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AchievingthePromiseofAcquisitionSuccess:
DesigningtheHumanFactor
DarnellLattal,Ph.D.PDFVersion
InJanuary2000,aleadingInternetcompany,AOL,andthemediagiantTimeWarnerannounceda
merger/acquisition,heraldingitasacomingofagefortheInternetandthetriumphoftheNewEconomy.Many
ofthetwocompaniestopexecutiveslearnedoftheM&Avaluedat$350billionviaconferencecallonthe
morningoftheannouncement.Someheardthenewsontheradioastheymadetheirwayintowork.Economists
warnedthatthedealmadenofinancialsense,butasoneexecutivestatedinasubsequentNewYorkTimes
article,Thecompanieshadanotherproblem:bothsidesseemedtohateeachother.Infighting,rangingfrom
clashingbusinessstrategiestowhichcompanystalentshouldrelocate,beganimmediately.RichardD.Parsons,
TimeWarnerspresidentatthetime,laterstated,Iremembersayingatavitalboardmeetingwhereweapproved
this,thatlifewasgoingtobedifferentgoingforwardbecausetheyreverydifferentcultures,butIhavetotellyou,
Iunderestimatedhowdifferent.
Afteraccountingscandals,executivedepartures(voluntaryand
otherwise),andbilliondollarlosses,theAOLTimeWarneraffairbecame
knownasthelargestmergerinAmericanhistoryandalsothelargest
M&Afailure.Theenduringdebateiswhetherthedealcollapsedbecause
theconceptwasflawedatthestartorbecausetheculturesweretoo
differentandtheexecutionofthemergerwasafailure,JerryL.Bewkes,
chiefofTimeWarnertoldTimArango,authoroftheNYTarticleHowthe
AOLTimeWarnerMergerWentSoWrong.
Whydocompaniescontinuetoacquireothercompanieswhenevidence
indicatesthatevenwiththebestofplanning,acquisitionsfartoooftenfail
tomeettheirpromise?Theobviousansweristhattheacquiring
companysleadershipstronglybelievesthattheacquisitionwillmakea
significantcontributiontothefinancialwellbeing,marketshare,or
importanceoftheirorganization.Yet,approximately70percentofU.S.
acquisitionsintheUnitedStatesnegativelyimpacttheacquiring
companysresults,sometimesimmediately,andoftencontinuingmanyyearsafterpurchase.Approximately40
percentoftheacquisitionsofthelast10yearsbroughtdevastatingbusinessresults.Inabout80percentofsuch
cases,productorservice,marketshare,andculturalimpactarefarbelowthegoalsanticipatedinthebeginning.

SeventypercentofU.S.acquisitionsintheUnitedStatesnegativelyimpacttheacquiringcompanys
results,sometimesimmediately,andoftencontinuingmanyyearsafterpurchase.Approximately40
percentoftheacquisitionsofthelast10yearsbroughtdevastatingbusinessresults.Inabout80
percentofsuchcases,productorservice,marketshare,andculturalimpactarefarbelowthegoals
anticipatedinthebeginning.

Weighthoserealitieswithcleareyedknowledgeofthefailurerates.Considerthetremendouseffortinvolved
beforeacquiringacompany.Conductacarefulexaminationofstrategy,fiscalissues,andlegalconsiderations
providedetailedevaluationofthesynergiesofmarketshare,machineryormaterials,andotherresources,
includinghumancapitalandundertakestrenuousanalysisoftheadvantagesanticipatedbythisjoiningof
operationalexcellenceand/orreductionofcompetitivethreat.Sucheffortsrequirehugeoutlaysofmoney,time,
andhumanefforttoensurethatthemergergoeswell.Manyofthesethingsaredoneanddonewell.Almostall
decisionmakersbelievethattheyknowwhatmakesforagoodM&Avs.aflawedonewhentheydecidetobuy
(NOTE:Faultydecisionmakingcriteria[opennesstoinformation,priorhistory,etc.]amongleadersatalllevels
areverycommonbutmostindividualsdonotunderstandtheirblindspotsinthisregardseeFantinoandLattal,
WiserDecisionsUsingScienceofBehaviorAnalysis,formoredetailonthiscriticaldimensionofacquisition
management).
Howeverthereisoneveryimportantreasoncompaniesfailtooptimizeotherwiseexcellentopportunities:inthe
decisioncriteriatobuyornottobuy,financialconsiderationstrumppeopleconsiderationsinalmostallcases.
Thisfocusonlaggingindicatorsofsuccesssuchascostsincurred,whilecertainlyimportant,ignoresthevital
reasoncompaniesacquireacompanyinthefirstplace.Whiletheymaybebuyingequityandhistory,most
companiesexpecttoachievecurrentandfuturegains.Theywanttherelativeneartermadvantagesofthe
companytheyacquire,includingqualitiesattributedtothecompanyculturestheyareacquiringgreatresearch
arm,novelstrategiesofinnovation,firsttomarket,customersatisfaction,andsoon.Allofthosethingsare
producedbypeople.Whatpeoplesayanddoinanybusinesscultureisreallywhatacompanyisacquiring.
Asidefromthemachinery,realestate,orothertangiblesproducedbyacquiredcompanies,peoplearetheprize.
Rarelydotheacquirers(oreventheacquired)actasiftheyfullyunderstandthispoint,andthereforetheydonot
actinawaythatistotheiradvantage.
Averysmallportionofallmergersmeetorexceedoriginalbusinessobjectives.Whydosomanyfailtomeet
theseanticipatedanddesiredperformancetargets?Theanswerliesinasimplesoundingterm:behavior.Even
withthewisdominvolvedintodaysacquisitionmanagement,littleunderstandingofthecomplexityofsustaining
desiredpracticesexists.Evenwhenchangesareanticipated,thebuyermaythinkthatthecompanybeing

