Merger ahead? Make sure HR is part of the deal

Summary

For companies eager to remain ahead of their competitors, a merger or acquisition may be just the answer. The hard part, however, is successfully integrating the two companies. At the heart of this is people management - a merger throws up a host of employment implications, creating additional work for personnel and human resources departments.

To examine the role of the personnel/HR function during a merger, we look at five business and financial services companies that have recently been involved in mergers: Bristol & West, Denton Wilde Sapte, Halifax, Lloyds TSB and PricewaterhouseCoopers.

Personnel and HR functions generally have little involvement in setting up a merger, but play a critical role during the transition and integration phases. Communication, involvement in strategic planning for the company and shaping corporate cultures are considered the most important aspects of the personnel/HR department's work during a merger. Reasons for merger failure include a lack of communication and different management styles in the two businesses.

 Companies are always lookingfor ways to remain ahead of their competitors, and merging with others is a tried and tested approach. Yet mergers often fail to create value for the acquirer. Moreover, they represent a huge challenge for directors thrashing out the finer details of the deal and are a daunting experience for employees and managers who have to keep the business running.

The end of the 20th century was characterised by high levels of merger and acquisition activity. The Office for National Statistics recorded 1,241 mergers and acquisitions involving UK companies in 1999, worth more than £194 billion1. Figures for the first quarter of this year show 283 mergers and acquisitions worth £49.6 billion, including well-publicised announcements from insurers CGU and Norwich Union, high street banks NatWest and Royal Bank of Scotland, and pharmaceutical giants Glaxo Wellcome and SmithKline Beecham.

Although a merger can bring career opportunities for some, the experience is often stressful for employees, as full integration of two companies can take years from when merger talks begin. Companies need to be ready for the employment implications of a merger and the effects these may have on the whole merger process.

Research led by Marion Devine at the Roffey Park Management Institute examined human aspects of organisational mergers and acquisitions (IRS Employment Trends 670)2. It concluded: "Putting people issues to one side in preference to sorting out processes and structures is a fatal mistake."

A report from accountancy and business services firm KPMG also suggests that: "It is the delicate balance between financial drivers and people aspects which underpins merger success" (IRS Employment Trends 696)3. Using shareholder value as a measure of merger success, KPMG finds that companies that focus on the selection of the management team and identify and resolve cultural issues are 26% more likely than average to increase shareholder value, and those prioritising communications are 13% more likely than average to produce a successful deal.

IRS Employment Trends approached five personnel and HR practitioners in financial and business services companies that have been involved in mergers. Our case studies provide a timely picture of how companies approach people management issues during a merger. The study group comprises:

  • Bristol & West: a financial services company that in 1998 became a wholly owned subsidiary of the Bank of Ireland Group;

  • Denton Wilde Sapte: an international law firm formed this year by the merger of Denton Hall and Wilde Sapte;

  • Halifax: the UK's largest mortgage lender, which merged Halifax Property Services into its banking division in 1999;

  • Lloyds TSB: one of the largest high street banks, formed by the 1995 merger of Lloyds Bank and TSB; and

  • PricewaterhouseCoopers: a business services giant, formed by the 1998 merger of two of the "big six" accountancy firms - Price Waterhouse and Coopers & Lybrand.

    Why merge?

    According to FT.com: "Merger deals are becoming bigger and more complex as companies scramble to achieve worldwide dominance and cut costs."4 The companies in our study group provide clear evidence of these goals.

    At Denton Wilde Sapte, the merger was designed to reduce costs and to increase market share. The merged business also intends to develop new products and services and to extend its financial reach.

    The decision to merge Halifax Property Services into the banking division of Halifax stemmed from a need to reduce costs and increase shareholder value. In particular, the property side of the business was underperforming and the company wanted to make it profitable again. Halifax itself was formed in 1995 from a merger between the Halifax Building Society and the Leeds Permanent Building Society - a union aimed at enhancing competitive position and improving customer service (See Building for the future: harmonising pay and conditions at the Halifax ).

