Who Goes? Who Stays?

In HBR case study “Who Goes, Who Stays?” Steve and Kasper lack on important communication with the employees. They should have begun communicating with their employees as soon as possible in the merger process. Should have considered informing them of company desire to merge with, acquire or be acquired by another company before they begun searching for a counterpart to the deal, if possible. They should have given employees plenty of time to provide feedback about the deal and make personal and career arrangements, if necessary. Any type of change is challenging for most employees, and being part of an acquisition or merger can be especially stressful. The uncertainty of whether you will even have job six to 12 months in the future is stressful enough without having to learn a new culture and establish new relationships with those at the new company. Most of the employee have slight to no confidence of the new future company. The most important tool to manage employee anxiety and uncertainly and offer a smooth transition is a well thought-out communication plan. (Merge ahead, 2012)

Know your audience – When it comes to communicating change, one size does not fit all. The messages and the tools you use must be tailored to your audience to ensure understanding, acceptance and, eventually, engagement. While a “change blog” or a Web page will work well for some head office employees, it may not make sense for employees who are on the road. Spending the time and effort doing a thorough stakeholder analysis will give you a deep understanding of what your employees are most anxious about and their preferred method of communication (print, lace to lace), and may uncover other issues that could pose a risk to the change. In the end, the analysis will allow you to be targeted and impactful, driving employee understanding and acceptance of the change. Though plan sponsors may face a tough road to change or update their pension programs after merger and acquisition activity, the hard work, communication and due diligence will pay off. Successful post-merger integration requires well-planned, coordinated communication. Improvising communication, just “winging it,” can feed the rumor mill, create needless anxiety, and harm productivity. Stress Benefits to Employees

Focus on how the deal will affect employees and their careers in positive ways rather than on how the deal will benefit the company as a whole. Do not neglect to discuss the business needs served by the deal and the benefits to both companies, but make sure that employees can understand the advantages of the deal on a personal level as well. For example, discuss how combining the two companies’ distribution channels can cut shipping costs, which in turn translates into higher profit margins, which translates into higher profit-sharing bonuses for employees. Layoffs

Inform employees as soon as possible if you are going to perform layoffs. Communicate the fact that the company will do all it can to help employees to find new employers by providing things like resume assistance, professional references, letters of recommendation and job-seeking assistance. Back up your assurances with action to avoid creating lasting feelings of resentment in your former employees. Make the actual cuts as early as possible in the process to allow cut employees to begin searching for jobs while putting the “survivors” minds at ease regarding their positions. Allow employees to work for several months after being informed of their termination, and provide them with generous flexibility in work scheduling to allow them to travel to interviews.

The following are the typical communication errors made as companies join forces:
Internal Communications
Failure to address the “me issues”
Employees cannot focus on work activities if they are consumed with anxiety over what might happen to them. Uncertainty is often worse than the certainty of bad news.
Shaving the truth
This sets up false expectations and will only serve to decrease the credibility of leadership and increase the level of distrust in the organization.

Not telling your troops the “truth” will change
Be honest. Tell employees that you don’t have all the answers now and that the truth will change from day to day. Help them understand the volatility of the situation.

Solution:
An effective communication to employees about strategy, targets, and initiatives is vital if employees are to contribute to the strategy. A merger is an agreement between the owners of two companies to combine the operations and brands of both companies into a new, single entity (Merge ahead, 2012). An acquisition occurs when one company purchases and either absorbs or sells another business, with or without the approval or the company’s leadership. Mergers and acquisitions affect the employees of all companies involved in a number of ways, making effective and timely employee communication vital to ensuring that the transition flows as smoothly as possible.

Given these challenges, it is essential to keep the following points in mind when planning and managing communication during a merge and acquisition.

