When two become one: Marrying employees during a merger or acquisition
Often when companies engage in a merger or an acquisition, they don’t engage their employees. And so, at the beginning of the process it is important for an HR Director to speak out and never hold their peace.
A merger, or acquisition, can be a very stressful time for employees and if not handled correctly there can have devastating effects. “It is a time when employees feel very unsettled and there is usually a degree of uncertainty in the future direction of the business and how that will affect them directly,” says Murray Fox, Principal Consultant at executive search firm Cripps Sears.
He continues: “During a merger or acquisition there is often much greater emphasis on external communication rather than internal.”
Understandably external communication is important as M&A activity can have a strong impact on a company’s brand and reputation. However future success is more likely to be determined by the people within, than those outside the organisation. If there isn’t enough internal communication during the procedure, both organisations will lose their top talent.
To have and to hold
Flip Filipowski, Executive Chairman & CEO of SilkRoad technology, says: “The best people go first, because you don’t give them a good explanation and when they get stressed, they leave. And they have all the actions in the world because every other company knows this transaction is now happening, and so they just try to find the best performers at the target company and go after them.
“That is the worst consequence because that in itself is perhaps the most valuable part of any acquisition – being able to get the best people with skillsets in your business to elevate the total skillsets of the two companies.” Therefore it would seem that the whole process would be made redundant by bad talent management.
Companies often merge to become more successful within their space, but if the most valuable asset is the talent within each company, and that gets lost to other companies within the space due to bad communication, then the process actually results in the opposite effect and the two companies end up feeding their competitors their top talent.
In January 2006 adidas acquired Reebok. The former rivals came together in order to, in the words of adidas’ CEO, benefit from a “more competitive worldwide platform”. However the process, especially when merging rivals, needed to be handled carefully to ensure the future success of the business and the retention of the best talent.
Tony Cooke, HR Director at adidas, was involved in this process and says that the key to any merger is to remember: “We are all human beings so by our very nature we worry. Therefore whenever there is an integration mentioned what people are actually thinking is ‘takeover’ and subsequently they ask themselves “what about me?” So straight away, in my opinion, the first job you have to do is develop a communication strategy at a very early stage.” This not only eases an individual’s worries but also prevents speculation throughout the two organisations. If there is no communication with employees then not only will they speculate but naturally they will think the worst and it is this fear of ‘the worst’ that will drive talent away.
Cooke suggests the use of a forum or a committee who can share the concerns and fears of employees with senior management regularly. “It’s about developing a trust, creating two-way communication, alleviating any issues about speculation and diminishing the grapevine as best you can – because a grapevine will sizzle in an integration situation. Don’t underestimate the fears and concerns employees have when they hear the word integration,” he says.
Most organisations realise that communication is important but two-way communication can often be overlooked. The importance of listening to employees during this time is paramount as it allows for more productive conversations that are more likely to put minds at ease – rather than just ‘telling’.
This is particularly important for the relationship between the acquirer and the acquired. Joanne Smith, HR Director UK & Ireland for G4S – a company that is constantly involved in M&A activity – says: “It is always good to listen to the new company. It’s good to hear their side of things as they usually like to get a few things off their chest.”
It is the relationship with the new company that can present a tougher challenge than the retention of talent, because if you succeed in keeping the best people from each organisation, you must then ensure that they can work together effectively in order to utilise them fully – a more likely challenge when the organisations coming together are rivals.
Smith says: “If you have got some common missions, common values and a common service – if you both want to provide excellent customer services at the same level – then really you are working towards the same goal. So where you can get that commonality, employees can see you are working towards the same thing and want the same thing. Therefore moving forward, hopefully the two cultures will start to work together.
“But certainly try and integrate people as quickly as possible, the worst thing is to have a silo-ed approached because that will never get the two merged at all.”
However sometimes it is necessary to not only find common ground, but to create it. Talentia Software is a business solutions provider that earlier this year underwent it owns acquisition procedure as Lefebvre Software acquired Cezanne Software. President, Viviane Chaine-Ribeiro, says that when she is merging different cultures she favours two approaches: “The first is that I listen a lot and make sure I understand and provide the local management teams with the necessary tools to run the local business. The second approach is that I remain firm on certain aspects of the business, such as staying focused on sales and putting customers first; this is achieved through thorough and timely reporting.” And so while listening is a necessary factor, it is also important to remember that the acquisition has occurred for a purpose – a purpose that all employees must realise.
For better and for worse
It is also important to realise that all the focus shouldn’t just be on the talent you want to retain and the creation of a common culture for that talent, companies also need to look after exiting employees. Naturally, given the nature of a merger there are often unavoidable redundancies but it is how you manage that process that affects both your employer brand and the morale of those left behind.
Cooke says: “If there are inevitable redundancies, do that with as much dignity and compassion as you possibly can because you never know you may well need people further on down the line.
“I would always aim to do it professionally and to make sure that employees leave you, as sad as they are, able to say later down the line that you tried your best to take care of them and tried your best to do the right thing.”
Smith echoes this and says: “At the end of the day you can only be honest. In these days of austerity people understand that you can’t have three or four people doing the same role.” In other words employees will be able to understand inevitable decisions, but will have a greater respect for openness.
It is honesty and transparency that underpins all of the essential aspects of managing employees during a merger or acquisition and so an honest business will foster a long and happy relationship with both its existing staff and exiting staff.