Friday, May 1, 2009

M & A : What's your DNA ?

Globalization has thrown open opportunities aplenty amidst increased market competition. Companies have realized the importance of remaining competitive in ensuring survival and growth; have resorted to measures, such as restructuring, alliances, joint ventures, mergers and acquisitions. Mergers and Acquisitions have become a common strategic practice and a tool to achieve faster growth and market leadership position.

As Feros, Lewis puts it: “ Mergers are People”. Hence, HR Strategy in any merger or acquisition process has to be an integral part of the business strategy. The business strategy in a pre-merger may be to look for a strategic fit in a partner. But to ensure that the strategic fit delivers results, in post merger, the people support gained through an effective HR strategy is essential.

The twin drivers- globalization and technology, operating simultaneously have ushered in the new Economy in more recent times. Organizations have been responding to such changes in the environment by organic growth or by acquiring/ merging organizations into their fold.

There are organizations that want to shape the future. They shape the rules of the game rather than being ruled by rules of the game. These companies learn to anticipate the possible directions that the future may take and begin to blaze the new path without hesitation. The leaders of these companies encourage their people to challenge conventional thinking and to create continuous renewal and progress. Renewal challenges the company to stretch and grow. For most of the companies, continuous renewal is more than a catchphrase; it is their culture. There are irreversible changes in forces that are driving these changes. We could call these the new economic drivers. There are three kinds of drivers with varying amplitude and time horizons, which will dictate the future of economy and the future of business.
They are :
a.) Short-term drivers.
b.) Medium-term drivers
c.) Long –term drivers

Will Culture make the difference ?
Generating a single wave of change is possible but the effects are seldom long-lasting or self-sustaining. When continuous renewal or performance is expected, and if the organizations have not created the right ambience for such an attempt, people become “smart dumps”. People have to be willing to accept the risk of change to create a self-sustaining cycle of improvement and an ongoing sense of renewal. That is possible only if employees know that individual and collective success can only continue if they embrace change as an opportunity rather than reacting to it in a crisis mode.

With today’s volatility in business, organizations should respond by placing one foot in the present and the other in the future- responding to today’s customer needs while preparing for tomorrow’s by striving to find the future first. Those who really succeed constantly adapt to the changing environment, managing the dimensions of competition, keeping pace with the design and technology marvels, applying scenario-planning technique, than casually talking about ‘aligning parts of the organizations’.

Cultural Assessment Tool
For any merger or acquisition to be successful, structures, leadership, culture and strategy are going to be critical. You can examine the firm at any level and the DNA remains the same, though functionality and character will change. The culture of a company gives it character and uniqueness that could be closet to biological DNA. Culture refers to the collection of values, beliefs, behaviors, customers and attitudes that characterize an organization. Each organization has a unique culture and hence, a unique DNA map. For assessing the cultural character of an organization, the organization could be guided by 14 discrete characteristics viz: governance structure, leadership roles/influence, power, how change is viewed, the basis of planning, the primary mode of problem solving, how control is exerted, communication styles/purpose, marketing focus, performance management, vision/values, how people are perceived, success definitions and guiding principles/assumptions.

Develop a Merger Competency Model
Companies have yet to learn the lessons from others. Up to three quarters of these deals destroy value that has been the objective of many mergers and acquisitions. Why ? Organizations that are high performers and who pursue their transactions as part of a disciplined and ongoing programme, link their transactions to clear strategic goals, and are organized for fast decision making and effective implementation. Most of the companies that have been failing in their M & A efforts have treated M & A , as occasional and major events.

A Merger competency Model that defines the merger leadership characteristics is important for professional success. The motivation is to develop a Merger Competency Model that would radically improve the ability of organizations to assess the environment, create structures, develop strategies and formulate policies that would attract , retain and develop leaders; thus retain the merger capability.

A merger competency model has been arrived at after considering the strategic objective and the key business drivers:
· Globalization
· Technology

The pointers are based on the experiences and the literature review for the components of developmental model, which has to be nurtured by the core team of the merged entity. The components identified are universally accepted dimensions
· Structure
· Strategy
· Leader’s Belief.
· Leader’s Approach
· Communication
· Process- Speed of Decision Making and Integration
· Handling People at Outplacement