A key reason is that companies don't spend enough time evaluating the impactthat mergers have on employees, says Ron Elsdon, director of retention servicesat DBM, a human resources consultancy in New York. "Mergers have an unusuallyhigh failure rate, and it's always because of people issues."
With Steve Case's departure from AOL Time Warner last month, executives inmany industries are rethinking how conglomerates wed. In most merger scenarios,the employees of the purchased company are given little information about theturn of events until well after the deal is settled. Rumors fly about what'sgoing on, and employees are left in limbo, bitter about the changes and worriedabout their jobs and their colleagues. If this goes on for too long, they canbecome less productive as a psychological protest, says Bill Belgard, presidentof The Belgard Group, a strategic transformation consultancy in Beaverton,Oregon.
The chance for success is further hampered if the corporate cultures of thecompanies are very different. When a company is acquired, the decision istypically based on product or market synergies, but cultural differences arerarely examined or even acknowledged. It's a mistake to assume that you will beable to easily overcome philosophical or cultural differences, Belgard says. Forexample, employees at a small family-owned business might be used to having easyaccess to the boss, flexible work schedules, or a relaxed dress code. Whilethese issues may seem insignificant, taking away those unwritten privileges canresult in resentment and shrinking productivity.
"To be successful in a merger, you have to show respect for the acquiredcompany's culture and ways," he says. "Your goal should be to achievesomething together that neither company could do alone." Unfortunately, oncethe deal is done, buyers often lose sight of that goal. They try to fold the newcompany into the existing one, squashing the acquiree's creativity, leadership,and vision in the process.
That's not to say mergers can't be successful, says Bruce Mann, seniormanaging director in charge of merger and acquisition activity at WR Hambrechtand Co., a financial services firm in San Francisco. Even if cultures conflict,success is attainable if the human challenges are addressed early on. To achievethis, human resources specialists should be involved in the negotiation process,making sure that employees' needs and culture issues are addressed and anintegration plan is developed, he says. As part of the due-diligence process,executives from the acquired company should be sharing employee evaluations,benefits expectations, organizational charts, compensation plans, and anythingelse that will help them make quick decisions about employment and helpassimilate the new staff as easily as possible. If human resources involvementcomes after the deal is signed, "it's already too late," Mann says.
Workforce, February 2003, p. 60 -- Subscribe Now!