People and organization structures are all-important when it comes to realizing the benefits of M&A investments. The most crucial transformation a PMI project must deliver is to successfully combine the two organizations to realize the expected cost efficiencies and bring the two corporate cultures together, while ensuring all daily business activities continue to be delivered as expected. Executing this step well helps deliver the anticipated people-related synergies – be it related to complementary revenues, increased innovation, or reduced costs. Conversely, if the organizational realignment stalls or fails to hit its targets, the entire value of the M&A deal could be at risk.
Stonewater Partners’ recipe for success involves a systematic approach to understanding and analyzing the current organizational design of each functional department of the two companies, designing the optimal future state of the combined organizational structure, and coordinating a disciplined, thoughtful, and smooth transition process.
“Going beyond the org charts and job descriptions to conduct these interviews is critical to painting a realistic and actionable picture of how daily business activities are being handled and by whom”
The organizational redesign involves thorough reviews of internal documents, including org charts, job descriptions, roles and responsibilities, delegations of authority and decision rights. It also involves interviews with senior management, functional leaders, and other key staff. Going beyond the org charts and job descriptions to conduct these interviews is critical to painting a realistic and actionable picture of how daily business activities are being handled and by whom. Often department employees handle critical activities that are not necessarily listed in their job description, so in-depth conversations help uncover these crucial details, without which the org redesign and reassignment of responsibilities would fail.
At this stage, to help uncover all possible synergies and ensure the newly redesigned organization continues to function effectively post-PMI, we also review all legal and operating structures, facilities footprints and geographic coverage, and examine the tradeoffs between centralized vs. distributed functional teams. We track key performance indicators (KPIs), such as spans of control or number of layers for each functional group and analyze them against internal and external benchmarks.
From the above analyses of the current state and the design principles and objectives articulated at the start of the PMI effort, we work with the leadership team to design the future-state organization, including streamlining org charts, optimizing roles and responsibilities, updating decision and information rights, and realigning compensation and incentives structures.
Having put the new org design in place, the next crucial step is to match the right people to the right roles. For that, we conduct a comprehensive audit of talent and leadership, including key appointments, leadership development, talent retention, succession planning, and, where necessary, recommend and initiate external recruiting of new talent.
Finally, no change happens smoothly by itself, and that is particularly true for potentially difficult org changes. To ensure successful PMI and redesign, it is key that leadership institute and adhere to a well-thought-out transition plan. That includes managing all job changes, relocations and seating reassignments, aligning all cultural initiatives (e.g., office parties, town halls, corporate social responsibility activities), monitoring progress against KPIs, and communicating clearly and frequently across the entire organization.
Interested in learning more? Find the next article in this series, “Processes in a Post-Merger Integration” here.
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