5 Keys to Successful Sales Force Integration Post-Merger
Melding two sales forces, post-acquisition, is undoubtedly a challenging prospect. We’ve put together a masterclass on key success factors to maximise sales force integration success.
The pharmaceutical industry seems besieged on all sides, with declining R&D productivity, expiring patents on blockbuster products and relentless downward pricing pressure forcing companies to look closely at the bottom line. One affect of this onslaught has been an upsurge in the level of M&A activity as players within the industry consolidate to cut costs, expand research pipelines and lengthen geographic reach. With the industry anticipated to be one of the most acquisitive in 2014, rigorous sales integration planning is critical to revenue growth and capturing the value that mergers promise but often fail to realize.
Sales effectiveness derives from a complex set of interdependent drivers; these include customer insight and segmentation, value proposition and sales process strategy, sales force design, sales force knowledge and skills, and rewards and motivation system. Even the most capable sales leaders are challenged to maximize sales effectiveness with just their own sales force. When two are merged, the degree of complexity can increase dramatically. Furthermore, the sophisticated combination of different sales roles and channels and of segment-specific value propositions employed by many of today’s sales forces, add to the degree of complexity.
Frank Dolan, Director of Sales at Corcept Therapeutics is well-positioned to comment on sales force integration, having experienced the leadership challenges associates with corporate buyers and mergers in previous roles. According to him, there are a number of risk factors that can undermine the degree of merger success, “There are two risk factors that stand out for me and that is 1) interpreting success with different sales teams and 2) managing morale and motivation. With interpreting success, I’m referring to the different measurements of sales success, for example the acquiring company may use a different measuring stick such as moving from number of prescriptions to percentage market share and the difficulty that arises to move to the new way and changing sales behavior. Managing morale and motivation centers on dealing with the two sales teams and the impact of a merger on their morale. There is the question of the great unknown: will there be downsizing of the sales team, how does this affect my progression within the sales organization, will there be increased competition for existing roles within the new organization. The integration process needs to generate a shared sense of mission, culture and teamwork to address these risks early on. It’s vital to get everything right on the inside before you can tackle commercial objectives on the outside”.
Key Success Factors
There is, of course, no one-size-ﬁts-all approach, but we have identiﬁed 5 key success factors that together maximize sales force integration success.
1. Communicate the Vision
You can never over-communicate when it comes to keeping people informed and giving people a clear understanding of the intentions of executive management. People tend to fill the silence with rumour and speculation and this does not make for a healthy, positive, commercially vibrant environment"
Understand the importance of having focus and vision for the organization and its key stakeholders. By communicating this vision, people know and understand the direction the company is taking with the new merger. Defining, developing and communicating a vision for the merger and for the future combined enterprise can play a critical role in quelling anxiety and defining the benefits for key stakeholders. “You can never over-communicate when it comes to keeping people informed and giving people a clear understanding of the intentions of executive management. People tend to fill the silence with rumour and speculation and this does not make for a healthy, positive, commercially vibrant environment”, confirms Dolan.
A merger integration vision statement is intended to provide high-level direction about the overall merger effort and outcome. Some common and important elements of a merger integration vision include any expected change to the core business, customer experience, and financial results, and a view of how any risks will be managed. “Sending a simple email about the vision will not work; the communication needs to feel real and be delivered on an ongoing basis. A formal communication plan ensures that this occurs and is done effectively. Employees and other stakeholders need to feel they are receiving the right messages from the right people (typically their direct supervisors) at the right time. This messaging needs to be reinforced through other communications vehicles that the organization has in place or chooses to establish for the merger integration. At this time more than any other, good internal communication is vital to minimize the risk to the business by maintaining productivity and sales employee motivation.It needs to cascade from executive management to their direct reports and down through the entire organization”, reiterates Dolan.
The communication plan serves to engage and motivate employees during a sustained period of uncertainty, giving clarity of purpose which focuses the team on achieving their goals.
2. Communicate and Market the Benefits to the Sales Team
Prove the merits of the merger to the sales team - whether its quick sales wins, an expanded product portfolio and/or greater coverage; proving the logic of the deal as it impacts on them in their roles and their compensation structures is an intrinsic part of sales integration success as people have to see wins, they have to see there is something in it for them".
