Joining Forces

The
main problems in any big merger are how to keep morale high and key players on
board at a time of maximum insecurity. Three global HR directors with a wealth
of experience in this field, share their knowledge

Mike
Moore
, senior vice president, HR operations at GlaxoSmithKline, talks
about the challenges faced in keeping employees happy and profits buoyant when
there is a long lead-in time to the merger

Ten
years ago, in March 1991, I presented a paper called "Managing when your
merger is announced" to a pharmaceuticals conference in Berlin. Many books
and articles had been written about managing the integration following a
merger, but not about coping during that period of time between media
announcement of the intent to merge and the first day of trading of the new
entity. This was my focus, the industrial equivalent of the early days of World
War II – the so-called "phoney war" – a time when seemingly not much
can be done except watch the dark clouds of merger madness gather on the horizon.

What
I didn’t know back then was how much longer this in-between period was going to
get over the next few years. When SmithKline merged with Beecham, which was the
case study I presented, it took a little over 16 weeks to gain regulatory and
shareholder approval. This was considered a normal timescale. Recent experience
in many fields, such as media and telecommunications as well as
pharmaceuticals, has restated the norm.

In
January 2000, when GlaxoWellcome (GW) and SmithKline Beecham (SB) announced their
merger plans, the expectation was that by the summer we would be done. In fact,
European regulatory approval was given on 8 May and by 31 July, shareholders of
both companies had voted to approve the merger. What hadn’t been anticipated
was that it would take the anti-trust authorities in the US until December to
give the go ahead. GSK shares began trading on 27 December – 349 days after the
initial announcement.

The
challenges of a delay are obvious and huge. First, there is no absolute
certainty that the merger will actually go through until very near the end of
the regulatory process. One forced disposal of a product can change the deal to
an extent not acceptable to one or both of the parties. Second, even if the
assumption is made that merger approval will be forthcoming, there are severe
legal no-go areas that impact on the integration planning process. As a
consequence, the third and biggest challenge is how to maintain morale and
business momentum. These became the two critical issues.

Business
momentum in both SB and GW was maintained. This is a fact. Both companies
reported earnings well within the range of City and street expectations. How
was this achieved? By refocusing business leaders on the achievement of
budgeted targets. This is when the investment in a pay-for-performance culture
pays dividends – literally. The achievement of stretch goals quarter-by-quarter
led to higher-than-usual bonus payouts in many of our businesses. The message
was clear – to miss budget would be even more unacceptable than normal.

Morale
is more difficult to define, manage and measure. In times of uncertainty,
people lose commitment – their thoughts turn inwards. "Me" becomes
the focus – pay, security and career. They start focusing on their own agenda –
all the things headhunters feed on. Managing uncertainty is of course always a
challenge, but particularly so when most of the big questions like "Will
the merger happen?" and "Will there be a place for me?" can only
be met by "Wait and see".

The
fact that our business results were good must give some indication that morale
was maintained. Very few key talents defected, yet another sign. It would be
naive to suggest that everyone was comfortable with the situation but I’ve seen
lower morale on a rainy Monday morning. I believe three things contributed to
this.

First
was the saturation of the two companies with updates about the integration plan
and our progress against it (towards this goal) as well as "getting to
know you" information. Communicate, communicate, communicate. Second, a
decision was made to start integration planning early. An overall Integration
Planning Committee was set up by mid-February. By March, many integration teams
had been set up in businesses and functions involving several hundred people.
Not only did this enable us to hit the road running when the merger was
eventually approved, but it had the benefit of focusing the energies and minds
of our key talent on the future of the new business.

Third,
we started the selection process for the top 120 or so jobs. The risks of
starting early are obvious. People who are deselected are nevertheless required
to stay in position until the merger is completed, which in this case was
several months later. Not only this, but the expectation was that they would
remain effective contributors. Impossible? No! I’m always surprised how most
people in this situation act with absolute professionalism – it helps of
course, if the company reciprocates by treating them with the flexibility and dignity
they deserve.

Arguably,
an even greater risk is posed by appointing people early. They can easily lose
focus on their current job while, at the same time, becoming increasingly
frustrated because they can’t start their new one. The clear benefit of making
appointments early is that key talent, who are susceptible to poaching, can be
reassured, and become focused on and committed to the future. In my judgement,
this benefit far outweighs the risks.

We
were determined that the selection process had to be absolutely fair, equitable
and objective. From the point of view of developing a new culture, there is no
greater indicator of what sort of company it will be than the process of how
the new company selects and deselects its people. With this in mind, we chose
to use a third party, Spencer Stuart, to provide an impartial objective input
to the selection decision-making process. By the time the merger was finalised,
over 600 leaders had been selected, ready, willing and able to drive the
business from day one. The overwhelming opinion was that the process had indeed
been balanced and fair – even by those who left the company.

Time
will tell how well we managed a challenging 2000. Early indications are good.
One side effect of the delay and all of the frustrations of last year has been
a bursting of pent-up energy this year to get on and move the new business
forward to become the indisputable leader in our industry.

Continual
two-way communication is at the heart of any successful merger, says
Lance
J Richards
, Teleglobe’s international director of HR

Merger
and alliance work is challenging no matter where you sit in the organisation.
From the HR chair, though, the impact on the employee population has to be
tightly managed. Having worked through HR issues in mergers or alliances at BT
(with MCI), at GTE (with Bell Atlantic) and now with Teleglobe (and BCE), I’ve
had a terrific opportunity to see some very large deals work through.

