Beyond structure: A people-first approach to M&A organization design

Contributors: Sean Martin and Kevin Fletcher

Executive Summary:

As organizations navigate post M&A activities, the initial focus often turns to restructuring and streamlining processes – leaders are tasked with making immediate changes that can clearly impact the bottom line. However, these efforts can fall short without a deep understanding and focus on the human element. Organizations that prioritize their people – aligning them with strategic intent, harmonizing cultures, defining connective tissue – are better positioned for long-term success. With an estimated 54% of health industry CEOs planning on at least one acquisition in the next 1-3 years, a renewed approach to navigating post-deal activities is more important than ever¹.

When integrating two organizations through a merger or acquisition, it is tempting for leaders to eagerly implement changes to the structural design of the combined entity. While that may offer a feeling of completion, premature structural changes may prove disruptive without driving the expected benefits. Our experience demonstrates that in the weeks and months following an M&A transaction leaders will recognize the most benefits from focusing on the non-structural elements of their operating model and organization design first, to drive near-term gains while establishing a solid foundation for well-considered structural changes to follow. Let’s explore how organizations can overcome key challenges and take a thoughtful approach that encompasses cultural, operational, and structural dimensions.

Articulating the strategic intent behind the deal is the first step toward organizational understanding and connecting your people’s roles to the broader strategy.

A key challenge of post-merger or acquisition is articulating the strategic intent behind a deal and communicating it effectively to teams. Organizations often struggle to clearly explain the value and impact to their individual teams. To address this challenge, leaders must define the strategic intent and business case behind the integration and connect it to the purpose of each team. By communicating how each team’s capabilities fit into the overarching strategic direction post deal, leaders can help team members rationalize the change in their minds and make the connection between their roles and the larger strategy at play. This proactive communication also serves as the foundation for short- and long-term organizational adoption. Team members impacted by organizational changes can sometimes feel left in the dark during the post-deal activities, resulting in a state of uncertainty and disengagement. By transparently communicating to your teams throughout the change (to the extent possible due to sensitivities), team members are brought along on the journey with the rest of the organization, furthering their connectivity to the overarching strategy.

Tactics to consider:

• Create a robust communication plan with key messaging that can cascade from senior leadership through department leaders, setting the tone for integration and aligning teams to common vernacular.
• a series of town halls where team members are encouraged to ask questions, provide feedback, and engage openly with leadership.
• Provide business unit/department leaders with a toolkit to facilitate smaller, follow-up discussions to continue the dialogue.

Defining connective tissue will quickly identify what’s changing and what’s not changing for the people doing the work.

While there may be shifts to key leadership positions at the forefront of the post-deal world, further structural changes should be limited to avoid disrupting the team’s productivity, with efforts instead focused on HOW the new entity will work together. Ask yourself: What is changing for my team? And what is NOT changing for my team? This articulation allows for the quick identification of changes to the team’s ways of working and how they should operate in the new normal. Defining this connective tissue mitigates potential silos inherent to any organization structure by defining interaction models and information flows across teams. This can include how decisions are made, how teams communicate within and across teams, and the extent to which workflows or handoffs have changed. With the implementation of fit-for-purpose connective tissue, leaders can ensure that the organization realizes the maximum value across its combined entities without sacrificing productivity.

Tactics to consider:

• Perform a simple start-stop-continue exercise with your leaders to understand potential shifts in ways of working and how the team should begin to operate differently.
• Based on the insights from the session, develop a clear action plan outlining who is responsible for implementing each change, the timelines, and the expected outcomes.

Intentionally harmonize cultures to adapt behaviors and norms across teams.

Cultural differences between organizations can pose a significant challenge to both team morale and overall productivity. To mitigate these challenges, leaders must intentionally harmonize cultures by identifying common values, behaviors, and norms that can be integrated into the new, combined organization’s culture. This may involve creating new rituals and traditions that blend the best aspects of both cultures or providing training and development opportunities to help team members adapt to the new culture. With intentional efforts, leaders can create a more cohesive and engaged workforce that is better equipped to drive successful outcomes. In fact, teams with high employee engagement rates have shown 21% greater profitability.²

Tactics to consider:

• Conduct a short cultural assessment to identify and capture similarities, differences, and key needs as it relates to cultural values, behaviors, and norms.
• Take the results into a working session to begin team building, defining your new culture and brainstorming tactics to drive and embed change. These key steps in building a cultural foundation establish trust and psychological safety amongst the team, which is especially critical during this period of uncertainty.
• Consider ongoing “pulse check” surveys to measure cultural effectiveness.

Align your team’s performance goals and objectives to the organization’s strategic intent to connect their purpose and drive the right behaviors.

Leaders should consider how performance measures can play a critical role in driving the desired behaviors within their teams. Leaders should aim to provide clear guidance on how teams can align their goals, objectives, and tactics with the overarching strategic direction. People inherently operate and behave in ways that align to how they believe they are measured; making small but incremental adjustments to align team members’ goals with the organization’s new strategic direction allows the team to better understand how they fit into the picture. Aligning with the team upfront allows leaders to set appropriate expectations as to how the team will be measured, getting ahead of any ambiguity that may spread across the organization.

Tactics to consider:

• After 30-60 days of settling into the new organization, set a priority with your team to refresh performance goals and objectives to better align with the organization’s strategic direction. It doesn’t need to be a complete overhaul of all existing goals – make small steps and shift ONE goal to better align with broader expectations.

Taking a people-first approach as a top priority in your post-deal integration activities will help engage, motivate, and drive your key asset – your people. As your teams adapt and become comfortable with their new normal, dive into the deeper structural considerations and ask questions such as:

• What areas or roles exist with common purposes?
• Where might the organization benefit from centralized capabilities or responsibilities to drive efficiencies?
• How might the organization need to consider geographic location across the newly formed entity?
• Have there been any shifts to our core customers, both internally and externally, where we need to shift our focus or show up differently?

Planning for, or in the midst of, a merger or acquisition? Contact Vynamic today to explore how our team of expert consultants can partner with your organizational leaders to navigate the complexities of post-deal life with ease. Together, we can maximize your efforts and create sustained success in the evolving landscape of healthcare.

End Notes:

1. (2024). 2024 Outlook – Global M&A Trends in Health Industries. Retrieved from https://www.pwc.com/gx/en/services/deals/trends/health-industries.html
2. (2018). Employee Engagement on the Rise in the U.S. Washington, D.C. : Gallup. Retrieved from https://news.gallup.com/poll/241649/employee-engagement-rise.aspx