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How to Redesign Your Organizational Structure After an Acquisition

Nov 10, 2021| Reading time: 13min

BY Sharon Rusinowitz

Director of Content Marketing

Companies exist in a state of constant flux on both a small and a large scale. Those large-scale fluctuations might be changes to key leadership, a pivot in product offering or focus, or a strategic redesign of the company structure.

McKinsey reports that 60% of companies went through a redesign in the past two years, but that less than 25% of those company redesigns were successful.

It’s a troubling statistic, but even more so when you consider that an organizational redesign is often necessary for the survival of the company.

Take acquisitions: They present exciting growth opportunities for the companies involved, but if handled poorly, they can have disastrous outcomes. However, approaching your integration and organizational redesign with your people and systems in mind can help your company navigate even the trickiest acquisitions.

Get a jump start on your integration plan

In order to hit the ground running on day one of an acquisition, you need a solid integration plan that’s been in the works in weeks, if not months, prior to signing the deal.

Integration plans help your company identify and tackle the most important parts of an acquisition. Acquiring companies often start with due diligence, or an assessment of the company they wish to acquire. They consider the customers, product or service, revenue, tools, processes, and employees in order to better understand how the two companies might come together.

Acquiring companies will also form an integration team, or a select group of leaders and key stakeholders tasked with overseeing the acquisition. Having HR leadership involved from the early stages of the acquisition is crucial to success. And we don’t mean simply being aware of what’s going on—we mean actively involved in creating and implementing an integration plan. A recent PwC survey found that 64% of responding companies saw significant value in including HR leadership in their integration team.

Developing an integration plan will also give your team a chance to figure out the communication strategy. Companies prepare change management communication plans for major changes, but these plans often lack the seven “critical drivers” of success, as outlined by PwC. These drivers include: culture, organization, communications, leadership, policies and procedures, employee onboarding, and incentives.

How to redesign org structure after an acquisition - impact of change management

Over 60% of companies claim to have a change management plan in place, but few include all seven “critical drivers” of a change management program. [Source]

Without considering these seven drivers, companies risk creating fragmented plans that overlook the foundations of an integration plan. For example, PwC found only 22% of companies included employee onboarding in their change management programs. Yet, the integration will typically bring changes in policies and systems, affecting the way people work. In many cases, employees may need formal training to use new tools and processes.

Design an Org Structure that Aligns with Your Desired Future State

Part of your integration plan should address how your new company will look. While each company’s current structure serves their current goals, a redesigned, post-acquisition org structure should reflect your combined company’s future state.

While it may be tempting to start your redesign by making a list of specific key personnel, instead you should identify the roles that will help support the short- and long-term success of the combined company. Let’s say you want to make the transition as seamless as possible for the customers of both companies. That requires that you have customer success team members who are familiar with each company’s customer base and available to speak with customers if they reach out. This role can make a huge difference in both the short and long-term in reducing customer churn post-acquisition.

Starting with key roles also allows you to be specific about the skills and experience needed to make your company a success. Take American Airlines, which focused on leadership during a massive change. Beverly Goulet, the chief integration officer, says, “We redefined leadership expectations and attributes for the new organization. … We translated these requirements into specific attributes and … incorporated the attributes into performance metrics against which leaders are evaluated.” Creating objective criteria enables you to be fair when making and communicating employment changes down the line.

Starting with key roles allows you to be specific about the skills and experience needed to make your company a success.

It’s also important that you be realistic when determining a role’s direct reports and span of control. If an acquisition introduces multiple offices or a distributed workforce, leaders will need time to adjust to the management changes these new work environments bring.

Here’s where having visual people analytics is useful. A people analytics platform makes it easy to forecast headcount changes effectively. With a visual image of your proposed structure, you can see at a glance how structural changes will impact the organization. Many people analytics platforms also integrate with your existing HR tech stack to support your planning with context. For example, you’ll be able to pull in compensation data to measure how every change affects the budget.

