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    HRs Role in Mergers and Acquisitions PDF

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    Iw THs ARTICLE HRD Roles HR’s Role in Mergers and Acquisitions By Ruth N. Bramson its about the people, [ute 19% Shaw's Supermarkets acquired Star Makes for oughly 13500 million, Shaw's at that time had 126 stores and about $3 billion in Volume: Star had 54 stores and $1 billion in sales, That acquisition was Shaw's latgest to date, growing revenue by roughly 50 percent and in. creasing sts workforce from 20,000 t0 32,000. I¢1ook eight months from signing the agrcement to Federal Trade Commission approval. To bless the deat, the FTC required that 10 stores be divested. Shaw's anticipates achieving roughly $50 milion in synergies, with about $10 million inthe first year ‘Completion of the acquisition and integration operationally and cculturally--of the two companies have required human resources to play major role. The work is still going on: Although most of the integration plan has been implemented, the human side of the integration contin toevolve The key HR inntiatives have included 4 development of preliminary organizational designs and identification ‘of the top three levels of management “4 assessment of critical players and deployment of appropriate re- Sources in the new company 4 retention of key people and separation of redundant stal? 4 development of 2 total rewards strategy for the combined companies ‘communications strategy development and implemeatation Comment © 2000. All rinhte reserved. Training & Development, October 2000 59 “No single intervention or change can fix every problem. But, as the saying goes, it's all done with people and if the human ingredient is ignored, then nothing else will work as well as it might.” Daniel Goleman, Working With Emotional Intelligence integration of payroll benefits and TRAS 2 ap ability to do all of the above with Speed We followed a carefully designed in- tegration plan, with the HR element at the heurt of much of it, The integration 1s proceeding on schedule and, by and Farge. the factors affecting the people have becn executed successfully. The cmntical learning throughout the process has been that it's all about people ‘The upheaval associated with any ‘merget of ucyuisition 1s prime opportu- nity for HR to demonstrate its know! edge and skill in the management of human capital. HR is an intrinsic part of the integration team in an m&a because ofits ability to evaluate the compatibility of corporate cultures und different op- tions for combining enterprises. HR myst also be the susted source of infor- mation for employees about what the anges means for them, The guiding principles: Take definitive action and make deci Sions quickly—the secret for hoiding on- {0 good people. Be candid with employees, and treat them with respect. Let them knew that the combined entity will be « more value able organization 5 Whenever possible, use ownership of the company as represented by stock op= tions and stock grants to get everyone pulling in the same direction, Treat those leaving with the same re- spect and attention as those staying. Rather than take & risk-averse, wait- aande-see attitude that can lead quickly 10 irrelevance, HR executives should be in tegral to all phases of due diligence. 10 easing the transition, and to focusing employees on the creation of shareboid= er value as soon as possible, Taking a wait-and-sce attitude will lead to an ir relevant role for HR. Insteud, the role rust be orchestrated so that its vale b ‘comes integral to the ea ‘According to Mergerstat, there were 60 7 ‘more than. 7,700 deals in 1998 involving U.S, companies valued at $1.2 trillion, Worldwide transactions totaled more than $2.4 trillion in nearly 23,000 deats, OF those, 96 percent were friendly percent were fo gain competitive advan tage, and 88 percent were companies in The Ten Lessons of Integration 1 Integrate fast. Realize synengios and efficiencies sooner rather than later. 2 Dedicate the necessary resources, 3 Make tough decisions about ‘organizations and people quickly. 4 Restructure and re-recruit top talent 5 Set clear, short-term objectives: ‘celebrate successes as you ‘achieve them. ‘Communicate strategically ‘be open and forthright 7 Allow the acquired company to conduct business. After al, that's why you acguired it ‘Manage the culture integration carefully 9 Focus on what each event means to individuals. 10 Keep your sense of humor ng & Development, October 2000 Comment © 2000. All rinhte reserved. similar businesses. Though the final ‘numbers aren't in yet for 1999, the pace team be expected 10 have inereased. Many companies report that their mergers are successful bat admit the end results aren't as successful as they could hhave been, Recent studies place the suc cess rake oF merged compani (60 percent, depending on what 1 you measure. No matier how flawless a ‘eal seers on paper, the results are often disappointing. Most merged orguniza- tions lose 1 t0 10 percent of their market value in the first year after the merger. ‘There's a Jot i learn about managing the transition period, optimizing short- term performance, keeping the highest percent of talent, and iniegrating processes and systems, Companies that don't address those issues may susfer a los of profitability, top talent, and conti- dence 18 leadership decisions. Although a multitude of factors exn contribute to a disappointing merger or acquisition, suocess depends ultiniately (on the effective use of people. A recent report from the Bureau of Business Re- search shows that organizational and cultural problems are more likely to de- rail a