Building the Management Team in the First Year After a Merger

In mergers and acquisitions, the preparation period is largely built around financial and legal matters. Valuation work, legal review, contract structure and the operational elements of the integration plan are all worked through in detail before the transaction closes. Once the transaction is complete, a subject that those plans usually treat only briefly moves to the centre of the agenda: two sets of executives from two different management traditions becoming a single management team.

At first sight this looks like a technical adjustment. The organisation chart is updated, reporting lines are redrawn, titles are matched. Yet what we observe in practice shows that completing the chart and building the team are not the same thing. When two organisations come together, it is not only two balance sheets that meet, but two decision-making habits, two reporting disciplines and two distinct management languages. The chart does not make any of these visible.

The first year is the period in which those differences either turn into a working order or settle into a permanent source of friction. Whether the integration has delivered its commercial objectives is usually discussed at the end of the second year, but a significant share of the decisions that determine the outcome are taken within the first twelve months. For that reason, building the management team is not a secondary heading within the integration plan; it is a stream of work that must run alongside the plan itself.

What distinguishes this period is that both organisations arrive with a functioning order of their own. Neither the acquiring party's method nor the acquired party's method is inherently flawed; both have produced results in their own history. The difficulty arises from two functioning orders remaining in force at the same time. Building the management team therefore needs to be approached not as adapting one side to the other, but as deliberately defining a shared way of working.

At E&E Group, across the executive recruitment, assessment and change management projects we have run since 1992, we observe that the post-merger period produces a number of recurring challenges for organisations. We examine these below within three main frames.

Two Decision-Making Structures Side by Side

An organisation's decision-making structure extends far beyond its written procedures. The number of approval levels, the level at which a matter is debated and the level at which it is settled, how much preparation takes place before a meeting, the form in which objections are voiced: all of these are habits that have settled over time. When two organisations merge, the points at which those habits do not align surface quickly.

The most common difference is the speed of decision-making. One side may have a structure in which authority is distributed relatively widely and middle management decides within a defined budget threshold. The other may have a structure in which decisions are concentrated at the centre and senior approval is sought more frequently. When the two come together, the picture in the early months is usually this: executives whose scope of authority has narrowed place decisions on hold, while those whose scope has widened hesitate to take on responsibility they are not accustomed to. In both cases, decision-making slows.

The second difference is reporting discipline. Which data is produced and how often, which indicator reaches the management agenda, and the fact that metrics carrying the same name are in fact calculated by different methods are recurring agenda items throughout the first year. When two executives looking at the same table reach different conclusions, the cause is usually not disagreement but a difference in definition. Defining a shared indicator set is therefore as much about establishing the management team's common language as it is a technical exercise.

The third difference is the management language itself. In one organisation, direct objection may be regarded as normal, while in the other the same objection is read as a lack of alignment. The habit of seeking views before a meeting may be established on one side and absent on the other. These differences appear in no written document, yet they directly shape how well the management team works together in the early months. Part of the tension experienced after a merger arises because the parties misread not each other's intent but each other's manner of communication.

Where these differences will emerge is generally not visible in the reviews carried out before completion. Legal and financial due diligence covers an organisation's commitments and risks; it does not cover management habits. Part of the work in the first months is therefore devoted to setting out, in writing, how each organisation produces decisions. Defining in a shared document which decisions are taken at which level, which matters are escalated to the board, and where rapid movement is expected shifts the discussion from individual styles to process design.

Another point often overlooked in aligning decision structures is the change in scale. In merged organisations, an executive's scope of responsibility usually expands. An executive previously responsible for a single region or product group may find themselves working with a portfolio twice the size. This transition does not mean doing more of the same work. The frequency of decisions, the need to delegate and the prioritisation of the agenda all change. Adapting to the way of working that a change in scale requires is the area in which executives most often need support after a merger.

Where clarity is not established early in these three areas, the result is the postponement of decisions. In periods of uncertainty, the behaviour executives fall back on most readily is avoiding decisions that cannot be reversed. Staffing decisions, investment decisions and commitments on the client side are all held. This is one of the principal reasons the value expected from an integration arrives late.

Part of this tendency also stems from the scope of authority remaining unclear for a period. Even when the new structure has been announced, the level at which a decision will be settled does not become clear until it is tested in practice. Staff infer the boundaries of the new order by watching how the first decisions progress. For that reason, a management team deliberately concluding a small number of decisions quickly and visibly in the early period accelerates how quickly the new way of working is understood across the organisation.

Clarifying Roles and Areas of Responsibility

Overlap in the management structure after a merger is unavoidable. Both organisations have a finance director, a commercial lead and a head of human resources. How that overlap is resolved is the strongest message the rest of the organisation receives. A delayed decision means the workforce spends months without knowing who to approach on which matter.

The tendency we observe in practice is that some of these decisions are addressed by deferral. Having two executives work together for a period is chosen in the expectation that the division of work between them will settle naturally over time. This approach can work when it is limited to a defined transition period with a stated duration. Where no duration or closing condition is set, however, both executives continue in a position that is not settled, and their teams determine for themselves which reporting line takes precedence.

Assessing overlapping roles solely on past performance is the most frequently repeated weakness in these decisions. Past performance shows the result an executive produced under the conditions of their own organisation. The post-merger structure, on the other hand, requires a different scale, a different reporting order and often a different pace. The assessment therefore needs to cover the behavioural competencies the future role requires. Using assessment work during this period places the decision on an objective footing and limits the perception of favouritism within the management group.