    The main aim of the merger of high street banks Lloyds Bank and TSB was to increase shareholder value. In the case of PricewaterhouseCoopers, the object was to develop new products and services. The sale of Bristol & West Building Society to the Bank of Ireland Group was aimed at increasing the latter's market share. In particular, the Bristol & West branch network across south-east England provides the Bank of Ireland with a greatly enhanced presence in Britain.

    Getting started

    Research by Roffey Park's Marion Devine suggests that the people issues in a merger or acquisition have a major part to play in its success: "Before the so called 'soft' dimensions of culture, values, behaviours and working styles begin to harden into enduring patterns of behaviour, managers need to take positive steps to ensure that they help, rather than hinder, the new business." The research brings together 10 key messages for personnel/HR practitioners on handling people issues during a merger or acquisition (see document extract).

    The point at which the personnel/HR function was brought into the merger process varied among our study-group organisations, but once involved, all undertook a large amount of work on the people management issues:

  • at Halifax and Bristol & West, the personnel/HR department was involved from the start of the merger negotiations;

  • at Denton Wilde Sapte and PricewaterhouseCoopers, the personnel/HR department was brought into the merger talks once the basics of the deal were agreed; and

  • at Lloyds TSB, the HR team was not involved in the merger until the deal was signed between the two banks.

    In those organisations where the personnel/HR department was involved in setting up the merger deal, it played only a minor role. However, moving into the transition and integration phases of the merger, the personnel/HR departments in all five companies had a major role in tackling the employment implications of the merger.

    People management issues

    We asked our case-study companies to provide details of the work the personnel/HR department carried out on 11 key people management processes during the merger. The results are presented in the table. Below, we summarise our main findings in the context of other research evidence on mergers:

  • Communication. Organisational change consultants Pritchett and Gilbreath suggest that, during a merger, companies should aim to over-communicate, and warn: "If you're not filling the communication void, somebody will - with rumours, fearmongering, wishful thinking, warped information and even outright lies."5 Many companies have the technology to pass information to employees at speed, but this also enables informal communication routes to take hold.

    Although companies may wish to limit the amount of communication during initial merger talks, it is vital that merging companies communicate with employees wherever possible: "Clear, honest and timely communication with employees in the run-up period and immediately after is critical in gaining [employees'] engagement and commitment to making the merger or acquisition a success," says the Devine study.

    Communication methods adopted by the personnel/HR departments in our study group include face-to-face meetings, bulletins, question-and-answer booklets, e-mail, internet and intranet. Lloyds TSB also enlisted the help of an external communications consultant to ensure full communication with its employees throughout the merger.

    Merging companies should not forget that customers also need to be kept informed of any changes that will affect them. The companies in the study group together provide services to millions of customers, but only Bristol & West specified that its communication plan included providing regular updates to customers.

  • Corporate culture. Employees are often protective of the way they work, behave and are managed. Integrating disparate employment cultures is not always straightforward: "Cultural differences will cause headaches in the process of merging the various parts of the two organisations," warn Pritchett and Gilbreath.

    Both Denton Wilde Sapte and Halifax used staff attitude surveys to help decide how best to bring the two organisations' cultures together. These provided the personnel/HR departments with information on the concerns of employees and the working practices they wanted to retain. The results were used to develop an action plan of changes to be made.

    Bristol & West relied on the HR director to review the cultural issues relating to the new organisation and to plan the necessary action.

    At Lloyds TSB, work on the culture of the merged organisation centred on developing a new set of corporate values. Run by the marketing department, this work identified a new set of values - based on the acronym "CARE" - focusing on service provision to customers. Each letter stands for an activity that should underpin the behaviour of all employees and influence the way they interact with customers and colleagues: "C" for customer and colleague understanding, "A" for accessibility, "R" for responsibility and "E" for expertise.

  • Employee support. Company-wide communication can help to allay employees' general concerns or uncertainties following a merger announcement, but for individuals the news can still create a great deal of worry. Providing support for all those affected by the merger is important if the company is going to minimise the loss of working time and valuable staff.

