This is the main cause of failed corporate acquisitions, according to the HR chief of a billion-dollar company
When Ken Brown joined Legrand, North America (LNA) in 2012, it was nine months into an acquisition that was going poorly.
"The leadership of that acquisition, who had signed on to stay on and lead their organization through the transition, woke up to the reality that they weren't going to control everything in the new world," he told Business Insider.
These cofounders left and the rest of the company was uneasy.
LNA is a billion-dollar subsidiary of Legrand, a world leader in electrical equipment, and it has been growing aggressively through acquisitions in the past five years. A failed acquisition would be disastrous.
Brown took a deep look at the reasons for the struggle and came to a simple conclusion: A failed integration of a company is primarily based on miscommunication during the negotiation and planning phase.
After many long hours of planning and negotiation, a corporate acquisition is agreed upon, but the way a culture is adapted is crucial to whether the partnership succeeds or fails. This is especially true when a company acquires one that is very different from itself in fundamental ways, like Walmart and newly purchased Jet.com.
In the specific case Brown investigated at the start of his tenure at Legrand, he found that both LNA and the smaller company had paid each other "lip service" to try to make the integration seem as painless as possible. Both sides were being dishonest with each other. "I think we went in and said nothing is going to change, and then immediately things started to change," Brown said. "Oftentimes it isn't the what but the how."
Brown met with LNA's CEO John Selldorff and the two eventually agreed that Brown would institute a culture of "change leadership" across LNA, which was so heavily reliant on successful acquisitions at this point in its history.
Brown said it is key to understand that a company's leadership that says it is "all in" with the deal cannot be taken at its word. "People are going to fall into three different buckets: early adopters, people who opted out and are demonstrating disruptive behavior, and then the vast majority are going to sit on the fence and wait and see what happens," he explained. It is necessary to determine which of these applies to a leader in question and act accordingly.
LNA's HR department created a system for educating an acquisition's leadership on how the integration was going to unfold. "People are very clear that we may not be able to tell you all the answers to all the questions that you have, but we can tell you how those answers will be determined and what your role in that will be," Brown said. "So in other words, change will not happen to you, it'll happen either with you or by you."
The training sessions have been very successful, Brown said, and LNA even had a chance to bring in the current leadership of the acquired company that was failing when he first joined. They told him, "Boy, it would have been wonderful to have this kind of a session right on the outset," he said.
"That's been a great transformation to see leaders in that organization, who were feeling victimized after their top leadership left, now taking the reins and helping guide the rest of the organization through change."