$24.95

acquiredwillonlygainfromthestrengthofleadershipormanagementpracticesalreadyembeddedinthebuyers
company.Rarelydoestheacquiringcompanyconductathoroughanalysisofworkplacepractices,current
cultures,andenvironmentalsupportneededtocontinuetheoutcomesthatarepartoftheassetbeingpurchased.
Abehaviorbasedpathforsuccesscreatedatthestartbytheexecutiveleadershipofbothcompaniesseldom
makestheacquisitionroadmap.
Peopleissuesareconsideredbymostcompaniesinverysensitivebutinsufficientways.Mucheffortisspent
modifyingpolicies,proceduresandbenefits,identifyingtrainingneeds,andprovidingemotionalsupportto
employeesanticipatingthechangesbroughtbyanupcomingacquisition.Often,seniorleaderscommunicate
openlyaboutthechanges,butsuchcommunication,whileimportant,haslittleimmediateandcertainimpacton
theactionsofperformers.Inmanymergers,apostacquisitionperiodoccursduringwhichlittlebusinessactivity
isaskedofemployeeswhoarewaitingtoknowwhatwillbeexpectedofthem.
Theseemployeesmayserveoninternalcommitteestodesignbetterpractices,buttheyoftenreportfeeling
secondarytotherealbusinessoftheacquiringcompany.
AsDennisSadlowski,formerpresidentandCEOofSiemensEnergyandAutomationwhohasheldleadership
positionsduringmanymerger/acquisitionspointsout,thispostacquisitionlagisexactlythetimethatleadership
shouldbecreatingpositivemomentumviaproactivebehaviorsratherthanallowinguncertainty,anxiety,andeven
resentmenttogrow.Thisisthetimetoacceleratecommunicationwiththeemployeesofthenewlyacquired
company,particularlythosefieldpersonnelwhohavefacetofacecontactwiththecustomersandtoactontheir
suggestions.Thisisalsothetimetodemonstratethattheacquiredcompanysemployeeswellbeingiscritical.
Muchischangingataveryfastclip,spokenorunspoken.Grabtheseearlymomentstoharnessthespeedof
changeintoharmoniousefforts.
Usually,however,therealbusinessisdefinedintermsofplans,fiscaltargets,newcultureandmissiondesigns,
largescalecommunicationwithstakeholdersandstockholders,outwardinvestorfocus,andengagementwith
suppliersandcustomers.Theimpactoftheacquisitiononemployeesisoftenviewedasbeyondtheactionsof
anyoneindividual.Letthechipsfallwheretheymay!(Andtheydo.)Thishandsoffapproachignoresthe
companyspotentialrichestresourcediscretionaryeffortprovidedbyhighlyreinforcedemployeeswhosee
themselvesascentraltothesuccessoftheneworganization.Leadersneedtounderstandwherediscretionary
effortcomesfrom,whattheycandotogeneratemoreofit,andhowtodosoquicklyaftercompletingan
acquisition.
Themappingofnecessarybehaviorstomaintainorincrease
impactprovidestheunifyingdirectiontoasuccessfulmerger.
Suchananalysisrevealsclearlythatnotonlywilltheacquired
employeesfacenewexpectationsandnewoperational
contingencies,buttheemployeesoftheacquiringcompanywillbe
facedwiththesame.Understandingtheimplicationsofthismost
importantandfundamentaltruthisthekeytoeffectiveacquisition
management.