    Devine describes a series of emotions that follow a merger or acquisition announcement: phases of shock, numbness, denial and blame immediately follow a merger or acquisition announcement, then comes a period of testing or experimenting. As employees move on to discovery and learning, they are on the way to final integration.

    Understanding and managing these employee emotions was taken seriously by each company in our study group. Halifax and PricewaterhouseCoopers set up support helplines, and all five personnel/HR departments offered employees the opportunity for one-to-one meetings. Advice and guidance offered by Bristol & West was specifically targeted at line managers, who often have to look out for their staff as well as themselves.

  • Management development. "There's little in the routine operation of an organisation that would prepare managers and executives for managing this kind of corporate upheaval," say Pritchett and Pound in their booklet on merger integration and management6. All the companies in our study group made allowances for this, and ensured some management development took place during the post-merger integration.

    PricewaterhouseCoopers, conscious that many managers and partners were taking on new roles in unfamiliar environments, provided one-to-one coaching. At Halifax, managers undertook a full development programme to support the transition, and at Denton Wilde Sapte the personnel department worked with the training officer to fill any training gaps.

  • Pay and grading. Different pay and grading structures in the merging businesses will often need to be aligned. However, devising a structure that meets the needs of the merged organisation, and successfully implementing it, are time-consuming processes.

    Recently merged Denton Wilde Sapte has allowed nine months for the development and implementation of a new pay and grading structure. PricewaterhouseCoopers implemented a new structure for all employees within 12 months of its 1998 merger, and Lloyds TSB introduced a broadbanded pay and grading structure for all employees in the bank within one-and-a-half years of the merger (Pay and Benefits Bulletin 421).

    By contrast, Halifax needed to make only minor changes to the pay and grading structure of Halifax Property Services staff, and Bristol & West employees remain broadly separate from those of the Bank of Ireland and so structures have not changed since the merger.

  • Recruitment. Although mergers are often associated with job losses, many also result in job creation. Each company in our study group underwent a recruitment process following their merger. For Denton Wilde Sapte, this meant filling the gaps where neither pre-merger firm had a suitably qualified candidate, while, for Bristol & West, it meant making some internal appointments.

    In the immediate aftermath of the merger, external recruitment at Lloyds TSB was limited to specialists, but an internal selection and appointments process was overseen by the HR department. The process was broken into four tiers, starting with senior management and working down through the company. Employees whose roles were not affected by the merger were excluded from the process.

    Employment at Bristol & West has increased from 2,500 staff before the merger to 2,800 employees today. All new appointments resulting from the merger were handled by the HR department, including internal transfers and secondments to fill posts.

    Devine offers a word of caution about making new appointments after a merger: "The fairness and logic of appointments come under the spotlight, making it important for senior managers to justify their decisions." This is of particular importance if, at the same time, redundancies are being made in other areas of the business.

  • Redundancy. For employees, one of the main concerns surrounding a merger announcement is the fear of redundancy. Such fears are often well founded, because, with the desire to cut costs, redundancies often accompany mergers. Sensitive handling of redundancies is important both for staff losing their jobs and for the employees left behind.

    The Halifax and Lloyds TSB mergers resulted in many redundancies. The reduction in employee numbers at Lloyds TSB was handled through redundancies and natural wastage, while at Halifax, a total of 7,000 Halifax Property Services staff before the merger has been reduced to 2,700 employees today.

    Both companies operated a voluntary severance scheme as well as making compulsory redundancies. Their personnel/HR departments offered support to those affected, through a dedicated transition support unit at Lloyds TSB and one-to-one support at Halifax.

    Bristol & West made only a few redundancies and PricewaterhouseCoopers used the opportunity to develop a new redundancy policy, although no redundancies were made as a result of the merger.

  • Relocation. Mergers often lead to relocation for some employees, as various functions are brought together on one site. Many people choose to work for a company because of its location, and may therefore require incentives to move. To encourage employees to move with them, merging companies need to look at their relocation policies to ensure they are adequate for the task.

