In Mergers and Acquisitions, Avoiding Conflict Is a Poor Communications Strategy

In Mergers and Acquisitions, Avoiding Conflict Is a Poor Communications Strategy

From our research at CEB, now Gartner, we know that most mergers and acquisitions are not clear successes. As with other forms of major enterprise change, there are many possible reasons why two companies might fail to integrate: culture clash, product mix-ups, stalled growth, complex technology integrations, and so on. According to INSEAD professor Quy Huy, another reason M&A can fail is because the communication plan is overly positive and too frequently impersonal.

Huy believes that part of the problem is what he calls the “trap of professionalism,” a symptom of modern corporate culture in which negative feelings are suppressed and politeness is overvalued relative to raising constructive tensions that can improve ideas. Additionally, once disagreements bubble to the surface, the response is often more rosy messaging rather than straightforward attempts to discuss and address any issues.

Huy discovered how this dynamic of productive disagreement plays out in the context of M&A by interviewing 73 managers across both organizations involved in an acquisition. At first, both sides were excited by the possibilities of their merger. The acquirer saw value in gaining specialized expertise within its walls and the acquired company was excited about having the resources to take on more ambitious projects. But tension quickly arose, initially due to differences in the philosophy of each organization’s sales strategy, and later due to challenges in IT integration.

The issue wasn’t that these tensions existed, but that they were never discussed or addressed.

“A strange split slowly developed. Both firms felt growing dissatisfaction with their partner, but believed their partner was satisfied with them,” Huy wrote. “This was an outcome of each having kept the other in the dark as to the vehemence of their negative feelings. […] Consequently, negative emotion hardened into negative sentiment, or a generalised disdain towards the partner firm.”

The situation eventually progressed into an actively combative environment, with the acquired company misleading the acquirer on sales data and a leader at the acquirer saying that managers at the acquired company were “incapable of doing business.” Ultimately, after three years of losses, the acquirer divested.

Another factor that played a role in the failure of the M&A communications strategy was the impersonal nature of outreach. Email was the primary mode of communication and as a result, the lack of face-to-face interaction removed emotion from the conversation. For an employee with concerns, replying to an email looks and feels a lot different than having a chance to voice opinions in an open forum and know that at least they’ll be heard. The absence of such forums was another problem that, in this case, prevented negative feedback from being discussed.

These findings underscore the importance of open communication and freedom to engage in constructive tension in any business environment. Pretending everything is great causes much more damage than bringing disagreements to light, as Huy concludes:

Had the emotions of either firm been accurately conveyed to the other, there might have been some ugly scenes in the short term, but the ultimate failure of the acquisition may have been avoided. Without emotional authenticity, after all, there can be no true empathy – and without empathy, there can be neither effective remedial action nor a successful communications strategy.

Amy Gallo, an editor at the Harvard Business Review, echoed this reasoning in a recent article, contending that workplace disagreements should be happening more often, not less. While disagreement has been conflated with rudeness and tends to make people uncomfortable, Gallo argues, a workplace culture that allow for disagreement is more productive than one that stifles it.

When you and your coworkers push one another to continually ask if there’s a better approach, that creative friction is likely to lead to new solutions. … And there’s rarely a fixed amount of value to be gained in a disagreement. If you and your colleague are arguing about the best way to roll out a new initiative — he wants to launch in a single market first and you want to enter several at one time — you’ll be forced to explore the pros and cons of each approach and ideally find the best solutions.

The power of productive conflict to produce better ideas and decisions is also one of the ways in which diverse teams generate additional value relative to homogenous teams. The variety of perspectives and experiences that a diverse group brings to the table serves as a check on groupthink and, as long as conflict is managed in an environment of psychological safety, enables the team to engage in more creative and critical thinking.

(To learn more about how to design an effective M&A communications strategy, CEB Corporate Leadership Council members can check out our guidebook for managers leading their teams through the M&A process.)