when leading through uncertainty to success?

Mergers supposedly represent a change for the better yet in the first few months of an acquisition, productivity falls by a staggering 50 percent.

Why the negativity?

One reason for this slowdown is that mergers and acquisitions often present harsh realities that lead to feelings of denial, betrayal, disengagement and anger. These and other emotions must be effectively dealt with before the day-to-day issues of running a business and meeting customer needs can get the attention they need.

But what is the role of a leader when it has just been announced that their organization has been acquired of merged? How do you stay focussed? What does it take to motivate employees?

The three crucial phases
There are three stages in a merger/acquisition

Pre-combination - Immediately after the merger has been announced, the "acquired" organization enters a limbo time. There is much uncertainty and little specific information available. This is the most difficult and trying period for leaders to manage.

Combination - Generally signaled by the official close of the merger/ acquisition. The two organizations begin day-to-day activities of integration. This is a busy time but there is much direction and guidance.

Post-combination - When all systems have been integrated and it is now a matter of maintenance and continuous improvement of the new organization. The role of the leader reverts to a more traditional role of managing daily operations. At this point the role of the new CEO takes on increased significance as they play a large part in shaping the culture of the new organization.

Leading through the pre-combination
The lack of tangible information during this phase can make it an extremely confusing time for both employees and managers. The work must go on, goals and targets need to be met, and customer demands need to be responded to, but it is not business as usual. This is a time of extreme uncertainty when employees in the merged/ acquired organization often feel betrayed and "defeated" at being taken over.

Setting out the skills
These are tough issues to deal with but there are six major skill categories on which leaders can focus in order to increase M&A leadership competency:

Emotional acknowledgement - It is essential to recognize that all employees will experience some type of emotion with the announcement, ranging from extreme anger and grief to happiness. As a leader, you need to handle this emotional fallout.

Work and customer focus - Keep employees focussed on work and meeting customer needs. This could mean renegotiating performance objectives and deciding which projects should stop and which are to proceed. More involvement in day to day processes adds to emotional support.

Communication cubed - Increase the number of staff meetings in order to communicate merger updates, even if the news is "there is no news". Seek out and provide as much information as possible regarding background of the acquiring organization and long-term strategy for the merger. Establish informal feedback systems and keep in touch with upper management to promote two-way communication.

Motivation and incentives - Re-recruit your best talent. Talk to your most valued employees and attempt to understand their needs in order to keep them motivated. Be generous and positive with feedback and consider introducing monetary incentives.

Creativity and involvement - Take advantage of the fact that rules about "the right way to do things" often fade out in this transition period. Encourage employees to try out creative methods without the usual obstacles. Remind them that this is an opportunity to change things for the better.

M&A savvy - Ensure you have an understanding of the types of activities which generally occur after a merger/ acquisition announcement. Expect to make mistakes, but focus on bottom line and meeting customer needs. Push for speed in decision-making, communication and integration.

Leading through the post-combination
This is where the CEO of your organization plays a significant part in these unsettling times. Companies undertaking acquisitions often focus more on the deal than on the subsequent integration of the companies - an approach which is doomed to reduced productivity and low employees morale.

After the merger, during the post-combination stage, it is the CEO who is largely responsible for influencing and reshaping (if necessary) the organizational culture. This plays an important part in terms of maintaining productivity for if there is a healthy culture, then there will be increased employee satisfaction.

Chemical case study
Important lessons can be learned about this phase when looking at what happened when Mom & Pop Chemicals (MPC) was acquired by ComChem. MPC was a small chemical firm which employed 22 individuals and had a "one of the family" feel to it. Employees were consulted about most of the organizational decisions yet had no say in the acquisition. This led to some resentment and bad feeling as employees were unsure of the exact reasons for the takeover.

However, necessary redundancies were dealt with privately which impressed everyone.

The transition phase was the most difficult for MPC but the new CEO, Fish, ensured that he made regular trips to the MPC warehouses and got to know the employees by name. He also presented a cash bonus for those who stayed with the organization in recognition of their hard work. Employees appreciated this and the fact that Fish seemed prepared to help at any level, even when it came to making the tea.

Employees were only given information on a need to know basis which did cause some confusion and frustration as they did not always see the big picture, but this was because the management themselves were unsure of exactly how all the pieces would eventually fit together.

The general consensus (from employees and management) was that, although some parts of the merger could have been planned a little more accurately, on the whole, it was a success. Because their CEO was open and honest about the difficulties in the transition period, employees were less resentful of the new organization. A prime example of this openness is when the management team made mistakes installing the new computer system as they admitted their mistakes and tried to learn from them.

Communication is key
Although pre- and post-combination phases of a merger or acquisition will feel very different and need to be handled in various ways, some aspects are pertinent to all managers at each stage of an acquisition. Communication, as always, is key, an increase in meetings at all levels is essential and acknowledgement of employees' mixed emotions and managerial errors will also help with a smooth transition.

Leading through a merger or acquisition is one of the most challenging times for a manager or CEO often requiring more social adjustment than many major life events. You will need courage to allow the emotions of your employees to be surfaced, the persistence to maintain focus on the business in the midst of turmoil and the patience to deal with individuals one to one.