    Employees at Bristol & West, Halifax and Lloyds TSB were all affected by relocation following the mergers. The relocation policy in operation at Bristol & West before the merger was used to compensate the 40 employees affected, following which the policy was adopted for the whole business.

    Lloyds TSB asked 450 employees to relocate, all of whom were offered compensation under the company's policy. When the head office was moved from Birmingham to Bristol, the relocation policy was redesigned to offer employees prepared to consider long-distance commuting a one-off tax-free payment in lieu of relocation. This feature was introduced to encourage those employees who did not want to move their principal place of residence to remain with the organisation. Services available to Halifax employees required to move offices after the merger included help with the sale of a home, removal costs, temporary accommodation and travel and disruption payments.

  • Retention. Some companies operate policies designed to encourage employees to relocate with the business. Others, however, need to provide employees with an incentive to stay with the company even though the business location does not change.

    In particular, companies will want to make sure that key employees do not become a casualty of the merger. Bristol & West, Lloyds TSB and PricewaterhouseCoopers did not report any problems with employee retention, although Lloyds TSB did take special measures to identify and retain key employees.

    At Halifax Property Services, an already high labour turnover rate increased following the merger. A year after the merger, this is being addressed by the personnel department, which is working on improving communication with employees.

  • Strategic planning. Apart from dealing with specific employment policies, the personnel/HR function also has a role to play in strategic planning for the whole business. It is important that people issues are part of the company planning process and that the personnel/HR department has an input in this.

    Halifax personnel department helped in the development of an overall way forward for the company, and, at Denton Wilde Sapte, HR was involved in establishing a long-term framework within which to take short-term HR decisions. PricewaterhouseCoopers' HR team was involved in developing e-business strategies for delivery of HR and leading the way in cost management as part of integration.

    At Lloyds TSB, the HR department was heavily involved in company planning through representation on the central coordination committee and all key task forces. This has continued beyond the integration stage of the merger, with the HR department presenting an annual report to the company board. This representation has helped to bring HR to the forefront of strategic planning at the company. In addition, a new "business partner" HR model has helped to increase HR involvement in the business planning process at divisional level.

  • Terms and conditions. Besides different pay and grading structures, employees from two merged companies will also have disparate terms and conditions packages. Companies often choose to amend the two packages so that all employees in the merged company receive a similar level of benefits.

    Work undertaken by our case-study companies ranged from a complete rewrite of terms and conditions at Denton Wilde Sapte, to a merged set of packages at Bristol & West. PricewaterhouseCoopers used the merger as an opportunity to introduce a new flexible benefits scheme for all employees. The personnel department at Halifax reviewed the terms and conditions of Halifax Property Services employees and recommended changes to bring them more into line with those of other employees.

    At Lloyds TSB, a full review and analysis of the differences between the terms and conditions of the two organisations was carried out by the HR department. A harmonised set of terms and conditions was designed that included measures for protection of some elements enjoyed by existing staff where appropriate. The HR department also oversaw the design and management of a new selection and appointments process and the development and implementation of a new set of harmonised HR policies covering equal opportunities, employee relations and reward.

    How did we do?

    Our study group was asked to rate - on a scale ranging from very well to badly - how well people management issues were handled during their respective mergers.

    Denton Wilde Sapte reported positive feedback in all areas, and was particularly pleased with the approach taken to changing employee terms and conditions. It was felt that the work carried out in each area was appropriate for the company's needs and that the personnel department played a full part in this. Similarly, the HR department at PricewaterhouseCoopers was satisfied with the handling of all people management issues during the merger and the role it played in them.

    Positive feedback was again the norm at Halifax, in all areas except corporate culture. Because this was critical to the success of the merger, our respondent felt that earlier involvement of the personnel department would have benefited the company. In particular, more work could have been done to integrate Halifax Property Services staff on their arrival at the heart of Halifax.

    Overall, Lloyds TSB was also very positive about the handling of the people management issues during the merger process. However, our respondent felt that greater HR involvement in the strategic planning process might have helped to improve the handling of the corporate culture issues.