UnderstandingtheIssue:TheBehaviorofEvery
Employee
Likeariver,behaviorisaffectedbythecurrentsofreinforcementaroundit.Settinguptheexpectationsforan
acquiredcompanytakesdetailedunderstandingofhowtoelicitandsustainthebehavioryouwant.Makingan
acquisitionsuccessfulrequiresathoroughanalysisofwhatisworthkeepingandwhatshouldbechanged.Such
anassessmentisnotcasualandrequirescareintheinitialstagesofpreparationthatgowellbeyondaplanto
recognizeandsupportindividualemployeesthroughHRpoliciesandassurancesrather,thiseffortrequiresa
strategiccommitmenttokeepthehumanassetperformingatorabovethelevelsthatleadtomergersuccess.
Thelawsofbehaviorimpactmergersinmeasurableandpredictableways.Beyondbadmarketsandeconomic
news,thenumberonereasonthatmergersfailistheabsenceofawellunderstoodhumanperformanceplannot
abenefitsandemploymentstabilityplan,butaplantobringoutthebestinyourhumancapitaltoachievemarket
shareanddesignandproduceproductsandservicesinhighlyeffectiveways.
Behaviorisbusiness.Thereisnobusinesswithoutbehavior(choice,decisions,direction,andactions)ateach
employeelevel:behaviordesignedtoachievecoreoutcomesintherightdirection.Nothingaboutblending
culturesiseasy,butiftakenseriously,atremendousamountofenergyflowsfromthoseactivelyincludedinthe
successofthemerger.Fromthebeginning,leadershipateverylevelmustunderstandtheenergyandimpactof
thefrontlineonoverallsuccess.Involvethem!

Bysomeestimates,85percentoffailedacquisitionsareattributabletomismanagementofcultural
issues."IndustrialManagementmagazine.

EdwardA.Kazemekreferstothepeopleelementofmergersandacquisitionsassoftissuesbutunlikemany
leaders,hedoesntdismisssuchissuesasbarelyrelevant.InhiscolumnWhymergersandacquisitionsfailhe
states,...Thesesoftissuesarelikethepartofanicebergthatisbelowthewaterlinenotreadilyvisiblebut
muchlarger(andmoredangerous)thanthepartthatisabovethewater.Ignoringsuchdangersultimatelyresults
inafailedmerger/acquisition.Infact,accordingtoIndustrialManagementmagazine,Bysomeestimates,85
percentoffailedacquisitionsareattributabletomismanagementofculturalissues."

MotivatingBehavior
Settinguptheexpectationsforanacquiredcompanywhilevaluingthebenefitsdesired,requiresdetailed
understandingofhowtosustainthebehavioryouwant.
Theleadershipofthetwocompaniesmustunderstandthehistoriesofperformerreinforcementthatbothparties

currentculturesbringtothetable.Determiningtheconsequencesthatwillsupportorimpedeperformancedueto
shiftsinculturalreinforcementhistoryisrarelydone,butthisomissionwillnotstopbehaviorfromimpactingthe
effectivenessofthemergerinmeasurableandpredictableways.
Fourareascriticaltoperformanceexcellence,ifimplemented,willensureamoresuccessfuloutcomeforany
acquisition.Eachoftheseareasincludesessentialbehaviorsfordetailedactivationbut,fornow,alistofthe
generalareasareasfollows:
Assessculturalconditionstopromotehumanperformancesuccess.
Developabehavioralroadmap.
Traintheseniorleadershipofbothcompaniesinbehavioralscience.
Coachforsuccess.

TheRoleofLeadership
Duringanymerger/acquisition,everyleaderwillhavenewbehaviorstolearnaswillthefrontline,andlearning
thosenewbehaviorsrequiresdedicationandeducation.Iftheacquisitionisnotaboutsimplytakingtheassets(in
suchscenarios,mostoftentangibles)andremovingcosts(mostoftenpeople),thentheideaistopreservethe
humancapitalaswell.Thatisthejobofleadership.
AubreyDaniels,inhisbookOops!:13ManagementPracticesthatWasteTimeandMoney(andwhattodo
instead),advisedleaderstotakeanactiverole.Hereisanextendedlist,includinghisthoughts.

