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Joining ForcesOn 1 Jun 2001 in Personnel Today Comments are closed. Previous Article Next Article Related posts:No related photos. Themain problems in any big merger are how to keep morale high and key players onboard at a time of maximum insecurity. Three global HR directors with a wealthof experience in this field, share their knowledge MikeMoore, senior vice president, HR operations at GlaxoSmithKline, talksabout the challenges faced in keeping employees happy and profits buoyant whenthere is a long lead-in time to the mergerTenyears ago, in March 1991, I presented a paper called “Managing when yourmerger is announced” to a pharmaceuticals conference in Berlin. Many booksand articles had been written about managing the integration following amerger, but not about coping during that period of time between mediaannouncement of the intent to merge and the first day of trading of the newentity. This was my focus, the industrial equivalent of the early days of WorldWar II – the so-called “phoney war” – a time when seemingly not muchcan be done except watch the dark clouds of merger madness gather on the horizon.WhatI didn’t know back then was how much longer this in-between period was going toget over the next few years. When SmithKline merged with Beecham, which was thecase study I presented, it took a little over 16 weeks to gain regulatory andshareholder approval. This was considered a normal timescale. Recent experiencein many fields, such as media and telecommunications as well aspharmaceuticals, has restated the norm.InJanuary 2000, when GlaxoWellcome (GW) and SmithKline Beecham (SB) announced theirmerger plans, the expectation was that by the summer we would be done. In fact,European regulatory approval was given on 8 May and by 31 July, shareholders ofboth companies had voted to approve the merger. What hadn’t been anticipatedwas that it would take the anti-trust authorities in the US until December togive the go ahead. GSK shares began trading on 27 December – 349 days after theinitial announcement.Thechallenges of a delay are obvious and huge. First, there is no absolutecertainty that the merger will actually go through until very near the end ofthe regulatory process. One forced disposal of a product can change the deal toan extent not acceptable to one or both of the parties. Second, even if theassumption is made that merger approval will be forthcoming, there are severelegal no-go areas that impact on the integration planning process. As aconsequence, the third and biggest challenge is how to maintain morale andbusiness momentum. These became the two critical issues.Businessmomentum in both SB and GW was maintained. This is a fact. Both companiesreported earnings well within the range of City and street expectations. Howwas this achieved? By refocusing business leaders on the achievement ofbudgeted targets. This is when the investment in a pay-for-performance culturepays dividends – literally. The achievement of stretch goals quarter-by-quarterled to higher-than-usual bonus payouts in many of our businesses. The messagewas clear – to miss budget would be even more unacceptable than normal.Moraleis more difficult to define, manage and measure. In times of uncertainty,people lose commitment – their thoughts turn inwards. “Me” becomesthe focus – pay, security and career. They start focusing on their own agenda –all the things headhunters feed on. Managing uncertainty is of course always achallenge, but particularly so when most of the big questions like “Willthe merger happen?” and “Will there be a place for me?” can onlybe met by “Wait and see”.Thefact that our business results were good must give some indication that moralewas maintained. Very few key talents defected, yet another sign. It would benaive to suggest that everyone was comfortable with the situation but I’ve seenlower morale on a rainy Monday morning. I believe three things contributed tothis.Firstwas the saturation of the two companies with updates about the integration planand our progress against it (towards this goal) as well as “getting toknow you” information. Communicate, communicate, communicate. Second, adecision was made to start integration planning early. An overall IntegrationPlanning Committee was set up by mid-February. By March, many integration teamshad been set up in businesses and functions involving several hundred people.Not only did this enable us to hit the road running when the merger waseventually approved, but it had the benefit of focusing the energies and mindsof our key talent on the future of the new business. Third,we started the selection process for the top 120 or so jobs. The risks ofstarting early are obvious. People who are deselected are nevertheless requiredto stay in position until the merger is completed, which in this case wasseveral months later. Not only this, but the expectation was that they wouldremain effective contributors. Impossible? No! I’m always surprised how mostpeople in this situation act with absolute professionalism – it helps ofcourse, if the company reciprocates by treating them with the flexibility and dignitythey deserve. Arguably,an even greater risk is posed by appointing people early. They can easily losefocus on their current job while, at the same time, becoming increasinglyfrustrated because they can’t start their new one. The clear benefit of makingappointments early is that key talent, who are susceptible to poaching, can bereassured, and become focused on and committed to the future. In my judgement,this benefit far outweighs the risks. Wewere determined that the selection process had to be absolutely fair, equitableand objective. From the point of view of developing a new culture, there is nogreater indicator of what sort of company it will be than the process of howthe new company selects and deselects its people. With this in mind, we choseto use a third party, Spencer Stuart, to provide an impartial objective inputto the selection decision-making process. By the time the merger was finalised,over 600 leaders had been selected, ready, willing and able to drive thebusiness from day one. The overwhelming opinion was that the process had indeedbeen balanced and fair – even by those who left the company.Timewill tell how well we managed a challenging 2000. Early indications are good.One side effect of the delay and all of the frustrations of last year has beena bursting of pent-up energy this year to get on and move the new businessforward to become the indisputable leader in our industry.Continualtwo-way communication is at the heart of any successful merger, says LanceJ Richards, Teleglobe’s international director of HR Mergerand alliance work is challenging no matter where you sit in the organisation.From the HR chair, though, the impact on the employee population has to betightly managed. Having worked through HR issues in mergers or alliances at BT(with MCI), at GTE (with Bell Atlantic) and now with Teleglobe (and BCE), I’vehad a terrific opportunity to see some very large deals work through. AtBT, we entered into an alliance with MCI to form Concert, a globe-spanningentity delivering a wide array of telecoms products and services tomultinationals. At GTE, our merger with Bell Atlantic to create Verizon wasdesigned to build on the tremendous geographic achievements both companies hadattained, as well as the technological excellence each had developed separately.Inboth of these projects, ensuring that employees knew what was going on, who wasin charge and where it was leading to was at the forefront of HR initiatives.In these situations, there are some vital lessons which I’ve learned, and whichare leading agenda items for me: –The CEO must be visible to the employees and interact with them.