Change management can be a logistical nightmare. Nick Martindale unpacks the story behind the DHL Logistic/Exel merger.
Following its acquisition of Exel in December 2005, DHL Logistics – part of Deutsche Post World Net – became the world’s largest logistics company. The business was subsequently divided into DHL Global Forwarding,looking after DHL’s air and ocean division and Exel’s freight management services DHL Exel Supply Chain, formerly DHL Solutions and Exel’s contract logistics business and DHL Freight, all under the DHL Logistics umbrella.
The merger of the two companies, and Exel’s integration into the wider Deutsche Post World Net network, posed considerable change management challenges for both the global HR network and its regional and country subsidiaries, with 111,000 staff from Exel worldwide joining DHL Logistics’ existing 30,000-strong workforce. Run by chief executive John Allan and headquartered in Bracknell, this was one of the biggest integration projects ever carried out in the UK.
“The key goal was to make integration as seamless as possible by involving our employees in the process, ensuring they were valued and, by supporting them along the way, maintaining a high-quality service and minimal disruption to our business,” says Allan.
“The biggest issue for HR – as for all the people in the business – was that we should make integration DHL’s business, and not the customer’s business. That meant we needed to do it very quickly and as smoothly as possible,” adds Jutta Rawe-Baeumer, managing director, HR global, DHL Logistics.
“From an HR standpoint, it was about how to get the new management structure and organisational design in place quickly, how to deal with staff retention, and how to harmonise the current policies and procedures so that we established a common culture.”
The company created a dedicated integration organisation across all disciplines, staffed by managers whose full-time job was to co-ordinate the process of bringing the two companies together. There was an emphasis on communication: individual managers held ‘town hall’ meetings to relay information and answer questions, while a dedicated staff helpline was set up to respond to queries within 22 hours. The corporate intranet also offered information about the wider company, its structure and senior staff.
“If you want to get people on board you need to have an open communication strategy to tell them what’s going on and what the next steps are,” says Rawe-Baeumer.
One of the major challenges was to establish a new management team using the strengths of both businesses. Within six weeks, the company had defined 260 first- and second-level manager positions, and then put managers from both businesses through an assessment centre.
The final management distribution was split roughly 50:50 between DHL and Exel staff, says Rawe-Baeumer. “We managed to win the loyalty of our people concerning staff retention not only by having the right programmes in place, but also getting people really excited about the greater opportunities they have for their development,” she says.
There were some redundancies, she admits, and others who wanted to leave, but the total number of staff the business employs has since increased from 140,000 to 165,000.
DHL Logistics also worked hard to establish a new company culture. Staff went through a talent management programme used by Deutsche Post World Net known as Motive8, where performance was measured against eight key competencies. It also developed seven company values, designed to ensure staff had a code of conduct in the way they were expected to do business.
“The cultures were different because Exel was much less centralised than DHL,” Rawe-Baeumer explains. “People came from different backgrounds, so the challenge was to create a new common culture, and you can only do that if you have a common flag under which the boat is sailing.”
The integration project, originally estimated to take three years, is now 90% complete after just 18 months. The big measure for the company as a whole is the number of customers it has kept, says Rawe-Baeumer, while for the HR department, staff retention and the ability to fill posts internally are the key criteria.
“We’ve managed to retain nearly all of our customers and most of the employees,” she says. “There were only a very few who didn’t want to go with us to the new world.”
Rawe-Baeumer also feels the company has sent out a strong message to all its employees by retaining its integration managers in other line manager jobs or projects. “That sends an important signal that people who are flexible enough to be an integration manager have career opportunities,” she claims.
Managing a merger in six steps
- Consider people issues from the start of the acquisition.By understanding what will happen to the people through the process, you will be able to plan and manage it.
- Use the due diligence process to highlight people issues and collect data to inform your post-deal integration activities. This can often raise issues which should be factored into price negotiations and post-deal planning.
- Find time before closing the deal to prioritise the people issues and have your ‘day one’ communication to staff ready to go. Employees need to hear the messages at the same time as other stakeholders.
- Do not underestimate the effect of the different cultures within the two businesses. Companies that look similar from the outside can operate in very different ways and possess different values.
- Strike a balance between getting the integration done and running the business as usual. It is important that those keeping the business going feel valued, while the management team focuses on the integration.
- Communicate honestly and regularly. The key to helping your people through the deal is to let them know what is happening and what is expected of them.
Source: Jeff Rowney, partner, PricewaterhouseCoopers
Like many employees who go through mergers or acquisitions, Stephen Chipping, global integration manager at DHL Logistics, had concerns.
“Initially I was slightly sceptical about the merger,” he admits. “We were told it would take three years, so I was expecting a long period of change.”
But he feels the transition was as smooth as could be expected and hopes to benefit in the long term. “Management kept us fully involved in what was going on – especially from an organisational perspective – and they put in a good strategy early on to ensure that there was minimum disruption to our work,” he adds.
“Bringing the two workforces together has brought a number of positive changes, and there are greater career opportunities for me within DHL since the merger.”
If I could do it again…
The fact that Exel had to be integrated into both DHL Logistics and the wider Deutsche Post World Net group meant there was a delay of about two weeks before a clear communication strategy was implemented, managing director, HR global, Jutta Rawe-Baeumer says.
There could also have been more collaboration and at an earlier stage between the two business units. “If there was a next time I would put even more pressure on establishing the right communications earlier in the day,” she says.