Organization design can be a political, emotional, and disruptive event, even in the best of circumstances. If done poorly, it can be paralyzing, demoralizing, and too often, a deal breaker. In an effort to avoid these issues, leaders can approach organization design much like a fourth grader tackles an order of operations math equation—with clear rules and purpose.
M&A deal volume is expected to increase in the coming year,1 driven by an appetite to acquire technology, expand and diversify products and services, and expand customer base, all in increasingly competitive markets. These deal drivers only heighten deal complexity, and thus, the criticality for organizations to effectively align their talent models to their new strategy through organization redesign.
Several M&A-specific factors can challenge organization design efforts:
- First Date Straight to Marriage – For the same reason skeptics question love at first sight, it can take time and dedicated effort for newly formed leadership teams, who may have previously been competitors, to find a common “true north.” Teams can struggle on alignment of business strategy, priorities, and timeline, which only slows organization design efforts. There is a constant push and pull among short- and long-term objectives, balancing the desire to build a transformative organization against the need to “keep the trains running on time” to minimize business disruption and maintain stability.
- Building a House with no Blueprint – When leaders think “org structure” they think about individuals. But putting people in roles without defining the operating model is like building a house before the architect has finished the blueprint. At best, you will end up with a shaky foundation, mixed-up wiring, and a leaky roof. At worst, your house may collapse altogether. Building a foundational operating model that aligns people, processes, and technology is a critical first step.
- The First Two Letters of Merger – The personal factor (“Me”) is hard to overcome in the M&A environment. Until leaders are able to fully address individuals’ personal emotions, and how this activity directly impacts people’s jobs, employees will likely experience high uncertainty, which can lead to productivity dips and retention risks.
So, how can leading organizations mitigate these challenges and effectively embark on org design post-M&A?
Following M&A activity, organizations may try to embark on org design with people in mind first and backing them into roles, or they can begin functional design without aligning leaders on how the new company will operate in the future. While these steps may feel like quick progress, these backward approaches will likely require the organization to undo decisions and redo work due to downstream decisions. Instead, leaders should consider the following “order of operations” steps before embarking on organization design: Please Excuse My Dear Aunt Sally (Deal Purpose Explained, Operating Model Defined, Aligned Stakeholders).
1. Deal Purpose Explained. Leaders should first align on “the why” of any org design process. Answering fundamental questions about short- and long-term objectives clarifies the end game, including level of effort, timing, and role of the various parties involved (including business line, Finance, HR, functional/geography leadership). Questions that can be used to help clarify objectives include:
- What is the value of bringing these companies together? What org design milestones must be accomplished in the short term to achieve the deal rationale?
- How fast must organization design move to prepare the organization to operate in an integrated way? Can transformation wait or are near-term incremental integration steps required to realize value?
- To what extent do synergy targets and future transformation plans depend on an integrated operating model? Is the strategy the same for the front office versus the back office?
Running headfirst into decision-making on topics such as org structure without aligning on the timeline to achieve the strategy is like going from a first date straight to marriage. You signed the deal paperwork, but there is much to uncover about how the two companies will fit together and how they will ultimately operate better together as “one.”
2. Operating Model Defined. When thinking about the future of their company, naturally leaders think about their people first and then build the roles to fit the people. Makes sense, right? Not so fast. Designing organizations around
individuals is not only backward, but can be extremely risky. There is no guarantee those individuals will stay with the company more than a few months down the road. Despite the temptation to think about people first, leaders should first consider how the company will operate with its new strategy—considering people, process and technology.
Similar to how an architect would not advise framing a house without a finalized blueprint, we see the operating model as foundational to sound organization design. The operating model is a blueprint that connects a company’s strategic vision and business model with its business processes and organizational structure. To build this blueprint, leaders should ask questions such as: What markets are key to our future growth, and how do we structure our organization to enable flexibility and scalability for growth? How much should we centralize services, decision rights, and governance? When org structure is designed around strategy rather than people, it is more likely to stand the test of time.
3. Aligned Stakeholders. Third, and often deprioritized by leaders, is the importance of aligning stakeholders and helping employees understand the answer to the question “What does this mean for me?” Amid the grand plans for organization design, the heart of your organization—the workforce—is often full of fear and anxiety. One of the most effective ways to reduce workforce anxiety is through transparency and “organizational honesty”—not simply communicating company strategy and vision, but the hard truths about job reduction, changing roles, location changes, and other life-altering personal impacts. As straightforward as this seems, the paradox of this truth is that leaders want to communicate but often find themselves hesitant to release information on these hard truths. Furthermore, it often takes months to finalize the org design and determine individual impacts. So, in the absence of final role decisions, many leaders fail to communicate anything on org design.
The fix here is an easy one: Leaders should focus on communicating information about the org design process in the absence of final decisions—telling employees about the operating model, the org design timeline, how role section decisions are being made, and when workers can expect to hear more. A bit of clarity on the topic can produce far better results than a black hole of silence. Through early, often, and open communications, business leaders can proactively build rapport, aligning stakeholders and employees and helping the organization realize org design goals.
A well-ordered approach
Org design is complex, emotional, and disruptive, even in the easiest circumstances. This stress is only compounded by an M&A environment, when the stakes are at their highest. Structuring talent in a way that drives your new business model is critical to overall deal success. The usefulness of Please Excuse My Dear Aunt Sally extends beyond fourth-grade math—Purpose Explained, Model Defined, and Aligned Stakeholders can guide leaders through critical M&A design activity. By approaching the M&A org design equation in the right order, organizations can reduce employee anxiety, mitigate the business disruption, and set their organization on the right path to achieve their strategy through their people.