merger than are financial factors. Only 28 pervent of companies said they did a yooe job of assessing the culture of their merging organizations before the deal. only 26 percent said they had put the right people in the right roies during the merger. and a scant 15 percent said they had suceessfully communicated the vision and goals alter the union From the due-diligence stage through the identification and appraisal of people to the management of culture issues and ‘communication, people issues impact every step along the way, Such issues are essential and integral to the process and must not be treated as an afterthought I's unrealistic to assume that one busi ness can absorb another without being altered, When two companies merge. fone may change more than the other. but both will change Looking at just one key issue, feuder- ship. it's essential to evaluate the Major Stages of Integration Pre-Acquisition | Foundation Rapis | Assimilation. | Bullding Intogration L eee Do thorough | i ue agence i Kay Eloments of Integration Process strengths and weaknesses of the players individually and collectively. to ensure that the management talent required 10 define the future of the new company is there to steer the chosen course, Due diligence Beginning athe star of the process, HR ‘must orchestrate its eoe in due diligence Due aitigence is more than a financial evaluation, Is essential to assess the valued homan assets that never show up con a balance sheet. in order to determine the true value ofthe deal and its likeli hood of success. Job number 1 is identifying the key people and taking immediate steps 10 keep them from walking out of the door the moment the deal is announced, Fach funetion has to be understood, including the field organization of stores or sales- people if applicable. Often, what exists in the Field is overlooked, yet it's there thatthe true business of 3 company is conducted. Each key individual should be assessed apuinst a set of clearly de- fined competencies that are aligned to the nocd ofthe new group. When the right questions are asked before u merger. HR isn't Tell to play catch-up for dhe first six months, The key aneay of HR due diligence: | Groate 2 post-acquisivor business plan, Develop a detailed intgration pian Mobilize tegration resources, F including an integration manager ‘Communicate plans and progress stategically | Drwe operations and cukuratntagraton by focusing on 100-tay results. Learn rom experience 3 cutture 2 employee demographies and compe: tency analysis, & Key talent analysis benefit and compensation structure and how it compares with that of the parent company any legal issues relating to outstand- ing employee litigation, workers’ com- pensation, and, where applicable, union ‘contracts and issues, ‘Staffing the new organization with the right people requires systematically de {ermining the roles needed and identity ing the people who are best able to fill them, Valuable people. central to the suc- cess of the integration. may be lost he- cause staffing decisions are made ‘without a plan, without any thought to an equitable process of assessment, and ‘without taking the future needs of the business into account, I's olten better obtain a third-party assessment of key players in both merging organizations, Using consistent criteria and thus getting ‘more buy-in to the outcomes and avoid: ing appearance of favoritism, Culture compatibility By understanding the similarities and dif ferences between the two companies early in the game, itis possible to avoid a di- vorce before the marriage vows are taken. Should in- ccompatibiliey Be too great, it may even be wise to call, off the wedding. To understand the cul- tures involved, you have to Took atthe history of each ‘company, its reputation in the industry, and its prod: tuts and services, Although those are fixed, other fac tors that influence how a ‘company operates and how employees, customers, an other stakeholders interact are critical to the effective functioning of the newly formed organization, Even Focation can affect the fit. West Coast group of techies may have great df ficulty merging successful- ly with an old-guard southern firm or a staid New Fngland operation. Another issue to con- sider is where authority Tes and how de- cisions are made. Are the companies bureaucratic or freewheeling? Formal or informal? Finally, there's the emotional cle= iment. How do employees feet about the ‘company. management, and the Future? How open are they to the new strategy? ‘What employee behaviors are the norm, and what values and beliefs drive those bbchav iors? How much job satisfaction déo people feel? Is important to identify cultural ar- «eas of dissonance so that people can dis- ‘pel misconceptions and begin creating a ‘culture that's right for the new organiza tion. That’ often Jef unti after the final papers are signed, which is risky because ‘culture mismatches can he the Achilles’ heel of many deals. How do we identify cultural differ ‘ences and similarities snd lear to leverage them’? Often the most seemingly inconse- {quential program and policies have great symbolic impact, Practices regarding ca- sual dress. attitudes about long hours, and hhow offices are apportioned are deeply in- grained and must be dealt with, (One can’t consider culture compatibili- ty without touching on the different views that the acquirer and the aequired have about the new company. The sequiter as- Trang & Development, October 2000 61 Copyright © 2000 All rights reserved. During the Shaw's: sole job is to mena Which Culture Is Desired? Star integration, we Th Integration is essential. planning Fill your imt with flexi- road experie 2 to make decisions quickly. handle conflict. New Culture Multiple Cttures resemble the original but with greater will it be complete? ‘ion and be infor the long haul mass and capabilities, The acquired com ‘The integration effort mast he ‘The primary roles of HR during this ' that many of its strengths a full-time im, There vill be crucial to the new company falter be an inte all. seta why iedicated 1 has jon project manager free 2 develop strategies for ret ning key was acquired?) from any routine responsibilities. whose people Prepare Yourself To Be Spoiled! ostivels pampered Your group wil be 58 executive gues rooms. 