At
BT, we entered into an alliance with MCI to form Concert, a globe-spanning
entity delivering a wide array of telecoms products and services to
multinationals. At GTE, our merger with Bell Atlantic to create Verizon was
designed to build on the tremendous geographic achievements both companies had
attained, as well as the technological excellence each had developed separately.

In
both of these projects, ensuring that employees knew what was going on, who was
in charge and where it was leading to was at the forefront of HR initiatives.
In these situations, there are some vital lessons which I’ve learned, and which
are leading agenda items for me:  


The CEO must be visible to the employees and interact with them.


The company must communicate – clearly, constantly and quickly.


The dialogue must be two-way. Employees must have a way to feed questions and
concerns back to the business and people in charge, then get answers.

In
many mergers and alliances, the corporate heads roll out a well-crafted vision
of the new entity, and how it will lead its market, leap ahead of competitors
and so on. For the average employee, it’s like listening to the adults in a
Charlie Brown cartoon – they hear nothing except what they want to hear – and
all they want to hear about is the future of their own job.

In
M&A activity, where the intellectual capital that resides in the employees
is often of overriding concern, it is important that, at the end of the day,
companies remember that all their employees are concerned about is making the
next car payment or paying the next quarter’s tuition for their child. The only
real solution here is communication.

The
recent BCE acquisition of Teleglobe was pretty much a case study in how to
manage employee expectations with professionalism and candour. Simultaneously
with the after-market-hours announcement to the public, all employees received
an e-mail with a link to a pre-recorded streaming video, with messages from
both the chairman of Teleglobe and chairman of BCE. They clearly outlined the
reasons for the acquisition, as well as the benefits, and then committed to
maintain clear communications throughout the process.

A
Q&A board came up on our intranet, accessible in all 43 countries where we
have employees, with most questions answered within five business days. Within
a month, BCE had appointed a new CEO. Within a week of his arrival he held the
first of several meetings with employees. Initially he made presentations in
person in our primary employment cities, then changed to a live, multi-country
broadcast format, followed by conference calls for outlying countries.
Simultaneously, he launched a series of breakfast and lunch meetings with 15 to
20 employees, which are still ongoing wherever his travels take him. Thus, he
won many points with employees for his candour and style. The key here was that
we immediately opened a variety of one- and two-way communication venues for
our employees, and ensured there was a steady flow of information to our people.

Cap
Gemini Ernst & Young’s global people resources management director
Carolyn
Nimmy
describes a three-way merger which led to one giant company with
60,000 staff worldwide

Last
year the Cap Gemini Group embarked on an enormous challenge – the acquisition
of the consulting arm of Ernst & Young. This acquisition brought with it
18,000 new colleagues. It required the group to bring together not just Ernst
& Young Consulting but also Gemini Consulting and Cap Gemini IT services
from within the Cap Gemini Group.

We
took the three global companies – each with strong brand recognition and
leadership positions in their given areas of expertise – and merged them to
form Cap Gemini Ernst & Young. The three companies brought together
strategic consulting capability, management consulting capability and strong IT
consulting skills to create one company of nearly 60,000 people. The HR
challenge was to bring these three companies together to form one cohesive unit
and yet recognise the differences of the talented individuals. All this at a
time when all these individuals had countless employment options in a thriving
marketplace.

The
merger established a broader client base and a richer talent pool for Cap
Gemini Ernst & Young. We realised there was a vital need for our employees
to get excited about the new company while remaining on a clear path to success
– despite the fact that our new organisational structure and dimensions were
still being defined.

In
response to these needs, we developed and launched an innovative strategy
called "Professions" – an approach that orchestrated individuals’
professional development. Professions are not organisational structures, rather
virtual teams that unite those individuals who have similar skills, interests
and aspirations. Each team recognised as a "Profession" is
collectively responsible for each member’s individual development and growth as
well as the evolution of the group as a whole. This growth and development is
supported by training, mentorship, competency models and career guidance, as
well as direct involvement with the company over profession recruiting,
resource planning, communications and knowledge management issues.

This
approach is rare, if not unique, for a company of our size, but Cap Gemini
Ernst & Young’s leaders decided early on that it needed to reinforce the
company’s people-centricity, with long-term professional growth as a core
focus. There are six professions – strategic consulting, business consulting,
technology consulting, business development, operate and the enabling
profession. The Professions’ communities also provide thought leadership to the
industry and enable their members to acquire leading-edge business and
technology skills. We believe the focus Professions bring helps members
discover and use tools that continually put them ahead of their peers at other
companies. This helps our professionals quickly become industry gurus and
thought leaders who can enjoy the personal and professional benefits this
affords.

The
company benefits by having access to focused professional groups that drive
forward innovation and benefit our clients in the long run. Teams, clients,
technologies and organisational structures will change many times, but
Professions ensure our people have a consistent peer group which helps them see
greater opportunities for their future with our company or their career paths
in this industry.

The
success of the Professions was tested through our International Focus Group
programme, an initiative aimed at gaining a comprehensive understanding for the
global concerns and views of our new company as a whole. The programme, which
is comprised of physical events as well as virtual "temperature check"
surveys and communication tools, measures the current "human state"
of Cap Gemini Ernst & Young. These results are continually assessed and
rolled into all Cap Gemini Ernst & Young’s learning efforts.

Since
the merger, Cap Gemini Ernst & Young has promoted the growth and long-term
success of its staff. The Professions model has provided a means to bring
people together, regardless of the company or country they come from. It has
also significantly strengthened our recruitment efforts, helping build a reputation
as the employer of choice – a people-centric company that has gained
recognition as one the world’s top services organisations.

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