Potential merger risk

One of the hardest parts of merging two organisations is blending multiple leaders into a single team without duplication or competition. When executive-level team members compete for influence or mistrust each other, feelings of territoriality emerge and subject crucial decisions to poor judgment. It is therefore essential for the members of the leadership team to hold each other accountable for operating with a joint mindset, including overcoming political whiplash from attrition and new appointments.

How Somerset FT mitigated this risk

The boards of the two legacy organisations recognised the importance of having a single, cross-organisational executive team to lead their collaboration and established that team two and a half years ahead of the legal merger. The team laid crucial groundwork by communicating the strategic direction and supporting staff to explore the benefits of working across organisational boundaries for patients. The leadership team followed three tenets:

1) Correct for past imbalances

• First, acknowledge differences in historic influence and resources. Physical health has consistently been prioritised over mental health in the UK, so SomPar had fewer resources than TSFT.
• Then, correct for imbalances. The leadership team conducted a Somerset mental health gap analysis in 2017 to bring resource imbalances to light. This inspired the new executive team to use the merger to bring parity of esteem to physical and mental health.
• Don’t underestimate the signalling value of your actions. The joint executive team challenged any identification, whether implied or otherwise, of SomPar as the political ‘underdog.’ This was symbolically reinforced by the fact that SomPar acquired TSFT, rather than the other way around. 

2) Acknowledge historic baggage

• Create a safe space for members of the leadership team to share their concerns. SomPar, for instance, had a negative experience with an earlier merger in 2015 designed to integrate community and mental health services. TSFT leaders acknowledged SomPar’s experience with empathy.
• Don’t sweep anything under the rug. Instead of glossing over historic difficulties, the joint executive team used lessons learned from the 2015 merger to guide their decisions. For additional support, the team hired an external consultant to facilitate executive development and relationship-building workshops across the course of six months.

3) Reconstruct the executive team for streamlined governance

• As early as possible, consolidate all C-level positions to one person per role. The legacy organisations created a joint executive team with members individually responsible for their own areas.1 This meant that the team saw some attrition, while some members
• Using a competitive interviewing process to appoint C-level positions, encourage your board to consider passion for patients a key asset and deprioritise individuals who are driven by personal interests.
• Consider having one public voice. Appointing one CEO long before the merger was complete sent a strong message to the two organisations’ staff and the community that they would be operating as one going forward.

Potential merger risk

Merging organisations that fail to identify and communicate an energising purpose often fall back on transactional details and find that employees drag their feet through change adoption. While leadership is accountable to the vision and outcomes of the merger, buy-in happens at the grassroots level. Lack of staff buy-in born from scepticism and confusion can lead to failed implementation of integration steps and alienate valuable talent, risking an uptick in attrition.

How Somerset FT mitigated this risk

The joint integration team communicated a mission-driven purpose that resonated with staff committed to improving patient outcomes. Thus, communication focused on the merger’s clinical benefits rather than the transaction itself, and clinical integration happened gradually over time so that when the merger became official, it was just another day for staff.1 Leadership relied on three tactics to persuade staff:

1) Anchor every integration step to a clear purpose

• Articulate a clear, patient-centred goal for the nascent organisation, such as Somerset FT’s mission: 'delivering outstanding care through a culture of listening, learning, and continuous improvement.'
• Intentionally explain why and how the merger enables your goals.
• Embed flexibility into the merger timeline to prioritise the development of the clinical model.

2) Demonstrate focus on clinical outcomes, not financials

• Draft the long-term financial modelling after the clinical integration model is complete.
• If there aren’t service duplications, guarantee there won’t be any clinical redundancies as early as possible.
• Share stories of early clinical wins with employees – and share them often.
• Emphasise the “person-centred” goal of the organisation over mere integration of services. Integration isn’t the end goal of the organisation; it is a means to an end.

3) Overcommunicate with staff

• Communicate through diverse channels to get the word out at different times, for different audiences, and in different fashions. For instance, Somerset FT’s joint executive team hosted roadshows, workshops, and webinars for staff to engage with and learn about the merger.
• Have direct leadership involvement, such as the CEO, the Communication Director, and COO facilitate roadshows about the merger internally and externally to spread consistent messaging.

Potential merger risk

Culture must be a central part of any merger strategy because it is closely tied to employee satisfaction, retention, and recruitment. In fact, a survey found that 28 percent of all jobseekers who left a job within the first 90 days listed company culture as the main reason.

A merger is already disruptive to the workforce because of changes in roles, geographic sites, and identity, so when merging organisations fail to incite passion for and bring comfort to changes through a positive culture transition, it’s tough to avoid the sentiment among employees of ‘we didn’t choose to be here.’

