People-Centred Data: A Crucial Tool in M&A
Of all the obstacles inherent in the M&A process, something that’s often overlooked is ‘the people factor’ – that’s to say, understanding, planning and correctly valuing the HR and employment side of a business, as well as company culture – an aspect that’s crucial when two companies come together.
A 2016 survey by KPMG showed that a staggering 54% of executives said that HR and corporate culture issues were the most significant issues they faced when integrating companies.
But why is the people factor such a challenge?
Firstly, whatever the apparent synergies and ‘fit’ of two organizations, they’re bound to have in-house cultures that differ, because just as with people, no two companies have exactly the same personality. Those differences could be slight, or they could be vast. People’s understandings (plural!) of the company’s goals to date may not match up, or the more fluid ‘company ethos’ could be quite different from the businesses you’re going to be dealing with. All of these can present issues for even very experienced business leaders when there’s a ‘marriage’ of workforces.
Secondly, business owners often feel they have a good grip on their company – but much of that is rooted in understanding the business, the products or services offered, the competitors, the market, the figures – and the staff ‘as seen from’ the CEO or MD point of view. In fact, staff members very often don’t behave or think in the way the business owner perceives them to, and this needs to be understood up-front before going into any M&A process.
So how does your staff really feel about your organization? How well do staff members understand its goals? And importantly, how well do staff actually perform in their given roles?
Very many companies just don’t have this type of information in data formats that are valuable to potential buyers or partners. There are often skills gaps and development requirements, staff-wise, that the business owners just have no idea about – but which might be glaringly obvious to an outside eye. And in the M&A process, you’re going to be under the unflinching gaze of an outside eye.
So how can you make sure you understand your people before selling or merging your company?
Investing in a good diagnostic tool makes sense as a first step. Here, you can get an idea of likely behaviours, as well as better insights into each individual’s specific role. What’s more, the results here will give you real people-centred data that will prove invaluable during the M&A process, because it demonstrates competences as well as highlighting areas that need work.
Don’t be afraid to do what’s necessary to gain a clearer understanding of your own staff before someone else goes over it with a fine tooth-comb. Give yourself the luxury of time to do this, and you’ll be able to tweak what needs changing well before the very serious task of selling or merging your company.