AttheStart(evenbeforeformalmerging):
1. Developknowledgeaboutandenthusiasmforemployeesinbothcompanies.Learnaboutindividual
accomplishmentsanddemonstrateinterestinthoseaccomplishments.Bespecificwhenpossible.
2. Ensurethattheacquiredcompanycantalkaboutitsaccomplishments,tellitsstory.Detailthestoryin
newslettersandothercommunicationbutallowtheacquiredcompanytimetoreviewandcelebratetheir
historyinformalandinformalways.
3. Begintobuildourhistoryearlyandgetthewordoutaboutwhatiscomingresources,materials,
methods,personpowerorothergains.
4. Considerthatthemostimportantgainsareoftenintheworldofideasbegenerouswithattributiongive
awaytoothersandbacktoallwhereideascamefrom,ensuringthattheacquiredteamanditsindividuals
arerecognizedforgoodideas.
5. Meetearlyonwiththosewhohaveproducedregularaswellasextraordinaryimpactandaskthemtotell
youwhattheydid.Promisetoconsiderstrategiestomaintainthatsuccessandgivepeopleapartin
designingthenewcompany:fromthevisionandmissiontotacticsofdailyperformance.
6. Donotcompletelydismantletheacquiringcompany.Evaluatehowtomakeallofthesystems,processes,
andproceduresaseasy,effective,andsafeaspossible.
7. Communicatethevisiontoall,andhavethemrespondinconcretetermsabouthowitwillaffecttheirdaily
worklife.
8. Communicatethatwhilemuchmaychange,muchwillremainthesamethatthetwocompanieswere
successfulinmanywaysbeforewillcontinuethegoodworkofindividualemployeeswillbereplicated
acrosstheblendedcompany.
AsaNewCultureEmerges:
9. Spendtimelisteningandactingonissuesimportanttotheacquiringteam,butalsoremainsensitiveto
thoseintheacquiringcompany.Bealertthatnomatterthecircumstances,itisstillmoredifficulttobe
acquiredthantobetheacquirer.
10. Formfunctionalteamstodiscoverandusebestpracticesfrombothorganizations.Agreetoremovebad
practicesandcommittogoodones,andthendoit.Followup!
11. Removeoverlyburdensomeregulationlightenthedailyloadbyreducingbureaucraticobstaclestobeing
heard.
12. Trynottocutjobsfromonecompanyonly.Lookcloselyatthetalentyouhaveanddevelopitforthe
future.
13. Involveallinavisualtrackingsystemofprogresstogoal.Encouragefeedback,bothinformalandformal,
astohowitsgoing.AskHowdidyoudidthat?whenpositivechangesaremadeorweredoneinthe
past.
14. Setshorttermtargetsforsuccess.Makeiteasytogetawinandseethebenefitsofthenewworking
teamsthatyoucreate.Breakupoldteams.Encouragealltotryanewandtoshareideaswithinandup
theorganization.Makethiseasytodo.
SustainingYourGains:
15. Helpallemployeeswithwaysoftalkingaboutthenewcompanywhileborrowinggoodstoriesfromboth
histories.Weaveusefulacronymsinfromnewandold.Languageisamongtheleastunderstoodbuta
mostpowerfulmediatorofchange.
16. Conductrealcelebrationsofsuccessbyspecialevents,butalsointhedailywordsanddeedsof
leadership.Nooneshouldfeellikethecompanybeingacquiredhasfailedinsomeway.
17. Treattheacquiredcompanylikeanewfamilymember:delightinginlearningnewhabits,demonstrating
newskills,andcelebratingsuccessoftenandvisibly.
18. Ensurethatsuchactionsarejustthewayweworkherewithnodifferentiatingtalkaboutwhoisnew
andwhowasfirstanditwillbe.
Iftheaboveactionsaretaken,youandyourorganizationareonthepathtomergersuccess.Itmayappeartobe
aroughroad,butignoringthepitfallswontmakeitanysmoother,andinthelongrun,mayprovedisastrous.
AsoneAcademyofManagementExecutivestates,Inacquisitionsthatdofulfilltheirpromisethatreallymake
twoandtwoequalfiveleaderspaidagreatdealofattentiontotheintegrationprocessand,notsurprisingly,

involvedpeopleatalllevelsoftheprocess.

ADIAcceleratingBusinessPerformance
ADI
Foundedin1978,andheadquarteredinAtlanta,GA,AubreyDanielsInternational(ADI)worksgloballywitha
diversespectrumofclients.Wehelpacceleratethebusinessandsafetyperformanceofcompaniesworldwideby
usingpositive,practicalapproachesgroundedinthescienceofbehaviorandengineeredtoensurelongterm
sustainability.ADIsupportsitsclientsinacceleratingstrategyexecutionwhilefosteringemployeeengagement
andpositiveaccountabilityatalllevelsoftheirorganization.
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