According to Rick Edmunds, Partner at global management consulting firm, Booz and Company, there needs to be a very clear articulation of the real value the merger delivers to the sales force: “One of the most common risks arising from a merger is low morale and motivation due to uncertainty. The sales force needs to know “What’s in it for me”? Will I have better products to promote, better access to physicians, better sales tools to access new opportunities, new territories to develop? Prove the merits of the merger to the sales team - whether its quick sales wins, an expanded product portfolio and/or greater coverage; proving the logic of the deal as it impacts on them in their roles and their compensation structures is an intrinsic part of sales integration success as people have to see wins, they have to see there is something in it for them. Market the mergers value and tangible benefits to the sales force”.
3. Communicate How Success is Defined
Create and communicate the plan for post-merger growth, outlining clear objectives, strategies, tasks/tactics, responsibilities and timelines.
This clear illustration of purpose gives clarity and direction to the sales force, which is critical in a time of flux. “Illustrate to the sales force what success looks like, the desired state, six months from now, a year from now, two years from now; the more you can communicate the long term vision, the easier it is to understand the justification for short-term decision making. The sales force wants to be empowered with knowledge of how their actions will translate into the organization achieving its goals. Give employees clear conceptions of the organisation’s structure, product range, systems, and distribution channels at key intervals. It’s also imperative to shorten the milestones, making the sales team feel there are achieving tangible goals quickly. This avoids any time lag which creates uncertainty in the sales team and the customer base. This is also an important time to invest in training to address any competency gaps”, says Dolan.
4. Speed of Integration
A 1987 McKinsey study identifies the 6 primary causes of 61% of acquiring companies failing to earn back their invested capital within three years of acquisition. One of the 6 was post-merger integration and the chief factor cited for the failure of the integration was “a slow pace”. Early completion of integration projects can both mitigate risk and permit an earlier realization of merger benefits. Immediate planning and design following the agreement is essential for a rapid PMI. Companies that move too slowly in the integration process face a number of threats, especially with regard to the two key constituencies. Employees may regard the slow pace as a sign of uncertainty and may pursue opportunities at rival companies where the situation seems more stable. Customers may likewise fear instability and seek competitors’ products if the visible aspects of the integration are not achieved rapidly.
5. Culture Integration
To mitigate risks during mergers and acquisitions, cultural integration should begin well before the deal closes. Any company acquiring another should be very clear about what it wishes to do with this cultural asset, and how to maximize its value.
Merging systems and policies is one of the best ways to demonstrate to the sales employees that this is truly a merger and not a hostile takeover. Engage them in the discussions as you decide what to keep and what to eliminate".
“Dealing with cultural issues inappropriately can destroy much of the value that the deal was supposed to create. There are three choices or avenues: we can impose the one culture, we can allow the two cultures to remain separate or we can create a compound culture, keeping the best aspects of each. Building a compound culture involves determining the elements of the corporate culture that would best support the accomplishment of the merger’s objectives. Perform a “gap analysis” of each culture relative to the desired culture. It’s vital to build communication and interaction channels between the two former entities such as joint working teams, co-location of personnel and informal events, to facilitate the cross-pollination of best cultural elements. The danger time in a corporate cultural clash is at the beginning when both sides feel threatened by the combination. Retain the best practices, policies and systems of the two cultures, rather than keeping one company's policies and abolishing the others. Merging systems and policies is one of the best ways to demonstrate to the sales employees that this is truly a merger and not a hostile takeover. Engage them in the discussions as you decide what to keep and what to eliminate. Mergers typically bring together multiple business units, often across geographical regions and multiple functions such as research, sales or production. Each of these, in turn, has its own unique culture that requires redefinition via targeted, simultaneous efforts. The starting point in designing these is to ask: How will the new company create value? What specific business model will support that? What new behaviors are needed to support the desired new outcomes within each local unit and function”, concludes Dolan.
No other managerial project is as complex as a post-merger integration and poses such a high risk of error. Not even every second acquisition succeeds in generating its expected synergies and creating additional value. A strategic approach ensures important parameters aren’t overlooked and lays the foundation for successfully creating synergies and generating sustainable additional value. Taking a disciplined, process-oriented approach and applying leading practices to sales integration is paramount to merger success. Failing to prepare is preparing to fail.
Frank Dolan will be speaking at eyeforpharma Philadelphia in April. For more information on his presentation, or on other speakers, click here.
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