    The Bristol & West HR department felt that all people management processes were handled satisfactorily or well during the merger. Communication was felt to be handled very well, largely because of the in-depth communication plans for employees and customers. However, an increased HR presence could have led to better management of internal secondments and the policy issues relating to these.

    Overall, all the personnel/HR departments in our case-study companies were satisfied with their level of involvement in the merger and integration of the two companies. However, some felt that there should have been a greater role for them during the setting up of the deal and the immediate transition.

    Is it enough?

    Information collected from the IRS study group clearly identifies a host of activities undertaken by personnel/HR departments at the time of a merger. Halifax, Lloyds TSB and PricewaterhouseCoopers all report that this work was critical in the success of their respective mergers, while Denton Wilde Sapte and Bristol & West both believe that the activities of personnel/HR had a major effect on merger success.

    Among the reasons given for this were the influence of the personnel/HR function on communication, strategic planning and culture:

  • Halifax personnel department feels that communication was the most important aspect of its role during the merger process. It ensured that all employees affected by the merger were kept well informed, understood why the merger was happening and what the implications were for the company as a whole and at individual level;

  • the HR department at Lloyds TSB completed several projects during the merger that are felt to have been critical to its success. Although a communications consultant was employed, it was the role of the HR department to uphold a constant two-way flow of information to ensure employees were aware of merger progress and had the opportunity to feed back their views. The HR department was also involved in strategic planning across the whole organisation through representation on all company functional-integration task forces;

  • PricewaterhouseCoopers emphasises the work of the HR department in developing a culture for the new organisation. This was helped by the development of new reward and benefit systems, integrated grading structures and performance management mechanisms within the first 12 months of the merger; and

  • a clear understanding of people issues displayed by the HR department at Bristol & West is felt to have fed through to policy decisions made at the time of the merger, ensuring that the people affected by the merger were kept at the top of the agenda.

    Outside bodies

    A merger is a huge process for a company to go through without external assistance, so it is no surprise that most of our case-study organisations enlisted the help of others. Lloyds TSB used an external consultancy to advise on the merger process and to play a major role in coordinating activity across the various functional task forces. In addition, a consultant was employed to handle communications during the merger and an external provider used to administer the employee support scheme. An external consultant was also used by Denton Wilde Sapte to carry out an employee attitude survey.

    Those companies that recognise trade unions discussed proposed changes with union representatives. At Halifax, the Independent Union of Halifax Staff was consulted during the merger process. Bristol & West does not recognise a trade union, but the Irish Banking Union represents staff at the Bank of Ireland. As Bank of Ireland staff were not affected by the merger, the union was merely kept informed of the merger developments.

    At Lloyds TSB, the Lloyds Group Union (which is now the Lloyds TSB Union) and the Banking, Insurance and Finance Union (now part of Unifi) were kept fully informed of progress and were consulted on key aspects of the merger. They also played a full part in negotiating and agreeing a new set of terms and conditions for employees. Following the merger, a more constructive working relationship was agreed with both unions, based on a new agreement involving the sharing of information on a wide range of employee issues.

    Failures

    One of the most interesting characteristics of mergers is that many of them fail to create value for the acquirer. According to the Boston Consulting Group: "The most common reason for [this type of merger] failure is underestimating the difficulty of successful post-merger integration."7

    But problems arising at an earlier stage - before the merger takes place - can also have a people management dimension. Among our study group, Denton Wilde Sapte and Bristol & West have had experience of an attempted merger that failed to materialise.

    Both cited different management styles as a reason for the failure, and Bristol & West additionally blames a lack of communication. It is noteworthy that in the merger with Bank of Ireland, communication was one of the Bristol & West HR department's top priorities, and managers developed a detailed plan for communication with employees and customers.