The headings that generally need to be clarified in the early months of the new structure are as follows:

•      The boundaries of each executive's area of responsibility, and the financial and operational thresholds of their decision-making authority within it

•      Where final responsibility sits in overlapping roles, and the role in which the second individual is positioned

•      The duration of any dual reporting arrangement during the transition period, and the condition under which it ends

•      The list of positions regarded as critical to the integration, and an assessment of the risk of departure in those positions

•      The framework of the process to be followed for roles that have no counterpart in the new structure

The final point is the most visible heading of the first year in terms of the organisation's reputation. The processes conducted with executives whose roles have no counterpart in the new structure directly affect the confidence the remaining workforce has in the organisation. Running these processes through a structured career transition support programme allows the departing executive to plan their next step within an organised framework, and gives the remaining workforce a clear indication of how the organisation manages such processes.

Who conducts the assessment also affects how credible the outcome is. Where the decision rests solely with the acquiring party's management, the process is left open to being read as one-sided. Carrying out assessment work through an independent structure secures both the consistency of the data and a concrete basis for demonstrating that executives from both organisations have been evaluated against the same criteria.

Identifying critical positions is a further priority in this period. After a merger, the group most inclined to leave is usually the group that can most easily find a role elsewhere. Clarifying these individuals' positions in the new structure early closes one of the integration's more fragile points.

How role decisions are communicated is also part of the outcome. The workforce watches not only the content of a decision but the criteria on which it rests. When the data behind the assessment, the stages the process passed through and the person who took the decision are not explained, the resulting gap is filled with differing interpretations across the organisation. Sharing the criteria in advance allows the process to be read consistently, even by executives who are not satisfied with the outcome.

In some cases, none of the overlapping roles meets the profile the new structure requires. Where the organisation formed after the merger operates at a scale neither party has worked at before, external executive recruitment may come onto the agenda for certain positions. This choice is read correctly across the organisation when it is framed not as a judgement on the existing management group but as a definition of the experience the new structure requires. For appointments made in this period, the incoming executive's adaptation over the first months also needs to be planned separately; an executive joining an organisation that has recently merged is adapting both to a new role and to a structure that has not yet settled.

Management Team: The Communication Rhythm of the First Year

In the post-merger period, the regularity of information flow is more decisive than its content. The workforce does not expect every question to be answered; it does expect to know when an answer will come. Where no regular communication rhythm is established, the tendency to fill the gap takes over, and information circulating within the organisation travels faster than the official announcement.

What works in practice is tying communication to a calendar. Setting out how often the integration agenda will be shared, at what stage particular decisions will be announced, and stating openly which matters have not yet been settled brings uncertainty within a manageable frame. We examined this approach in detail in our article on transparent and consistent communication during change.

A recurring shortcoming in the content of communication is that the rationale for the integration is not sufficiently explained. Because the commercial logic of the merger is clear to senior management, conveying that logic to the workforce is often limited to a single announcement. Yet an employee whose daily work is changing adapts to the extent that they can relate the rationale to their own role. Conveying the rationale at different levels of detail for different tiers, and repeating it, is the core element of the first year's communication plan.

Much of the communication load falls on middle management. This is the tier that hears teams' questions first, has to explain decisions and maintains continuity in the daily work. Assigning this tier to the task without preparation leads to the message being relayed in different forms across the organisation. Clarifying in advance which information managers may share, and at what level, preserves the consistency of communication.

What works in preparing middle management is a process that covers not only receiving the message but working in advance through the questions likely to come from their teams. The questions on teams' minds usually concern not the organisation's strategy but how the daily work will continue. Preparing clear answers at management level to matters such as who reporting will go to, whether current projects will continue and whether working arrangements will change keeps communication consistent across the organisation.

Alignment within the management team itself also needs to be treated as a separate stream of work in this period. A newly formed senior team begins working without knowing one another's decision-making style or order of priorities. Structuring this process rather than waiting for it to develop on its own accelerates the team's move to a shared working order. Executive coaching programmes are used in this period both to support an individual executive's adaptation to a new role and to help establish the team's working order.

Another dimension of communication faces outwards. Clients, suppliers and business partners want to know who their counterpart is after a merger. Delay in forming the management team is reflected outwards as uncertainty and leads to commercial relationships being placed on hold. Planning the internal and external communication calendars together therefore directly supports the commercial side of the integration.

A further matter to track through the first year is measuring the effect of the new structure on the workforce. Collecting employee engagement data in a comparable form before and after the merger shows where alignment has been achieved and where further work is required. Without that measurement, the management team is left assessing the internal situation solely through the feedback that reaches it, and that feedback usually comes from its immediate circle.

The question to be assessed at the end of the first year is not whether the organisation chart has been completed. The real indicators are whether decisions are being taken without delay, whether executives looking at the same data reach the same conclusion, and whether the workforce in critical positions has remained in place. In organisations where these three indicators are positive, the commercial outcome expected from the integration generally also progresses to schedule.

Tracking these indicators should not be limited to a single review at the end of the year. Quarterly interim reviews allow matters that are not working to be corrected within the year. In the post-merger period, the situation that generates the highest cost is not the existence of a problem but a problem continuing unnoticed for twelve months.

As the second year begins, the management team's agenda naturally shifts. Where the first year is about establishing the structure, the second is about placing growth targets on top of it. Whether that transition is sound depends on how far the decisions taken in the first year have become settled. In a structure where roles have not been clarified, the decision-making mechanism has not been made common and critical staff have not been retained, the second year's targets are usually carried forward alongside the first year's unresolved matters.

At E&E Group, since 1992 we have provided executive recruitment, assessment, executive coaching and career transition support together for organisations going through restructuring and merger periods. For guidance on building your management team after a merger, you can contact us.