Senior Client Partner
Leadership
How to Create a Winning M&A Leadership Team
Successful M&A integration hinges on the strength of the leadership team. Here’s how to build yours with rigor, transforming your organization for growth.
What makes a merger or acquisition a success? It all starts with having the right leaders in place. Research shows that strong leaders predict M&A strategy success and specific competencies are associated with high-performing deals.
The right leadership team is so critical because they have a big job on their hands: ensuring executive alignment, setting the cultural vision for the new company (Newco), and making timely and effective decisions. They define the strategy for Newco, inspire people to be part of something bigger, and maintain a laser-like focus on integration priorities. Through their communications, actions and behaviors, leaders set the standard for how work will get done in the new organization.
Choosing the right leadership team, of course, is easier said than done, especially when you find yourself with two of everything for many key leadership roles. What’s more, in some cases, neither person may be the right choice for Newco. If not planned for intentionally, there’s a risk that selection decisions will be made via bartering or negotiation versus objective rigor.
Here’s how to sidestep common mistakes and assemble a winning leadership team for day one readiness and beyond.
M&A Integration: Skills That Matters Most for Leadership Success
Finding the right leaders is critical when two organizations come together. These leaders are being asked to simultaneously run an existing company and create a brand-new company while moving through a complex business climate characterized by crisis and disruption. They must be the ‘meaning makers,’ rallying employees from Company A and Company B around a compelling vision for Newco amid internal uncertainty and upheaval. It’s a tall order, and two skills rise above the others: adaptability and learning agility.
Leaders with a strong adaptability competency meet new challenges as they arise, thrive on change, and make sense of uncertainty. Unexpected events do not emotionally trigger them. Instead, they shift into solution mode, performing well regardless of circumstances. Similarly, leaders with strong learning agility have an innate sense of “knowing what to do” amidst uncertainty, coupled with an open and receptive mindset. One component of learning agility is mental agility: the ability to embrace uncertainty and uncover novel ways of doing things—an essential skill for M&A success.
Learning agility also impacts the bottom line. Our research shows that companies with the greatest rates of highly agile executives produced 25% higher profit margins than their peers–which helps your M&A to be successful.
“Individuals with high adaptability and learning agility have the ‘X-factor’ that propels success,” says Sherry Duda, Senior Client Partner and Korn Ferry’s M&A practice lead. “They have learned how to run the business and change the business at the same time. They can perform and transform.”
Choosing Newco’s Leadership: 3 Questions to Ask
Mergers impose short, urgent timelines on leadership. With thousands of decisions to be made, it’s critical to fill governance positions as quickly as possible with the right leaders. But how can you confidently identify the agile leaders of the future when you’re unfamiliar with the new internal talent pool from the acquired company?
Start by asking these three questions:
- What talent do we need?
- What talent do we have?
- How do we close the gaps?
“Companies need to make decisions quickly and confidently, but in the early stages of a merger or acquisition, there’s no rhythm yet and no rules of the road,” says Duda. A common mistake is to focus on task integration first versus human integration, she says. “Task integration can seem easier since objective data exists on system effectiveness. The truth is, objective data exists on people too. But avoiding the hard issues around people is a mistake. Get your team in place from the beginning and start making key leadership decisions early based on objective criteria.”
Making Leadership Decisions: 3 Steps for Success
In a highly charged political environment, there’s a tendency to default to two common processes for leadership selection. One option is for Company A to retain most of its current leaders and let most of the Company B counterparts go. Another option is to strive for a 50/50 integration: half the C-suite is made of Company A and half is made of Company B. Neither approach leads to long-term success.
“Leadership selection must be made using objective, data-driven decisions,” says Duda. “This is the only way to determine if you’re truly selecting leaders with the skills needed for success, like adaptability and learning agility. This isn’t about making a gut choice or one company asserting dominance over another. If the goal is for Newco to be successful from Day One, then you need data-driven insights.”
A consistent, objective, and transparent process is essential for selecting the right leaders. If you’ve asked the three key questions, you’ll have a good sense of where your overall bench sits. Now, it’s time to assess each individual’s fit for Newco’s leadership and critical roles.
Step 1: Obtain clarity and alignment on what great looks like
What does success look like for the role, for the context and challenge, and considering Newco’s cultural aspirations? Aligning key decision makers to what great looks like provides an objective standard for individual assessment.
Step 2: Assess performance and potential
Gain in-depth and actionable insights on your leadership talent with a standardized, scientific, and data-driven assessment approach. For example, an objective survey measuring skill sets and mindsets can illustrate an individual’s current capability and future potential. This minimizes selection uncertainty and human bias.
Step 3: Make strong selection decisions
Using objective assessment criteria, determine which people will be best for which roles and which roles need a net-new hire. Solidify Board and leadership decisions quickly to drive the business forward. Understand individual and collective leadership risk factors and establish a plan to proactively close the gaps, keeping the focus on how you get to success.
“When making leadership decisions, while stability counts, remember that you have one opportunity to create a new company, a masterpiece called Newco– and success is going to look different here than it did at Company A or Company B,” says Duda.
Sometimes that means you’ll go out and hire a new person for a role. For example, if the Board determines neither CEO is the right future leader, you’ll need to execute a CEO search quickly. From a relationship standpoint, this can be a tricky process. “But the fact is, some skill sets are more important today than they were in the past,” says Duda. “You need to keep your focus on getting to success for Newco.”
Throughout the leadership selection process, consistency, objectivity, and transparency are key. Develop and communicate selection principles early on, followed by an objective and fair talent planning process. Retaining your top leaders is much easier when there is clarity and trust in the selection process.
Next Steps: Setting a Winning Vision
Once you’ve decided on your leadership team, these leaders can begin fulfilling one of their key responsibilities: being the meaning makers at Newco. Whether it’s about setting the vision, prioritizing the right work, or confidently answering the team’s questions, Newco’s leaders provide the insight and understanding essential to engage and retain talent who will help create a winning organization.
“One job of the leader is to describe winning,” says Duda. “Why is Newco more than just a combination of Company A and Company B? What makes it special and why will it be a success? Internally, people at all levels are looking for this answer, but externally market analysts need this answer too.”
Is your leadership team prepared to set a winning vision? Learn from successful M&A leaders today.
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