Making mergers work

How do you manage the human side of mergers and
acquisitions? Steve Darien advises on the best ways to keep things running
smoothly

Q "The rumours have been confirmed, my company is merging with a
long-time rival. The public line is that this is ‘a merger of equals’, but in
truth, my company’s HR department will make the talent assessment and direct
the blending of employees. My HR counterpart at the other company will be
stepping down when the merger is final. I know a lot of mergers fail because of
clashing cultures. What advice do you have for me?"

A You have just described one of the most difficult and trying
situations an HR professional will face in his or her career. In my experience,
the outcome of any merger is influenced more by how you handle people issues
than by any other factor.

Chief executives tend to discount the importance of human issues in mergers
and acquisitions. Caught up in the excitement of deal making, the CEO may deny
there are personnel problems, or think that these types of problems will take
care of themselves. But they won’t.

Potential incompatibilities between organisations abound. Differences in
control philosophies, unionisation, culture, executive strengths, pay and
benefit plans can all interfere with a blended company’s performance. You can
also expect that performance will be reduced by employee anxiety which always
accompanies merger announcements.

The time necessary to unite two organisations is also a problem. A merger
requiring resolution of government regulatory issues can take 18 months or more
– a long time for employees to be concerned about their jobs. If the transition
is badly managed, the value of the deal can be undermined as a result of poor
upward feedback, lack of co-operation among different functions, scepticism
about leadership, and a lack of loyalty to the firm.

Furthermore, discontent in management’s upper ranks can undermine efforts to
retain enough key people to keep the company running as it did before.

Your goal must be to minimise disruption. I would recommend working through
this checklist:

– Communicate, communicate, communicate. Utilise employee hotlines, e-mail
and voicemail and publish an online newsletter to provide progress reports and
keep information about management’s activities out front

– Make sure mid-level managers are briefed regularly and encouraged to share
information with their staff face-to-face. Resist adopting a "bunker
mentality" in which news is held close to the chest and employees are left
to speculate about what’s really going on.

– Use tools such as formal and informal surveys to gather information and
encourage upward communication.

– If you are inexperienced in managing a merger or acquisition, bring in an
independent third party to advise you. An experienced outsider can help keep
relations between the merging entities balanced and bring objectivity to
decision-making.

– Develop a mechanism for identifying the right people from each company and
develop incentives for them to stay. Identify the "non-compatibles"
and set up buyouts for them. And don’t forget incentives for those who will be
needed for a period after the merger

– Be realistic about organisational differences. This is where your outside
consultant can provide valuable help. That person, or a team of people, can
dispassionately evaluate both companies’ value systems, executive styles,
company rituals and internal communication customs and illustrate how they
compare

– If there are gaps or conflicts, you will know where work needs to be done
for the merger to gain acceptance by all retained employees. This knowledge
will help you, and the CEO, to project "big-picture" goals to unify
the aggregating elements.

What if you do all of this and then the merger doesn’t go through? The media
is full of examples of corporations that have geared up to merge, only for
things to fall apart after months of negotiation. Yes, some of your time will
have been wasted, but the process should have provided you with useful
assessments of your own people and a clear idea of which individuals can grow
with you.

The first thing to do is to prepare a communication strategy to explain to
your employees why the deal collapsed. Next, deal with employees who expected
to leave but now hope they can stay. Assess their futures with your firm on a
case-by-case basis. You may wish to continue the separation process with some
individuals while retaining others.

Whether the merger succeeds or fails, the most important contribution you
can make is to help employees accept the fact that change is constant and their
best hope of landing on their feet at times of change is to excel at what they
do. Their chances of success will be better if the senior HR executive capably
and decisively manages institutional change and realignment.

Steve Darien is chairman and CEO of the Cabot Advisory
Group (www.cabotgrp.com), a US-based
company of veteran senior HR executives from global organisations. Cabot
principals have direct experience conceptualising and implementing creative,
practical solutions to today’s leading HR challenges. Darien is the former
senior vice-president of HR and director of management consulting services for
pharmaceutical giant Merck & Co, Inc.

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