How to Redesign Your Organizational Structure After an Acquisition

New acquisitions are exciting, as they present growth opportunities for the companies involved. However, if handled poorly, they can have disastrous outcomes. But don’t cue the daunting music just yet. Luckily, when you approach your integration and organizational redesign with your people and systems in mind, you can help your company navigate even the trickiest acquisitions.

Read the steps below to make sure you’re setting yourself up for success during your acquisition and merging process.

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.

Integration plans help your company identify and tackle the most important parts of an acquisition. Ideally, these plans have been in the works for weeks (if not months) prior to signing the deal.

As part of the acquiring company, make sure you:

• Perform due diligence, which is an assessment of the company you wish to acquire. Consider the customers, product or service, revenue, tools, processes, and employees in order to better understand how the two companies might come together.
• Establish 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 leaders simply being aware of what’s going on — we mean being actively involved in creating and implementing your integration plan.
• Form your communication strategy. It’s important for you to prepare change management communication plans for major changes. When doing so, make sure you include the seven “critical drivers” of success: culture, organization, communications, leadership, policies and procedures, employee onboarding, and incentives. Without considering these seven drivers, you risk creating fragmented plans that overlook the foundations of an integration plan.

Design an Organizational 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 organizational structure serves their current goals, a redesigned, post-acquisition org structure should reflect your combined company’s ideal future state.

While it may be tempting to start your redesign by making a list of specific key personnel, you should instead identify the roles that will help support the short- and long-term success of the combined company.

Start with analyzing key roles, which allows you to specify the skills and experience needed to make your new company a success. And once your leadership team agrees on these standards, it’s important to formalize objective criteria to promote fairness when making and communicating employment changes down the line.

American Airlines, for example, focused on establishing leadership expectations during a massive change. And with this initiative came a more standardized performance management strategy. Beverly Goulet, the Chief Integration Officer, explains, “We translated these requirements into specific attributes and incorporated [them] into performance metrics against which leaders are evaluated.”

Next, consider organizational modeling, or analyzing your roles and reporting structure. When it comes to organizational modeling, it’s helpful to:

• Create multiple scenarios. HBR advises, “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.” Therefore, creating scenarios in a shared sandbox helps leaders from all departments get on the same page and sign off on different workforce plans that best align with success moving forward.
• Choose a structure that optimizes your talent. There’s a lot of org structures out there. 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 their skill sets and gaps – whereas the more traditional top-down approach relies on limited information and assumptions of performance.
• Use a platform to visualize (and budget) headcount plans. A people operations platform makes it easy to forecast headcount changes. With a visual image of your proposed structure, you can see at a glance how organizational structural changes will impact your company. And the right people operations platform integrates with your existing HR tech stack to support your planning with context, such as looking at your compensation data to help you stay within budget.

Take organizational modeling to new levels by creating and collaborating on scenario plans within your people operations platform.

Communicate Your Organizational Redesign

As you navigate acquisition, both pre- and post-deal, remain mindful and intentional about 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.

Specifically, make sure you:

• Provide transparency. 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.”
• Set up systems for collaboration. Ultimately, you want to make the transition as seamless as possible for your people – and your customers. That effort requires that you have team members who are familiar with each company’s customer base and available to speak with customers if they reach out. This effort can make a huge difference in both the short and long-term in reducing customer churn post-acquisition.
• Give employees time to adjust. Changing your organizational structure can bring a lot of, well, change. These shifts often look like multiple offices, a distributed workforce, and new direct reports in managers’ span of control. Therefore, it’s important to give leaders time to adjust to the management changes these new work environments bring.

Develop Your Employee Retention Strategy

After communicating any new changes in your organizational structure, it’s important to focus on retaining your people. This effort is important, especially since post-acquisition employee retention has seen a steady decline in the last decade.

In fact, 56% of companies reported “significant success” in employee retention in 2010, but this number dropped to 10% by 2019. Losing employees not only costs money and compromises your combined company’s collective knowledge and expertise, but it also invites the risk of those employees being picked up by competitors.

For a successful retention strategy, look to Buffer, who prioritizes 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%.

But while this approach works for Buffer, it’s important to note that employee retention strategies can take multiple forms, such as:

• Incentivizing staying: McKinsey suggests offering an incentive package to employees with mission-critical knowledge and skills. Financial incentives are an obvious option, but “praise and commendation from an immediate manager” also works as an effective retention measure.
• Prioritizing culture: Culture is too often overlooked during an acquisition, but it 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 with your company.
• Creating a re-onboarding strategy. Only 22% of companies include employee onboarding in their change management programs. Yet, the integration will typically bring changes in policies and systems, affecting your company culture and employee engagement. Don’t overlook this important step in your new acquisition.

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 tech stack of each company. This step 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.

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 integrations can play so you’re not clicking through multiple platforms and spreadsheets to make decisions.

Specifically, a modern people operations platform (with people analytics features) offers extensive integration options, making it easy to combine data from tools like applicant tracking, compensation, org charting, and payroll into a centralized platform. These integrations not only make 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.

Just like all of your employees should collaborate with one another, your tech stack should do the same. When you use a people operations platform, all of your data is housed in one place to help drive informed decisions.

Conduct Your Organizational Redesign With Confidence

You have a long to-do list when it comes to acquiring and merging with a company. But you can attack this list with confidence knowing you have a strong implementation plan in place. That implementation plan – which includes considering your organizational structure, prioritizing your people strategy, and analyzing your HR tech stack – will help ensure a more seamless transition for both companies moving forward.

Interested in how an ideal acquisition and merger plays out in real life? Check out our interview with Kathryn LaViolette, HR Tech & Analytics Manager of BigBear.ai, to see how they tackled their organizational structure and rolled out new initiatives.