Continued low crude prices are driving a revival in mergers and acquisitions (M&A) activity in oil and gas this year, and a few large deals are already on the table. The need to monetize assets, vertically integrate or seek companies/competitors who can help deepen market and technical expertise and grow market share is encouraging energy companies to embrace M&A. The key question is how can they manage these deals for success?
Successfully managing large-scale transformation and integration projects can be extremely challenging. The price of failure can be staggering, not just in terms of the hit on the bottom line but in terms of the ancillary cost of pain and stress to people in the throes of change. However, recognizing and prioritizing people and culture-related implications early on in a deal will influence—and, often determine—overall success.
While integration teams have well-developed toolkits for managing the financial and operational aspects of a merger, integrating two cultures, by contrast, is often undervalued. One recent study on M&A Retention found that understanding the cultural implications of the merger, building employee engagement and working with key employees early in the deal process helped retain essential employees beyond a year.
A 2014 survey of HR executives found that the top two HR factors contributing to the failure of an M&A program were culture and leadership. The widespread assumption that change causes employees and organizations to go off track is not correct; our research shows that dysfunctional culture, or behaviors—for example, poor management or lack of collaboration between different divisions—that are typically ingrained in the organization can unravel or block change. Some 85 percent of groups that run into trouble were found to have major underlying issues before implementing their change program. Indeed, while many emphasize a correctly-run integration process as the most critical to M&A success, few know how to measure culture factors correctly to manage the process effectively.
Happily, we may have an answer. Over the past 15 years, Accenture studied a range of change initiatives, including M&A deals, across more than 150 organizations spanning 50 industries and 25 countries, to find a pattern for success. We found that more than technical issues, figuring out how to unleash the power of human creativity in times of transformative change could be critical.
We also found that change capability, or fitness for change, is increasingly becoming fundamental to the way organizations do business. How to create change capability? Insight-driven approaches using sophisticated analytics capabilities will help organizations identify potential roadblocks in advance and effectively formulate and track transformation initiatives—including merger integration. Combined with strong leadership and agility, this will be the critical success factor for well-managed change in energy companies. Learn more about building effective pathways to managing organizational change from this new book from Accenture.
1 “Retaining talent critical to merger success,” by Dan Cook, BenefitsPro.com, 13 October 2014. Summit Business Media via Factiva.
2 ”Successful deal-making,” Working Paper Series – 2014, M&A Research Centre, Cass Business School, City University, London.
3 “Turning change upside down,” by Warren Parry and Randy Wandmacher, ©2015, Accenture.