–The company must communicate – clearly, constantly and quickly.–The dialogue must be two-way. Employees must have a way to feed questions andconcerns back to the business and people in charge, then get answers.Inmany mergers and alliances, the corporate heads roll out a well-crafted visionof the new entity, and how it will lead its market, leap ahead of competitorsand so on. For the average employee, it’s like listening to the adults in aCharlie Brown cartoon – they hear nothing except what they want to hear – andall they want to hear about is the future of their own job. InM&A activity, where the intellectual capital that resides in the employeesis often of overriding concern, it is important that, at the end of the day,companies remember that all their employees are concerned about is making thenext car payment or paying the next quarter’s tuition for their child. The onlyreal solution here is communication.Therecent BCE acquisition of Teleglobe was pretty much a case study in how tomanage employee expectations with professionalism and candour. Simultaneouslywith the after-market-hours announcement to the public, all employees receivedan e-mail with a link to a pre-recorded streaming video, with messages fromboth the chairman of Teleglobe and chairman of BCE. They clearly outlined thereasons for the acquisition, as well as the benefits, and then committed tomaintain clear communications throughout the process.AQ&A board came up on our intranet, accessible in all 43 countries where wehave employees, with most questions answered within five business days. Withina month, BCE had appointed a new CEO. Within a week of his arrival he held thefirst of several meetings with employees. Initially he made presentations inperson in our primary employment cities, then changed to a live, multi-countrybroadcast format, followed by conference calls for outlying countries.Simultaneously, he launched a series of breakfast and lunch meetings with 15 to20 employees, which are still ongoing wherever his travels take him. Thus, hewon many points with employees for his candour and style. The key here was thatwe immediately opened a variety of one- and two-way communication venues forour employees, and ensured there was a steady flow of information to our people.CapGemini Ernst & Young’s global people resources management director CarolynNimmy describes a three-way merger which led to one giant company with60,000 staff worldwideLastyear the Cap Gemini Group embarked on an enormous challenge – the acquisitionof the consulting arm of Ernst & Young. This acquisition brought with it18,000 new colleagues. It required the group to bring together not just Ernst& Young Consulting but also Gemini Consulting and Cap Gemini IT servicesfrom within the Cap Gemini Group.Wetook the three global companies – each with strong brand recognition andleadership positions in their given areas of expertise – and merged them toform Cap Gemini Ernst & Young. The three companies brought togetherstrategic consulting capability, management consulting capability and strong ITconsulting skills to create one company of nearly 60,000 people. The HRchallenge was to bring these three companies together to form one cohesive unitand yet recognise the differences of the talented individuals. All this at atime when all these individuals had countless employment options in a thrivingmarketplace. Themerger established a broader client base and a richer talent pool for CapGemini Ernst & Young. We realised there was a vital need for our employeesto get excited about the new company while remaining on a clear path to success– despite the fact that our new organisational structure and dimensions werestill being defined. Inresponse to these needs, we developed and launched an innovative strategycalled “Professions” – an approach that orchestrated individuals’professional development. Professions are not organisational structures, rathervirtual teams that unite those individuals who have similar skills, interestsand aspirations. Each team recognised as a “Profession” iscollectively responsible for each member’s individual development and growth aswell as the evolution of the group as a whole. This growth and development issupported by training, mentorship, competency models and career guidance, aswell as direct involvement with the company over profession recruiting,resource planning, communications and knowledge management issues. Thisapproach is rare, if not unique, for a company of our size, but Cap GeminiErnst & Young’s leaders decided early on that it needed to reinforce thecompany’s people-centricity, with long-term professional growth as a corefocus. There are six professions – strategic consulting, business consulting,technology consulting, business development, operate and the enablingprofession. The Professions’ communities also provide thought leadership to theindustry and enable their members to acquire leading-edge business andtechnology skills. We believe the focus Professions bring helps membersdiscover and use tools that continually put them ahead of their peers at othercompanies. This helps our professionals quickly become industry gurus andthought leaders who can enjoy the personal and professional benefits thisaffords.Thecompany benefits by having access to focused professional groups that driveforward innovation and benefit our clients in the long run. Teams, clients,technologies and organisational structures will change many times, butProfessions ensure our people have a consistent peer group which helps them seegreater opportunities for their future with our company or their career pathsin this industry.Thesuccess of the Professions was tested through our International Focus Groupprogramme, an initiative aimed at gaining a comprehensive understanding for theglobal concerns and views of our new company as a whole. The programme, whichis comprised of physical events as well as virtual “temperature check”surveys and communication tools, measures the current “human state”of Cap Gemini Ernst & Young. These results are continually assessed androlled into all Cap Gemini Ernst & Young’s learning efforts.Sincethe merger, Cap Gemini Ernst & Young has promoted the growth and long-termsuccess of its staff. The Professions model has provided a means to bringpeople together, regardless of the company or country they come from. It hasalso significantly strengthened our recruitment efforts, helping build a reputationas the employer of choice – a people-centric company that has gainedrecognition as one the world’s top services organisations.