Org structure visualization on ChartHop org chart

When it comes to org design, it might benefit your company to create multiple scenarios. Harvard Business Review puts it best when they write, “No solution will perfectly fit all future possibilities and every solution will have its downsides: only by weighing alternatives will you see what you might gain and what you might lose.”

Develop your employee retention strategy

Post-acquisition employee retention has seen a steady decline in the last decade. According to PwC, 56% of companies reported “significant success” in employee retention in 2010, but this number dropped to 10% by 2019. Losing employees not only compromises your combined company’s collective knowledge and expertise, but it also invites the risk of those employees being picked up by competitors.

Planning with your people in mind should happen early in the acquisition process. An employee retention strategy can help. Take Buffer: They prioritize transparency with their employees in everything from communication to salaries. They’ve found that this transparency, coupled with values that help sustain and support their distributed workforce, has delivered a retention rate of 94%.

Planning with your people in mind should happen early in the acquisition process. An employee retention strategy can help.

While this approach works for Buffer, it’s important to note that employee retention strategies can take multiple forms. Here are a few other common examples:

  • Incentivizing staying: McKinsey suggests offering an incentive package to employees with mission-critical knowledge and skills. Financial incentives are an obvious option, but a McKinsey survey found that “praise and commendation from an immediate manager” also worked as an effective retention measure.
  • Prioritizing culture: Culture is too often overlooked during an acquisition, but culture plays a huge role in employee satisfaction and willingness to stay. Being up front about what the culture of the combined company will look like can go a long way toward keeping employees engaged.
  • Communicating paths of growth and opportunity: Lean into your newly redesigned org chart to show employees what their future can hold. Establishing longevity and opportunities for growth in the future state of the new company can help employees envision their long-term future.

You may also consider adopting a bottom-up approach when it comes to identifying the talent you wish to keep, promote, or redistribute. A bottom-up approach leverages the insight of those who work directly with these individuals and therefore know what they’re capable of, whereas the more traditional top-down approach relies on limited information and assumptions of performance.

Lastly, be open, honest, and timely with your personnel decisions. Acquisitions, or any potential change or threat to employment, can cause your employees a great deal of anxiety. As Betty Jane Hess, the former head of the acquisition integration team at Arrow Electronics, points out, “[Communication] helps people relax just a little bit. And then they want to help you make this work.”

Plan how to integrate HR systems and technology

It’s crucial that all employee data lives in the same solutions moving forward as everyone will now be part of one company. As a result, an essential part of planning an organizational redesign post acquisition is identifying which HR solutions will make the cut.

Start by studying the HR systems each company uses. This is a standard part of due diligence, but we can’t stress it enough. Make sure you understand why each company uses a specific tool or system and what purpose it serves. Doing so can help your teams combat tool redundancies, save money, and improve process efficiencies.

Data integration is crucial in ensuring that everyone is working from the same information rather than scouring multiple tools and platforms in search of what they need.

Marrying this information is part of data integration, and solidifying your HR tech stack can speed up that process. Data integration is crucial in ensuring that everyone is working from the same information rather than scouring multiple tools and platforms in search of what they need.

When making decisions on which HR systems to keep, choose ones that best serve the identified goals of your future, post-acquisition company. You should also consider the role tool integrations can play. For example, a people analytics platform can help streamline your team’s redesigned work experience and make the entire data integration process far easier for everyone involved.

Specifically, a modern people analytics solution that offers extensive integration options makes it easy to combine data from tools like applicant tracking, compensation, org charting, and payroll into a centralized platform. This integration not only makes it easier to bring together all of your people data, but the centralized platform also delivers reporting and invaluable insights to continue evolving the workforce post-acquisition.

Keep the human touch during organizational redesign

As you navigate acquisition, both pre-and post-deal, remain mindful and intentional in how you communicate changes to your employees. In a time that can cause employees a great deal of stress and uncertainty, ask questions, listen, and make yourself available. Employees remain the most valuable resource a company has, and continuing to invest in that resource with honest and open communication can only benefit the future of your company.

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