How Somerset FT mitigated this risk

To avoid mass attrition and begin recruiting under a new culture and identity, the joint executive team didn’t leave its culture transition to chance. It put ample emphasis on a strategy facilitated by both a cultural audit and an HR transformation. The strategy blended some old cultural elements with new ones, highlighted the importance of staff engagement, and appealed to staff’s passion for improving patient outcomes. This approach promoted widespread buy-in over time so that the merger date didn’t feel insurmountable. Three tactics helped Somerset FT build a new culture and bring it to life:

1) Perform a cultural audit

• Conduct an audit of both merging organisations. The two organisations’ culture audit informed a workforce strategy for the alliance (dubbed the Alliance People Strategy) which was then used to guide the workforce merger.
• Use the audit to blend new and old. The audit of both organisations helped the executive team build a hybrid culture that brings together the best of both legacy cultures with new values, behaviours, and a fresh identity.

2) Transform HR into a vessel that supports complex culture change

• Expand HR’s scope of responsibilities. Somerset FT’s Alliance People Strategy, for instance, focuses both on traditional HR responsibilities and engagement through a smooth cultural transition.
• Ensure HR is a key enabler of success for the merged workforce. Somerset FT’s Alliance People Strategy is based on three pillars: resourcing (the recruiting cycle), engagement (employee wellbeing) and development (employee success). This reconfiguration to support the whole hire-to-retire cycle is supported by HR’s services and programmes, making HR a key player in the merger’s success, not just a back-office function.

3) Supplement culture change with L&D programmes

• Outline the array of skills needed post-merger. The HR leaders involved in Somerset FT’s merger assessed what skills and behaviours would be needed for the workforce to drive transformational change. Then, they reinforced the new culture through learning and ambassadorship initiatives that matched those needs.
• Periodically stand up programmes to bridge knowledge and behavioural gaps. Somerset FT, for instance, launched the ‘Compass’ leadership development programme, which helps leaders actively exhibit the values of the new culture, thus encouraging culture change from the top down. See the next page for an example of the ‘Compass’ programme.

Compass Programme for Leadership Development

Description: The Compass Programme was designed to support leaders across clinical, administrative, and support services explore leadership within the context of the alliance’s values. By setting the leadership agenda and embedding new values, Compass forms a critical component of setting organisational culture for the next ten years.

Four modules delivered one at a time

• Module 1: Setting the context of the programme
• Module 2: Our value – listening & leading
• Module 3: Our value – working together
• Module 4: Our value – outstanding care

Metrics for success

• Attendance
• Satisfaction with programme delivery quality
• Extent to which leaders took away meaningful action
• Whether participants would recommend the programme to others

Results: 89.2 percent of participants, who were invited by pay band, left Module 1 with definite actions or ideas for action, and the module was attended by a diverse assortment of roles and professionals. Compass Programme organisers noted the importance of focusing programme material on leading through a changing organisational and health care landscape rather than selling the idea of the merger.

Potential merger risk

Merging organisations must support their integration efforts with sufficient resources such as time, workforce, capital, and will power. Lack of resource commitment and follow-through sabotage the desired outcomes of the merger by putting care quality, financial benefits, and the merged workforce at risk. Adversely, true and realistic commitment to the merger ensures that desired outcomes are enabled by, and not held hostage to, time and resources.

How Somerset FT mitigated this risk

When Somerset FT’s integration plan was put into practice, it required some adjustments. However, based on need, the leadership team dedicated the ongoing necessary input, particularly time, to meet initial expectations. More critically, those accountable for the merger’s success were fully committed to the process from start to finish. Recognising that the job would be extensive and symbolic in nature, the team took these four steps: 

1) Match resources to outcomes, not outcomes to resources

• Don’t tailor outcomes to resource constraints; rather, define the desired outcomes and goal of the partnership first and then think through the resources required.
• If resources don't exist to meet the desired outcomes, then reconsider M&A – pivoting early is less abrasive than overpromising and underperforming. Somerset FT’s leadership team, for instance, contemplated many options for change, only one of which was the merger between SomPar and TSFT.

2) Define the inputs required in detail

• Once leadership is aligned on merger purpose, define in detail what is needed to achieve the desired outcomes.
• Recognise that not all mergers require the same inputs. In Somerset FT’s case, some business functions needed more time to breathe before integrating, while others could integrate earlier on. Therefore, the resource Somerset FT needed the most was time to gradually integrate functions – but for other providers it may be workforce or capital.

3) Critically assess availability of internal resources

• Assess whether you have the resources to manage the process alone. Given competing priorities, the Somerset FT executive team realised they needed a dedicated project management function. While they could have partnered with a third party, they instead opted to own the merger process internally to create a homegrown clinical model.
• Regardless of whether you decide the process will be managed externally or internally, create an internal M&A management function. In Somerset's case, it was crucial to have hired a full-time Director of Integration to write the merger business case and coordinate the merger steps.

4) Fully commit the resources

• Earmark resources so you can commit the right level of input for the entirety of the merger process instead of back-tracking.
• Commitment is required not just from the top. So, to boost willpower and appetite for change across the entire organisation, Somerset FT’s joint leadership team asked managers to make the merger a priority for their respective teams and tailored messaging to each stakeholder group.