Flow Diagram Retrieved from: Reflection on M&A, 2007

Discovery
Different types of deals drive very different messages about the possibility, content and effect of change. Be very specific with employees when talking about likely outcomes and possible scenarios. A common pitfall is for the acquirer to communicate to employees early in the deal that they intend a “merger of equals” so as not to upset employees in the acquired organization. Before long, however, as systems and processes are overhauled, those employees realize they have been fed a “party line.” Leaders lose credibility and productivity slows. This classic mistake was made when a large financial services firm acquired one of its competitors. In initial communications, employees of the target company were told by leaders of the acquiring company that they would “look at the best processes.” For reasons of expediency, however, the acquirer’s processes were pushed onto the target. Employee “pulse checks” at that stage reflected serious distrust of leaders, and this in turn made new contract negotiations difficult. The acquiring business had also lost the opportunity to consider new and better ways to do things. In developing a change agenda for the communication strategy, be clear and straight about decisions from the executive and integration teams concerning the major parameters of the deal, such as: * Is this a merger, acquisition, joint venture or divestiture? Communicate early on the anticipated level of integration and assimilation and what that will mean for employees. * Will leadership be changed or kept intact?

* Which systems, policies and processes will change?
* What should employees say to customers, vendors and other publics?
Certain deals, such as private equity, are driven purely for investment purposes and present few, if any, integration challenges. This is particularly true if a “bolt on” strategy is intended. In such cases, communication planning can be fairly straightforward, with messages of “business as usual” to help employees move quickly through their initial concerns and questions. At the other end of the continuum, when full integration is intended to achieve synergies, communication planning requires far more intricate analysis before launch.

Delivery: messages and implementation.
Understand how the change will affect and influence each stakeholder group. While every employee, regardless of level or role, will be concerned about “What’s in it for me?” each audience will have additional key issues, for example: * Employees: Does this change my employment deal?

* Managers: What should I say to my team? What support tools will I have? * Executives: How do we change behavior? Is there evidence of success? * Unions: How will we save jobs? Protect benefits?

Anticipate the key issues for each stakeholder group. Be clear on where resistance is likely to emerge, and plan communication to help employees with their personal transitions. This investment in communication can pay off in significantly higher levels of employee engagement.

Assessment: measure and reinforce.
Communication during a merger and acquisition is not a one-time event. It requires constant attention and reinforcement to promote a sense of progression. When employees are anxious, they are less able to absorb initial messages, so repetition is critical. Also, key messages must change as decisions are made and integration proceeds. An efficient way to evaluate the effectiveness of current communication and assess what more is needed is to conduct regular “pulse checks,” which are short, random interviews or surveys across the business to monitor progress. One large, diverse organization that sought to grow its broking operations through acquisition did a particularly good job of communicating messages to each part of the target organization, and this had a measurable impact on the retention of mission-critical employees. The messages were honest about the long-term business strategy that would make some units and functions redundant, and respected the individuals affected by the change. Employees in the broking arm, whom the company wanted to retain, watched carefully how their colleagues in other parts of the business were treated. The acquirer achieved a very successful initial integration with high rates of retention in critical areas. In post integration pulse checks, employees across both organizations gave the company high marks regarding the quality and effectiveness of the communication.

References:

Sorhaitz, Kevin M., McCullagh, David (2011) “Merge Ahead” Retrieved on July 9th 2012 from http://web.ebscohost.com.ezproxy.ltu.edu

Lea Peterson and Stella Voules “Mastering merger and acquisition communication helping employees to deal with the deal” (2007) Retrieved on July 6th 2012 from web
http://www.mmc.com/views/ReflectionsOnM&A_HelpingEmployees.pdf

“Top common communication mistakes in a corporate merger and acquisition” http://www.mergerintegration.com/post-merger-management/common-communication-mistakes-takeover-corporate-acquisition

David Ingram “Employee Communication in Merger and Acquisition” Retrieved on
July 12th 2012 from
http://www.ehow.com/info_7801031_employee-communication-merger-acquisition.html

Claudio Fernandez-Araoz, Nitin Nohria (2011) “How to hang on to your high potentials” Retrieved on July 3rd 2012.

Fred Hassan “A front line advantage” May 2011
Retrieved on July 3rd 2012.

Robert S Kaplan and David P. Norton, The office of strategy management, (The office of strategy management, 2005) Retrieved on July 10th 2012 from website http://web.ebscohost.com.ezproxy.ltu.edu