Myths as Facts
When I was a boy, myths held a special place for me. Stories about Greek and Roman gods, like Hercules and Perseus (mye eefavorites), off on heroic quests fueled my imagination with stories of their leadership, heroism, and courage. Quite frankly,I believed these myths to be true. I wanted my heroes to be real. However, when I grew up I learned that these stories of gods were, well, just myths—and not based on any kind of evidence to prove their validity. These ancients stories, passed along through the generations, were based on false beliefs or ideas, and took on a life on a life of their own over time.
A similar set of beliefs—or myths—exist with respect to leadership in mergers and acquisitions (M&As), have taken root over time. Now is the time to crush these particular mergers and acquisitions leadership myths to hell.
M&A Leadership Myths
Humans create and plant false ideas or myths about what is happening in situations when we don’t have sufficient information on what exactly is going on. In the case of M&A leadership, a similar set of myths have been created and passed down as fact over time.
- “We know we have the right leadership to make this M&A successful.” Wrong! That is a huge assumption, and we know what assumptions do to you and me. What is this assumption based on? Direct observations? Gut feelings? Chances are very good that a company, acquirer or target, does not know if the right leaders with the right leadership skill sets are in place to ensure deal success. With this as a major blind spot, a company exposes itself to major risk.
- “All leadership skills are important in M&A deals.” Wrong again! Potentious research indicates this is not the case. While companies need a wide variety of leadership skills to drive efficient and effective execution of their business strategies and growth, my research shows all leadership skills are not created equal in M&As. Can you afford not to know which leadership skills matter in M&As, and if the acquirer and target leadership possesses the right mix of skills? I think not.
- “Cultural assessment is more important than leadership.” As I tell clients, culture is absolutely important to consider in M&As, but it is not the end all, be all or right place to start. Let’s assume your company hires the best consulting practice and they are able to provide the most comprehensive cultural assessment that pinpoints everything that must be addressed for the deal to potentially work. A world-class change management plan is then created and ready for execution. Does the acquirer and target have the right leaders with the right sets of leadership skills to execute said plan. Are leadership skills, like show adaptability, lead change, and influence others, in proper supply to effect these changes?
- “Senior executives are the most important leaders in target companies.” The reality is that as major change events, M&As require leadership from top to bottom within the acquirer and target organizations. Potentious research found that target middle managers and front-line supervisors have a greater effect on M&A success than their senior executives. Yet, middle managers and front-line supervisors get little attention in M&As.
- “No one knows the leadership skills that impact M&A success, and ultimately financial performance.” Suffice to say that is old thinking. Potentious identified that positive financial performers, when compared to negative financial performers, have more identified M&A leadership skills at above average levels. Bottom line, having the right M&A leadership skills has a positive impact on M&A performance and growth.
- “Good communications and change management plans are all we need to assure M&A success.” I beg to differ. Again, we assume that all we have to do is execute upon the right communications and change management plans to guarantee success. But these plans must take leadership into account. Does your company have the right leaders who are effective communicators? Do you have the right leaders who can lead change and motivate employees? If you don’t know the answers to these questions, then even the best-intended plans will not work.
- “We don’t have time to conduct a huge leadership assessment of both companies for this M&A deal.” The truth is your company probably already has the leadership data needed for an assessment. You probably have a leadership development program and an assessment component associated with it. By taking a new look at this data, you can improve your company’s chances for M&A success.
If left unchecked, these and other M&A leadership myths will have a detrimental and far-reaching effect on whether your deal can achieve its strategic objectives. Is that worth leaving to chance?
Change the mindset. Change the model. Change the outcome.
Dr. J. Keith Dunbar is founder and chief executive officer of Potentious. He can be found connecting and sharing knowledge about M&A leadership on Twitter and LinkedIn.