    It is hard to reach general conclusions about the appropriate level of personnel/HR involvement during merger negotiation, transition and integration, because circumstances vary from one merger to the next. Nevertheless, two companies in the IRS study group offer advice on the most important areas:

  • Halifax advises companies involved in a merger not to underestimate the cultural differences between two businesses, noting that people act very differently at a time of insecurity. The personnel/HR department should be involved from day one of the merger talks; and

  • Bristol & West also emphasises that the personnel/HR department must ensure its involvement at the start of the merger. In addition, our respondent says that a comprehensive communication plan covering both employees and customers must be developed.

    A final note from Marion Devine's study warns of the dangers of a poor people management strategy during a merger or acquisition: "If mismanaged, people issues can translate into lost creativity, lost energy and lost focus as key employees leave or become demoralised."

    1Office for National Statistics press release, 9 May 2000, available at www.ons.gov.uk

    2"Mergers and acquisitions: getting the people bit right", M. Devine and W. Hirsh, Roffey Park Management Institute, tel: 01923 854052, price £50.

    3"Unlocking shareholder value: the keys to success", KPMG, available from Nikki Brown, tel: 020 7311 4805, free.

    4FT.com, 14 April 2000.

    5"Mergers: growth in the fast lane", Price Pritchett and Robert Gilbreath, Pritchett & Associates, tel: 08705 335555, price £5.95.

    6"Smart moves: a crash course on merger integration management", Price Pritchett and Ron Pound, Pritchett & Associates, tel: 08705 335555, price £12.95.

    7Quoted in the Financial Times, 2 March 2000.

    The role of HR/personnel during a merger

     

    Bristol & West

    Denton Wilde Sapte

    Halifax

    Lloyds TSB

    PricewaterhouseCoopers

    Acquired by Bank of Ireland Group in 1998.

    Created from merger of Denton Hall and Wilde Sapte earlier this year.

    Halifax Property Services merged into the banking division in 1999.

    Lloyds Bank and TSB merged in 1995.

    Formed in 1998 from the merger of Price Waterhouse and Coopers & Lybrand.

    COMMUNICATION

    In-depth communication plans developed for employees and customers.

    Liaised with managing partner and communications team.

    Formulated staff communication and Q&As on issues relating to changes and individuals.

    Employed communications consultant to run the merger communications platform.

    Fronted workshops to set out new benefits and performance management processes. Provided regular updates/bulletins on intranet.

    CULTURE

    HR director reviewed possible culture issues.

    Analysis and action steps from attitude survey by external consultants.

    Administered attitude survey. Devised actions to be taken.

    Helped to develop a common set of values and beliefs for internal purposes.

    Introduced new career development models and performance management processes.

    EMPLOYEE SUPPORT

    HR advice and guidance provided for line managers.

    Produced booklet and held individual meetings where requested.

    Provided a full range of support - one-to-one counselling, telephone and face-to-face.

    Extended TSB employee support scheme to Lloyds Bank employees.

    Offered employee support helpline. Provided unceasing energy and enthusiasm to employees and management struggling to cope with change and uncertainty.

    MANAGEMENT DEVELOPMENT

    Not applicable.

    Liaised with training officer.

    Put together full management development programme to support transition.

    Designed and introduced a new performance management process.

    One-to-one coaching of senior managers and partners provided by organisation and executive development teams.

    PAY AND GRADING HARMONISATION

    Not changed.

    New structure currently being designed.

    Improved terms and conditions for Halifax Property Services staff.

    Introduced a broadbanded pay and grading structure.

    Created new structures for all employees.

    RECRUITMENT

    Managed new positions and internal transfers.

    Filled gaps where neither firm had a suitably qualified candidate.

    Placed adverts and assisted in interviews where line manager inexperienced.

    Managed internal recruitment as part of major selection and appointments process.

    Developed and marketed a new brand in the marketplace. Developed employee referral schemes.

    REDUNDANCIES

    Experienced a small number of redundancies but were handled within policy.

    No redundancies as a result of the merger.

    Administered voluntary and compulsory redundancies.

    Set up a transition support unit to handle redundancies.

    No redundancies as a direct result of the merger, but a new policy was developed.

    RELOCATION

    Approximately 40 employees relocated. Adopted Bristol & West policy.

    No employee relocation.

