By Jason Wingard | Oct 25, 2019
On October 16, the Federal Communications Commission voted to approve a merger between T-Mobile and Sprint, two of the largest cellular networks in the country. Though the deal still faces antitrust lawsuits from more than a dozen state attorneys general, some experts believe it will eventually go through.
If and when that occurs, the leadership at T-Mobile and Sprint will be responsible for bringing together more than 80,000 employees — a gargantuan task that, regardless of the size of the companies involved, is one of the most difficult aspects of mergers and acquisitions (M&As). Unless they execute this step correctly, the T-Mobile-Sprint merger may join the ranks of the 70% to 90% of M&As that fail.
After studying M&As, Godfred Yaw Koi-Akrofi posited in the International Journal of Innovation and Applied Studies that leaders must focus on “the human factor” to avoid failure. “Equipment and processes can be changed without any problem, but human beings are difficult to change,” he explained. “[T]he employee must be pivotal.” Given their importance to a deal’s success, here are three strategies for uniting employees following a merger or acquisition.
1. Put Culture FirstToday In: Leadership
In one Bain & Company survey, executives cited “culture clashes” as the top reason for a “deal’s failure to achieve the promised value.” Jeff Cox, a leader in Mercer’s global M&A division, agreed. “[O]ur research is crystal clear; culture matters,” he said. “When looking to transform the workforce for the future of a newly formed organization, simply ignoring culture is not an option.”
In fact, in a study of 4,500 international mergers, academics found that mergers between companies with “loose” cultures, which value fluidity and ideation, and companies with “tight” cultures, which value rules and processes, fared worse than other deals. “In addition to negotiating price and other financial terms, organizations discussing a merger need to negotiate culture,” they concluded in the Harvard Business Review (HBR). “Leaders should start by conducting a cultural assessment to understand how people, practices, and management reflect tightness or looseness in both companies.”
One example of this approach can be found in Enterprise’s acquisition of Vanguard’s car rental brands Alamo and National. Enterprise pursued a “deliberate integration,” CEO Andrew Taylor told the HBR, that sought to reflect “the best elements of both cultures and operating approaches.” Rather than attempting to swallow Vanguard immediately, Enterprise allowed the company to operate as an independent subsidiary for the first year, and told employees they need not fear an “invasion of the white shirts” from Enterprise’s headquarters. Slowly combining the cultures and employees turned out to be a smart move: The deal paid for itself in less than three years.
2. Provide Onboarding
The single most important factor in achieving a successful M&A, according to the respondents of a 2019 Deloitte survey, is “effective integration” — which came in ahead of proper target identification, a sound due diligence process, and a stable regulatory and legislative environment. More specifically, another Deloitte report stated that one oft-overlooked integration issue is the onboarding of new employees.
“A successful onboarding program can make a complicated process feel simple and effortless,” wrote the report’s authors. “It starts with acknowledging that there is no such thing as ‘business as usual,’ and it’s not necessary to pretend otherwise.” During the onboarding process, it is also important to share the “three answers every employee needs,” wrote Whitney Johnson in the HBR: “1) Do I have a job? 2) Who do I report to? And 3) How will I get paid?” It is only after receiving these answers, she said, that employees will “really show up to work.”
After the online comment company Disqus was acquired by Zeta Global in 2017, Kim Rohrer, its vice president of people and culture, said: “Having intentional onboarding for the newly-acquired company, as you would for a new hire, is a great way to make them feel integrated… Make them feel as welcome as you would for any new team member.”
3. Build Teams With Intention
Following a merger or acquisition, employees will inevitably fight to prove their value. Leaders can combat these self-serving tendencies by focusing on team dynamics instead. “You can’t keep individuals from positioning themselves to gain the upper hand, but you can fight a wave of selfishness with relationship building,” explained Anthony Edwards at Quantum Workplace. “Create opportunities for your team to collaborate and remember that they are part of a whole.”
While these efforts can involve team building activities, such as volunteering or traveling off-site, it is arguably more important to engage individuals at their workplace. One important step, for example, is building teams that draw individuals from both companies. Those teams can then develop a charter that outlines their goals and processes. “[C]reating the charter will not only help to answer the questions that result from a merger or acquisition,” wrote business consultant Nettie Nitzberg, “but will also begin to build trust among the team members.”
As an example, leaders can look to Disney’s $7.4 billion acquisition of Pixar in 2006, which has been heralded as a rare media merger win. One reason for the deal’s success, according to David A. Price, author of The Pixar Touch, was CEO Robert A. Iger’s deployment of Pixar employees throughout the company. “If you are acquiring expertise,” Price told the The New York Times, “then dispatch your newly purchased experts into other parts of the company and let them stretch their muscles.” Not only will this utilize their skills, but it will also help them integrate as full members of the newly formed company.
In conclusion, if the T-Mobile and Sprint merger survives its legal battles, its leaders should pay as much attention to their human resources as they do to their financial resources. They should strive to unite employees through cautiously negotiating culture, introducing an onboarding program, and intentionally integrating teams. As Skip Maner, a partner at NewSpring Capital Holdings, told Forbes: “Focusing on pure mathematics guarantees failure. At the end of the day, it’s the people that make M&As successful.”