Don’t Break What Made the Company Valuable

Change is hard. Yet it is a necessary component of the M&A process. While it will take new team members time to adjust, how you approach integration plays a huge role in how effective you are at preserving what made the company worth acquiring in the first place.

“When culture is honored and evolved, engagement stabilizes quickly and productivity accelerates,” says Robert Jackson, chief human resources officer for Monarch Landscape Companies, based in Los Angeles, California. “When culture is abruptly replaced, turnover risk increases and discretionary effort declines.”

Preserving Stability

One method to provide a sense of stability during the integration period is to retain the former owner for at least a year.

Frank Annino, president of maintenance for Sperber Landscape Companies, based in Westlake Village, California, says this gives Sperber an opportunity to work with the new partner to learn what they do so well, and perhaps where their experience can enhance their operations. 

Skip Thompson, vice president of post-merger integration for Landscape Workshop, based in Birmingham, Alabama, says they also appreciate when they can retain an owner in a role, whether it be a general manager or an ambassador.

Because acquisitions are an emotional and stressful time for employees, having the owner on board to communicate the post-acquisition plan can provide reassurance.

“The more the stress level goes up, the more issues there are, the more questions that are asked,” Thompson says. “Uncertainty breeds a lot of different things. It’s so important to inform as much as you can. Be as transparent as you can, and tell them the good and the bad. You can’t ever say, ‘Hey, nothing’s going to change’ because there are going to be changes, but it might be minimal, and it depends on where you’re at in the company.”

Beyond having the former owner stay on during the transition period, another practice that can boost employees’ confidence is conducting due diligence to identify what makes the organization successful.

“When founders exit, we focus on stabilizing the leadership bench early, reinforcing what employees are proud of, and codifying cultural strengths so they are institutionalized, not personality-dependent,” Jackson says.

Reducing Resentment During Changes

If you want to mitigate employee hostility to changes, Thompson says inclusion is huge.

“If you explain the why, if people understand why you would want to do things a certain way, and they have understanding and inclusion, they’re more likely to be part of that process,” Thompson says. “Instead of being just told, ‘This is what we’re going to do because this is what we do.’ It’s a partnership. You’ve got to explain the why, and the more understanding they have, the better off you are.”

Jackson says beyond explaining the why, honoring what worked before introducing change and involving local leaders in designing the solution can help streamline cultural changes.

Annino recommends being curious about what the employees in the new partner company may be concerned about and then putting them at ease

“Let’s have a conversation around what changes versus what doesn’t change,” Annino says. “We don’t go in and tell them how to mow grass or apply fertilizer, for instance. Rather, we focus on all of the amazing things that they do. This is why we wanted the partnership to begin with.”    

He says that Sperber recognizes that each partnership is unique, and they want them to keep that uniqueness. 

“Whether that is how they title their people, or how they set up their people for success through performance planning, we understand that is what makes them great,” Annino says. “It is important for the team to carry on their story throughout their market.”

It also helps when the post-acquisition changes feel additive, which is typically the case with compensation and benefits.

“We conduct a full compensation philosophy review during diligence,” Jackson says. “Our objective is alignment to Monarch’s pay-for-performance model while avoiding unnecessary disruption, and no one goes backward is our main priority.”

Jackson says they prioritize market competitiveness, internal equity, incentive alignment to EBIT and growth, and communicate earning potential to their new employees.

Similarly, Sperber ensures that, during the due diligence phase, their benefits package is better than the acquired company’s current package.

Thompson says they’ve never had any issues with an acquired company having higher pay rates than Landscape Workshop.

“We are able to offer a lot of different benefits and have a lot of options,” Thompson says. “Our 401(k) is very, very good, and now we have our shared prosperity program, which goes all the way down. That, in itself, is something that I don’t know that anybody else in the market is able to offer at this point.”

Measuring Whether Integration Is Actually Working

Closely monitoring metrics such as safety incident rates, customer retention, and regrettable turnover can help determine whether a transition is going smoothly.

Annino says in one instance, an organization had several OSHA recordables over a short period of time before the acquisition. Sperber responded by stepping in and providing a four-step plan to work with the partner company.

By working together, that same organization went two full years without a single OSHA recordable from the moment that the partner company committed to the plan.

“We see our job as enhancing the partnership, whether through an advanced safety program, a focused sales strategy, or perhaps technology aimed at helping with efficiency within the operations,” Annino says. “We know that in the end, we are better together.”

Thompson says they keep an eye on customer communication, how their numbers compare financially to before the business was acquired and if the employees are happy and bought in.

Lessons Learned from Past Mistakes

One of the biggest challenges during integration is determining which changes need to happen immediately and which should be phased in more gradually. Jackson cautions against moving too quickly.

“Even when financially rational, perceived loss of control can erode trust,” Jackson says. “We now pace change more deliberately.”

Thompson says having a dedicated integration team is critical, as they can assure everyone that everything will be okay and work alongside the organization as they move through the process.

Annino says the worst thing is to not communicate honestly with the team. He says it is best to be direct.

“If you’re going to change some things, do it in the first 90 days and then only go after the things that are super important,” Annino says. “The color of the truck probably isn’t that big of a deal. The color of the uniform is not a big deal. Do that as time goes on, because those are a little more sensitive. If it’s not going to be materially different from the output of what that organization is going to do, leave that stuff alone, and go after the low-hanging fruit where you can change lives.”