    Relocation incentives included enhanced travel and disruption payments and relocation assistance.

    Standard relocation policy offered to 450 affected employees, plus some additional help for head-office based employees.

    No employee relocation.

    RETENTION

    No retention problems.

    Had some problems retaining key employees.

    Problems retaining key staff now being addressed.

    No retention problems, but did take special measures for key employees.

    No retention problems.

    STRATEGIC PLANNING

    HR director was involved in initial merger talks.

    Established long-term framework within which to take short-term priorities and budgetary decisions.

    Involved in developing overall way forward at general manager level.

    Heavily involved in strategic planning through representation on the central coordination committee and all key task forces.

    HR developed e-business strategies for delivery of HR to lead the way in process re-engineering and cost management as part of integration.

    TERMS AND CONDITIONS

    Subsidiary Bank of Ireland company based in UK was merged with Bristol & West with terms and conditions merged.

    Changes to terms and conditions consulted on. Rewrote and launched new set.

    Reviewed and recommended approach in this area. Provided documentation and leaflets.

    Reviewed and analysed the differences between terms and conditions of the two organisations. Merged set of terms and conditions designed.

    New flexible benefit scheme for all. New statement of consolidated terms and conditions prepared.

    Ten key messages on how to handle people management issues during mergers and acquisitions

  • Consciously manage the merger process by identifying and planning for key people issues from the earliest point. Involve a high-level HR professional during the negotiating stage. Assemble an integration team which coordinates activities not just within the first six months but throughout the transition and integration period;

  • parcel the merger or acquisition into a number of simple and easily understood stages. Communicate key milestones to everyone and celebrate their achievement. Give staff a sense of the various phases of change, so that they can make better sense of their experiences;

  • set short-term goals for the business at each stage to help everyone retain their focus on performance issues and the external environment. Help employees to understand that it takes time to construct a detailed business strategy for the merged business. Warn employees that a second wave of change is likely as the new strategy emerges;

  • try to map and plan for the various emotional waves that will sweep through the organisation as different groups of employees work through the changes brought about by the merger or acquisition. Remember that the way these personal transitions are managed helps determine how well employees relate to the post-merger organisation. Build in feedback mechanisms to inform executives how people are feeling at grass-roots level;

  • communicate at every step - even when there is no news. This is a critical process: the oxygen of the changing organisation. If business leaders want their organisation to survive the trauma of merging and to recover fully, they must ensure that there is a steady flow of high-quality communication. Stopping this flow temporarily or prematurely can prove fatal to employee confidence and commitment;

  • get people on board as quickly as possible. Protect your human capital. Identify as early as possible who are the key people and be willing to design flexible employment packages which dangle the correct mixture of enticements for these individuals. Build trust by being honest, making realistic and specific promises and sticking to them. Attach the highest priority to first encounters between the merging organisations. Ensure that early visitors from one organisation to the other do not whip up fear and tension by arrogant or insensitive behaviour. Remember that this is a vital time to learn about potential synergies;

  • protect the core business. Be prepared to ring-fence it by committing additional managerial resources and by giving support and direction to the managers who are left running the core business. Help line managers to cope with the transitional period by identifying temporary policies and short-term priorities;

  • adopt a phased and professional approach to HR issues. Identify key and sensitive issues as early as possible. Consciously phase the redesign of major personnel procedures (pay, grading, appraisal etc) so the HR function does not sink into a bureaucratic quagmire. Demonstrate a high standard of care and professionalism in handling the most critical actions for individuals, especially redundancies, relocations and appointments;

  • accept that it is at the local, micro level where differences in working practices and underlying values are resolved. Allow this to happen and use a light touch to try and obtain positive outcomes from these sometimes friendly but often tense interactions. Highlight crucial values from the top very early on, so local teams can build them in to the way they work; [and]

  • don't try to paint the culture on afterwards. The merger process itself, and how well or badly it is managed, helps mould the values and behaviour codes of the emerging organisation. Executives need to role model during the transition the values and behaviour that they want for the future.

    Source: Roffey Park Management Institute.