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21 Nov. 2019 | Comments (0)

The Conference Board report, The Leadership Factor in Mergers & Acquisitions, indicates that several factors inhibit firms from taking a more focused and structured approach to understanding the impact of acquirer and target firm leadership capabilities on deal success. Understanding what factors inhibit Human Resource (HR) leaders’ abilities to acquire the insights they require to make informed decisions in areas such as successful integration, organizational change, key talent identification, organizational design, succession planning and leadership team alignment can help HR M&A executives build stronger business case for formal leadership assessment in their deals.

The factors listed below, in many cases, are cumulative in their impact and require a detailed approach to mitigate in each deal. These factors include the following:

  • Time – There is immense pressure to get deals completed as quickly as possible. This comes into play in two ways. First, is access to the target company leaders. During due diligence, there is little time available to engage, interview or assess target company leaders. This is limited to meetings between business executives who are largely focused on financial and legal aspects of a deal, not necessarily leadership capabilities. Second, time to spend on leadership assessment is perceived as a time consuming endeavor. Because there are a number of leaders from both the acquirer and target involved in deal success, this perception of leadership assessment as time consuming inhibits making leadership assessment a priority. Time pressures also constrain the need to scale leadership assessment much deeper within the two firms. While an emphasis is typically on target company top management and possibly executive management, as The Leadership Factor in M&As research points out, middle management is a critical group to include in the leadership assessment process.
  • Culture – The aspect of culture as a critical component to deal success is often discussed, written about and pushed by M&A consulting firms as a critical element in deal success. There is no doubt that culture is an important factor, yet it has pushed a focus on leadership to the backburner in many respects. For example, cultural assessments have leadership components captured in them like leadership style, how firms collaborate, manage risk, etc. What comes from a cultural assessment project is then detailed change management and communications plans. What cultural assessment negates to account for in these plans to implement two different cultures is whether there are leaders in the two firms that can lead change, build relationships and foster teamwork. All critical leadership skills to deal success.
  • Leadership Behaviors – Another aspect was the understanding from the Conference Board research that firms do not know what leadership behaviors matter most in achieving deal outcomes. This lack of knowledge impedes firms from pursuing a greater leadership focus in their deals. As The Leadership Factor in M&As research identified, various leadership skills are more important at various deal stages.
  • Leaders Themselves – Another important facet that prevents a leadership focus is that business leaders don’t want to know their leadership strengths and risk areas. This is driven by a couple of important aspects. For example, how the leadership assessment data is used. For the target company, concerns will abound that this information may be used to make decisions about who to keep post-day one and who leaves. From the acquirer perspective, a willingness to go through a leadership assessment protocol is lessened because they “won” in the deal.
  • Soft Data – Even with the research and validation to support importance of leadership assessment data, it is still viewed as “soft data” by business leaders. This perception inhibits a wider focus on understanding acquirer and target leadership capabilities that can be brought to bear on deal success.
  • Access – Tied closely to the Time and Leaders Themselves factors, is access to leaders, whether acquirer or target firm, to conduct a formal leadership assessment during a deal. As noted in the other two factors referenced, leaders don’t have time or are under the impression they don’t have time to participate in leadership assessment. Additionally, some leaders do not want to know how effective they are as a leader. Therefore getting access and in large part leaders’ attention to conduct formal leadership assessment to support a deal is impacted.

Leadership capability is a foundational element to M&A deal success. Without the detailed knowledge of acquirer and target leadership strengths and risk areas, HR M&A executives are at a distinct disadvantage in helping position deals for success. By understanding the factors that inhibit detailed analysis of leadership in your deals, HR M&A executives are better positioned to mitigate these factors and support successful deal outcomes.

  • About the Author:J. Keith Dunbar, EdD

    J. Keith Dunbar, EdD

    Dr. J. Keith Dunbar is a Distinguished Principal Research Fellow in Human Capital at The Conference Board. He is an internationally renowned, award-winning expert on leadership and human capital. Duri…

    Full Bio | More from J. Keith Dunbar, EdD


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