Post Merger Integration - Thinking about the human elements of any acquisition or merger

Last month we examined the importance of setting up a framework of teams to manage the post integration process in any acquisition.

This month we will be looking at the more human elements of any acquisition or merger and how it effects managers and employees.


One of the common mistakes in a Post Purchase Integration (PPI) is to assume that logic and facts will win the day: communicate the strategic rationale of the merger and most employees will see the light and throw their weight behind it.

But an integration is quintessentially about change, and change is an intensely personal and emotional experience. Not surprisingly three of the most common feelings at the start of any PPI are anxiety, uncertainty and vulnerability. Three of the most frequently asked questions reflecting these very human concerns are - Do top executives know what they are doing? Can they pull it off? Is this the company where I want to risk my future?


Cultural differences between the two companies invariably add to the emotional cauldron, sometimes with explosive effect. How these "softer" human issues are managed is arguably the most decisive factor in the integration. Two key aspects will determine a company's relative success in this field: how it communicates and how it manages the organisational aspects of its people including selection of the top management team, initiatives used to retain star performers and restructuring the work force.


Identifying points of cultural conflict

Understanding the cultural differences between the two companies - how their beliefs, behaviour's and expectations differ - is an essential step in developing an effective, targeted communications strategy. For instance, some businesses can be very marketing and sales orientated and believe in empowering their teams, and others can be technology driven and adopt a command and control approach.


The critical issue is to identify and systematically map out the contact points between the two businesses where these cultural differences can amplify difficulties and opportunities. For example, language differences are likely to be less important in areas such as procurement, where cost synergies are the goal, than in fields such as R&D where close human interaction is essential in delivering revenue synergies.


Taking the emotional Temperature

Regularly monitoring morale and confidence will play an equally important role in deciding what to say, to whom, and when. What are the main doubts and concerns? And where exactly in the business are the issues festering? One way to answer these questions is through frequent, formal surveys of "opinion leaders" - widely respected managers and individuals throughout the organisation. These surveys should track key indicators of the success of the PPI such as staff's understanding of the company's strategic vision and whether employees believe there are clear roles and responsibilities.


Another excellent way to answer these questions is through the informal, grass roots feedback from a group of "networkers." Networkers are the stalwarts of the kitchenette. These people are plugged into the corporate grapevine and have a well rounded view of the issues being discussed. Networkers could be given a special email address to use to encourage feedback on the latest rumours and concerns. Networkers can also be used to pre-test communications messages.


Using the information gleaned from the opinion leaders and networkers together with the company's core strategic message, the project management office PR team should develop a carefully crafted communications strategy. The strategy must include a plan for a steady, regular stream of news - bound together by simple, clear, and consistent messages that are repeated again and again. As soon as a company loses "radio contact" with its employees, others fill the silence - and rumours and misinformation quickly spread.


To enhance credibility and trust everything that is said and done must be consistent with the merger or acquisition's goals. For example don't describe a merger as "a merger of equals" or "all about topline growth" if the primary goal is consolidation, cost synergies and job cuts. Similarly don't emphasise collaboration and then turn around and appoint a hard charging, command and control executive to head up the new business. In short it is essential to walk the talk - actions speak louder than words. In a consolidation merger, where painful cuts often have to be made, it is important to show positive progress - for example by highlighting how new processes are making life at work easier and how concrete advances are being made toward realising growth synergies.


Promoting dialogue

True two-way communication is another essential ingredient for instilling trust and credibility. Formal communications such as presentations and webcasts are important, but they will never match the power and effectiveness of informal, face-to-face dialogue. At such an emotionally charged time, managers need to seize every opportunity to hear and allay employees concerns. Face to face discussions also enable employees to connect live with leaders and to test their candour and sincerity up close.


Management appointments send messages

Deciding who the managers of the newly formed company will be delivers one of the first and most important messages in any PPI. In some simple mergers or acquisitions, the choice is relatively straightforward: either continue with the existing management or replace it wholesale with the executives from the acquiring company. For large mergers involving two companies of relatively equal size, the preferred approach is to identify the best people in both organisations. Where agreement cannot be reached, it is often advisable to use external consultants to gain additional insight.


The top appointments can send powerful signals about the future roles and responsibilities of individuals further down the chain. Therefore it is vital to clarify the timetable and selection criteria for the lower layers of management as soon as possible - to remove uncertainty and prevent employees second-guessing, often wrongly, about who will stay and who will go. Any statements about future roles and responsibilities should also be crystal clear. In one case a CEO told top managers that they would all keep their jobs. What he forgot to mention was that they would have to relocate to a new headquarters many miles away. Such an oversight can have understandably damaging repercussions. It is equally important that people perceive the appointment process as fair. At a minimum, the top executive team should systematically interview all potential candidates for senior management positions. Some companies go even further using a merger as an opportunity to audit skills, experience and leadership capabilities of senior executives at either or both companies.


Retaining key personnel

Long before any formal appointments are made, the top executives need to identify and assure the best people in the two companies that they have a future in the merged entity. As soon as the deal is announced, head-hunters will be circling, so it is essential to reach out to top talent quickly, systematically, and ideally personally.

One thing an acquirer should not do is hand out retention bonuses that are disconnected from concrete performance targets. In many cases companies pay out retention bonuses only to lose key personnel shortly afterwards.


Restructuring the work force

In any merger or acquisition, how a company deals with a reduction in its workforce can be as important to morale as how it deals with appointments. Many companies assume that the best way to approach restructuring is to make painful cuts as quickly as possible. However, it is often not that simple. The speed at which restructuring can occur is governed largely by the legal and regulatory environments in which that company operates. For instance in the US it is relatively simple to restructure company's workforce as employment regulation is minimal. However in Europe - most particularly in France and Germany - restructuring a work force can be very complex and involve compulsory consultation with unions, politicians, and government agencies.

Regulatory obstacles to restructuring, however, can be overcome. One solution might be to introduce a program of voluntary departures, supported by appropriate incentives. Managed properly, voluntary departures can enable an acquirer to restructure more quickly and constructively - from the perspective of all concerned - than forced terminations. It is especially appreciated if one incentive is to help employees find other jobs or retrain.

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