25 spacious bythe fendi ec Vitanova Conference Center Its eas tu rex and enjoy emveoped by our 32 naan paris of ail acres of Serenity fst nates our hire Montrose Mansion from Philadephia iterations air. Villanova Conference Center Ge Coun Lane Road Rar PA 1987 Phone Gi 52317 + Fae (6) S2 QE ZT ARAMARK Fader Senice #17 Copyright © 2000. All rights reserved. MU Rane) examine compensation and benefit | programs 2 ety bares toa merged cute At last-A Fully Integrated tsiccoomesncsbices | | Training and Knowledge pelle canes maze: t- Management Solution! al that turns corporate-wide knowledge isc advantage, Choose the any complet solution availble th uly iterated Total Knowledge Management” CERN! system Communication No ther product onthe market can compete withthe benefit of sing TKM and our The need to communicate. commun fe-usable Dynami earning Objet™ technology a develop deiner Maal an cate, communicate exten well into th manage yout inowlege. later wags fe inert Wa mi Move beyond training with benefits that make TKM unique: ten, communication efforts are frag. | fj Re-wsable learning objets: inka (On-demand performance support: Users single Dynamic Leaming Obect n search the database when they need mented with different messa information flowing to inverters one ‘mutope courses to, The learning objets associated with ployees, managers, and customers Easy maintenance: when aOynamec th guey at dered ght the Messages to all stakeholders must be | fleeing Object changes hecouses_ SsKapor wiles dence well planned and consistent. There can | J l"kedto tare nstantyupdat Customized iearing environments: never be enough repetition, The mes Telrecouse wrk: Preece Deel your owe consistent oad sage must be heard again and again to be customzed couse work el hough user-faenty templates, fully understood. | BBP expandea training options: Pubish Managemen capability: TEM captures Two-way communication always mmaterals onthe Ineret.inianetin ning history, mamas your rade belps comprehension. All avenues print oron CO-ROM. Bonk, presevesiearing pois and more should be used: written, one-on-one | JMB Simplified course development: You dont TKMTS legacy: 14 yearn deveogment KM meetings, and small- and large-group "eed programming kil to develop couse, aS ongnally crated fr the high-tech, mssioe crcl vaningenvronmentof Cape Canaveral @* Generation21 i eel Seemann meetings. People need a chance to | probe, discuss. ask questions, and arrive a a personal level of understanding that Seven-Step Communication | Seria. me rs ee ff Send for your FREE information kit today! 1 0, call 1.888.601.1300, Ext. 1190 and request your Free TKM Information Kit! Develop macro messages. ‘Conduct analysis of key audiences : {Vest serif on te 2001 Confrence on ag and 1 ong Maragert Nach 28-30 na eps 3 | : Proxtuce micro or issue-specific messages. | 4 Select media mix. | @ Special Research Report, Micon 5 Ting oka Sut Produce srtegyinetin, = | emu iran LH econo oveniew 6 [EE @ vcochure Implement rategy = sicteoniggu gener ery Se 7 i. Se us Meunrethe Aesivenessot | [eat elbow a ne 0 ‘contmunication strategy. | Reader Serwce #227 Traming & Development Oct 63 Copyright © 2000 All rights reserved they can't get from a piece of paper. ‘The overriding question is, "How does this affect me?” Speed in cormmuni- cation goes slong with speed in the total integration, Don't leave people waiting for the other shoe to drop. Talk to them even if you don’t have all ofthe informa- tion, rather than let the grapevine fil the ‘communication void. Reduce anviety by ‘boing upfront and honest Accessibility to managers. officers. and directors is critical to satisfying em- ployees’ hunger for information. During ‘our acquisition, we developed an excel Jent tool, Rumor Buster, which was pro- duced and distributed weekly 10 counteract rumors, Sometimes, it’s ‘enough to clarify the message or give more desails; other times. it requires a 360-degree turnaround explanation for people to finally get the right informa- tion. Senior managers must remember that while they may have been involved in the acquisition for months. employees have only begun to acclimate themselves to the new situation. The information they're receiving is new to them, ‘The goa! of communications should be not only to inform, but also 0 engage employees’ heurts and minds. By pre senting a clear vision of the future and ‘suining commitment t0 it, the new com pany begins to build the loyalty that's ‘erucia to survival In the seven-siep process we used (see page 63), we were careful to avoid state rents that could be dismissed immediate ly as propaganda—such as. “We're not oing to change anything.” “We respect ‘your autonomy.” And “We want fo get to know everyone. Don’t worry, there's plenty of opportunity for each of you." Statements like those are remem- bred. and nothing hurts the solidarity of the new company more than communi: ceation that is later contradicted, The synergies ‘There are to kinds of synergies that companies eck trough a merger oF ac

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