A recent report by the management researchers, Roffey Park, Effective Mergers and Acquisitions, argues that: Most mergers fail to realise their value because senior managers often lack a clear strategy for driving the merger through and they frequently mismanage the people issues.
Nick Starritt, BPs outgoing group vice president HR and a veteran of M&As, agrees: HR should be involved in the process early on. One of the main reasons M&As go wrong, he adds, is that the senior management of the dominant party fails to set an appropriate, fast-moving pace. They pussyfoot around with major decisions. People find it most difficult to deal with uncertainty.
And where there is uncertainty, productivity plummets and people start dusting off their cvs. Companies need to make appointments quickly and communicate decisions rapidly if this is to be avoided. Its a situation which puts undue pressure on HR.
To find out how they cope we spoke to three prominent people who have been involved in M&As and asked them the following questions: What were the HR challenges posed by the merger? How were these challenges met? What lessons were learned?
Allan Johnston, Corus
Position: executive director
M&A: British Steel & Koninklijke Hoogovens
The greatest challenge we faced was bringing together two great national steel companies and trying to create one new company culture out of the merger. In effect we had to put to death British Steel and Hoogovens and bring them together in a wedding.
The other big challenge was to bring together an effective and committed leadership team that was moving in the same direction and to fill the top 300 leadership jobs in the new company. We also recognised that there was a big communications job to keep employees on board and well informed on the reasons for the merger and the direction the new company was going in. Finally, we decided that we had to do all of this as quickly as we possibly could.
The top 11 people from both companies who knew about the merger beforehand (which included me and Kees Blokland, my counterpart at the Dutch company, although he wasnt involved until three months before the merger) worked very hard at planning how we would come together. There were worries, for example, on the Dutch side about the impact of British Steels perceived reduced manning policies on their way of doing business. We also looked very hard at the different cultural issues around the way we do business.
For instance, the Dutch are very direct in their dealings with others and it is not unusual, for example, for a Dutch boss to tell a subordinate he is not pleased with, I think you have behaved badly. We used our knowledge of these sorts of differences to prepare for the meetings ahead.
We focused very hard on the issue of filling the top 300 jobs and managed to get the task done within the first three months after the merger. Kees Blokland and I worked together sharing information and that created a close bond.
We also prepared for the ups and downs of employee morale and for the initial volatility caused by the uncertainty felt at the time of the merger. We were also ready for a big downswing much later on after employees fully recognised that there would have to be some pain ahead as the new company tried to achieve greater shareholder value.
One major lesson we learned was that we had fallen into a satisfaction trap after the merger. I think we said to ourselves Great job, weve made all these appointments, weve got everyone settled in, weve got the unions and the Dutch works councils with us, its time now to look forward. In fact wed spent so much time on integration and post-merger integration activities that we had temporar-ily taken our eye off the ball in terms of providing customer satisfaction.
The second lesson related to internal communications. We were pleased to find employees congratulating us on how well we handled this side of things. But we forgot to keep thinking about the individual employees. It is not just about the company, and why its a good thing to merge. We should have been communicating much more to the employees about what was in it for them.
Beware also the cultural differences. Dutch and British cultures are quite similar but nonetheless there are significant differences. For instance, the Dutch generally do not regard the chairperson of a meeting as having an ascribed status. This means that they wont look to the chair to make the final decision. Both sides can feel frustrated when up against these differences.
John Ainley, CGNU
Position: group personnel director
M&A: CG (Commercial Union and General Accident) & Norwich Union
The biggest single issue was dealing with the personal insecurity that everyone feels at a time like this. The next challenge was understanding the culture of the merging businesses, followed by the sheer amount of work that is involved in a major merger from an HR perspective. We tried to learn from previous merger experience. We asked people what went well and what didnt during previous mergers.
We were determined to get as many management appointments out of the way as quickly as possible to minimise personal insecurity. All the top posts were decided by the time the merger was announced, that is, Norwich Union Insurance made 18,000 appointments in four months.
We took a great deal of care to measure and understand each of the cultures involved by setting up focus groups and individual interviews with a cross-section of people from all over the company. We brought HR teams together from across the business as soon as the announcement was made and broke down the work into 10 streams, assigning senior HR management to each.
We learned that you can never do enough to understand the culture. And whatever you do in a merger, do it quickly. Also be absolutely fair and above board in all that you do and communicate that across the company.
Angela Hyde, AstraZeneca
Position: HR vice president
M&A: Astra & Zeneca
The challenges were how to develop the new culture and values of the organisation, while ensuring that we retained the talent that we wanted during a period of uncertainty; while at the same time supporting ongoing business and helping to achieve merger objectives; and doing it all as fast as possible.
Working to the slogan Fast, Fair, Flexible and Forgiving, the HR team played a key role in establishing integration task forces to look at the issues. They developed detailed policies, procedures and guidelines for all phases of the merger.HR also worked very closely with our internal communication professionals to ensure information given to employees was consistent. The whole organisation was encouraged to meet face-to-face before the merger became legal to share information, get to know one another, and work out the new culture.
We also developed a fair and transparent selection process very quickly. The day the merger was confirmed, the top 200 people were in position and this helped stabilise the process. Spending time working things out early in the process is very important. In retrospect we could have shared more information between the two companies at an even earlier stage.
Carolyn Nimmy, Cap Gemini Ernst & Young
Position: director, global people relationship management
M&A: Cap Gemini Group (Gemini Consulting and Cap Gemini IT Services)& Ernst & Young Consulting
The challenge was to bring together three rather than two companies to combine the best of these organisations into one coherent global com-pany that would enable us to maximise the huge breadth of capability the merger would give us.
While our organisational structure and dimensions were still being defined, we had to ensure that we retained talented people in a very hot talent market and all the while being careful not to lose our client focus.
Our new leadership team used our own strategic consultants and own mergers and acquisitions experts in the merger teams. Cap Gemini Ernst & Young is a company that has grown through acquisition and, although the scale of this merger was much bigger, our management team had previous experience.
To help with talent retention we developed our professions [initiative]. These are communities based around capabilities such as strategic consulting, business consulting, technology. Each profession is collectively responsible for members individual development and growth.
Working to the slogan Big, Best and Bold we focused a lot of energy on internal communications. We also invested time and effort portraying our new global image, securing our position as an employer of choice.
Because we moved from being a partner-based business to a publicly accountable one we had to develop greater transparency and accountability and a strong focus on profit and loss and shareholder value.
