Mergers: Putting the people asset first

by Michael Custers

The New Year brought the news that the Competition and Markets Authority in the UK has provisionally agreed the merger of BT. BT is the UK’s biggest supplier of broadband and EE, the country’s largest mobile operator. Not only is a merger significant from business and technology perspectives, it presents a huge HR challenge.

Reports show that BT has 88,000 employees in 61 countries, with 72,000 of those working in the UK. EE has approximately 13,000 full time employees in the UK. That is a lot of people to conjoin; to convince to join the new organization, and to rationalize into positive teams. For success, employees must buy-in to the vision that it is proposed to change the way all interconnect.

Smooth Merger transitions

At NGA, we have ourselves grown through a series of M&A activities. We have also, in our capacity as HR and payroll specialists, worked with many, many organizations around the world to smooth the process transitions and ongoing management of their workforces. Often employees are disparately located and in every job function you could imagine. This is not a straightforward process, by any stretch of the imagination.

So far, much of the conversation has focused on the merger of BT and EE’s customer services reputations. However, for the employees of this pending acquisition, and all M&As, the impact of the news is far more personal, immediate and pressing.

Do I still have a job? Will my employment Ts&Cs change? What about my career development? Is my benefits package safe? So many questions. And possibly not enough answers.

Clear and regular employee communication is vital throughout the M&A process. Engage employees in the process from the beginning. The human asset is vital to the success of the evolved business. Note that  buy-in and cooperation of the employees of each company is also essential to its future.

Stronger together

With M&As, the overriding objective is to bring together the strengths from each business and from this build the new, challenger organization. Apply this same principle to the workforces. Be careful not to wait to consider this too late in the merger process.

By coming together early in the M&A process, HR can work with the management teams to develop the culture of the new organization. Agree on these values at the beginning, and build the company can be built on these. This is better than trying to squeeze values in as a barely achievable afterthought.

This “new culture” is vital if the end result is to be a successful, single entity and not two vaguely merged operations, unified by name and letterhead, but operationally still very independent.

Humanizing Mergers and Aquisitions

The outcome of an M&A for many will be good, at worst, business as usual. For others, it will not be. Any redundancies, relocations and contractual changes must be clearly communicated to the individual. By making the process, timeline and outcomes clear, the impact on the employee and company can be lessened.

Steer processes to meet compliance with the employment laws of the operational country of the individual. They must also reflect their employment status and tenure with the organization, sometimes spanning previous merger situations, which adds its own complications.

With multinational mergers, the process is highly complex and made only harder if the visibility of the human collateral is poor. The smart use of HR tools makes these processes more straightforward – and eliminates the risk of legal and / or compliance reporting failure.

By using an audit view of the workforces of both organizations, the best people can be profiled and mapped against each divulged role. This process clarity also highlights the opportunity for revised team structures and the creation of job functions that, under the new culture, will drive revenue opportunities for the evolved business.

Human Collateral Management during a Merger

The “human assets” have such a significant influence on the success of M&A plans. It is these people who have built the businesses – to the point where the natural development is the creation of the new enterprise.

It is these people who continue to hold the customer relationships and understand the minutiae of the day-to-day functioning of the organization – even if their tenure with the organization will come to an end. This is increasingly being recognized by the advisors called in to support acquisition processes.

According to PWC “People issues are increasingly being recognized as strategic elements in M&A transactions and HR professionals are being invited to the table more frequently and earlier in the deal process.

Companies recognize the importance of people-focused integration, but acknowledge that deals have been less successful due to a lack of people integration activities.

There’s no guaranteed formula for deal success, especially when people issues are brought into the strategic mix.”
Source: summary findings by PwC

HR – the finger of success (or failure) points to you!

The due diligence that now precedes an M&A points the likelihood of failure to the handling of the people aspects of the change. The pressure on HR teams is, therefore, huge, but equally, so are the opportunities HR professionals can bring to the emerging business.

By putting HR high on the agenda from the off, the culture and expectations of the new organization can be set; essentially putting in place the blueprint for its success – as a business and as an organization that retains and invests in its greatest asset – its workforce.

Your Merger Checklist for HR Success

Prepare the ground

  • Create a checklist for due diligence
  • Carry out a risk analysis on key jobs
  • Prepare a due diligence database
  • Prepare algorithms for all benefit costs in different countries
  • Identify key people in own organization
  • Target specific communications for different groups
  • Put integration of HR systems high on your priority list

Culture audits

  • Management styles – are they matrix, consensus or centralized?
  • Hierarchy
  • Acceptance of accountability
  • How people are motivated
  • Impact of redundancy on local cultures
  • Decision-making styles
  • Perceptions of time
  • Perceptions of what can and can’t change

Source: CIPD – How to Handle Mergers & Acquisitions