The people issues can make or break a merger.

What can you do to ensure success?

Companies aim to gain a competitive edge with mergers and acquisitions (M&As). It’s a mentality which saw a record 9,500 deals worth 3.5 trillion dollars last year. Yet less than half of them will add shareholder value.

A recent report by the management researchers, Roffey Park, Effective Mergers and Acquisitions, argues that: ‘Most mergers fail to realise their value because senior managers often lack a clear strategy for driving the merger through and they frequently mismanage the people issues.’

HR should be involved in the process early on. One of the main reasons M&As go wrong is that the senior management of the dominant party fails to set up an appropriate, fast-moving pace. They pussyfoot around with major decisions. People find it most difficult to deal with uncertainty.

Where there is uncertainty, productivity plummets and people start dusting off their CVs. Companies need to make appointments quickly and communicate decisions rapidly if this is to be avoided. It’s a situation which puts real pressure on HR.

You need to ask the following questions: What are the HR challenges posed by the merger? How are these challenges to be met? What lessons can be learnt?

M&A: British Steel & Koninklijke Hoogovens

The greatest challenge they faced was bringing together two great national steel companies and trying to create one new company culture out of the merger. The other big challenge was to bring together an effective and committed leadership team that was moving in the same direction and to fill the top 300 leadership jobs in the new company. They also recognised that there was a big communications job to keep employees on board and well informed on the reasons for the merger and the direction the new company was going in. Finally, they decided that they had to do all of this as quickly as they possibly could.

The top 11 people from both companies who knew about the merger beforehand worked very hard at planning how they would come together. They also looked very hard at the different cultural issues around the way they do business.

They focused very hard on the issue of filling the top 300 jobs and managed to get the task done within the first three months after the merger. They also prepared for the ups and downs of employee morale and for the initial volatility caused by the uncertainty felt at the time of the merger. They were also ready for a big downswing much later on after employees fully recognised that there would have to be some pain ahead as the new company tried to achieve greater shareholder value.

One major lesson they learned was that they had fallen into a satisfaction trap after the merger. Great job, we’ve made all these appointments, we’ve got everyone settled in, we’ve got the unions and the Dutch works councils with us, it’s time now to look forward. In fact they had spent so much time on integration and post-merger integration activities that they had temporarily taken their eyes off the ball in terms of providing customer satisfaction.

The second lesson related to internal communications. They were pleased to find employees congratulating them on how they handled this side of things. But they forgot to keep thinking about the individual employees. It is not just about the company and why it’s a good thing to merge. They should have been communicating much more to the employees about what was in it for them.

Beware also the cultural differences. Dutch and British cultures are quite similar but nonetheless there are significant differences. For instance, the Dutch generally do not regard the chairperson of a meeting as having an ascribed status. This means that they won’t look to the chair to make the final decision. Both sides can feel frustrated when up against these differences.

M&A: CG & Norwich Union

The biggest single issue was dealing with the personal insecurity that everyone feels at a time like this. The next challenge was understanding the culture of the merging businesses, followed by the sheer amount of work that is involved in a major merger from an HR perspective.

They tried to learn from previous merger experience. They asked people what went well and what didn’t during previous mergers.

They were determined to get as many management appointments out of the way as quickly as possible to minimise personal insecurity. All the top posts were decided by the time the merger was announced, that is, Norwich Union Insurance made 18,000 appointments in four months.

They took a great deal of care to measure and understand each of the cultures involved by setting up focus groups and individual interviews with a cross-section of people from all over the company. They bought HR teams together from across the business as soon as the announcement was made and broke down the work into 10 streams, assigning senior HR management to each.

They learned that you can never do enough to understand the culture. And whatever you do in a merger, do it quickly. Also be absolutely fair and above board in all that you do and communicate that across the company.

M&A: Astra & Zeneca

The challenges were how to develop the new culture and values of the organisation, while ensuring that they retained the talent that they wanted during a period of uncertainty; while at the same time supporting ongoing business and helping to achieve merger objectives; and doing it all as fast as possible.

Working to the slogan – "Fast, Fair, Flexible and Forgiving", the HR team played a key role in establishing integration task forces to look at the issues. They developed detailed policies, procedures and guidelines for all phases of the merger.

HR also worked very closely with their internal communication professionals to ensure information given to employees was consistent. The whole organisation was encouraged to meet face-to-face before the merger became legal to share information, get to know one another, and work out the new culture.

They also developed a fair and transparent selection process very quickly. The day the merger was confirmed, the top 200 people were in position and this helped stabilise the process.

Spending time working things out early in the process is very important. In retrospect they could have shared more information between the two companies at an even earlier stage.

M&A: Cap Gemini & Ernst & Young Consulting

The challenge was to bring together three rather than two companies to combine the best of these organisations into one coherent global company that would enable them to maximise the huge breadth of capability the merger would give.

While their organisational structure and dimensions were still being defined, they had to ensure that they retained talented people in a very hot talent market and all the while being careful not to lose their client focus.

Their new leadership team used their own strategic consultants and own mergers and acquisitions experts in the merger teams. Cap Gemini Ernst & Young is a company that has grown through acquisition and, although the scale of this merger was much bigger, their management team had previous experience.

To help with talent retention, they developed their "professions" (initiative). These are communities based around capabilities such as strategic consulting, business consulting, technology. Each profession is collectively responsible for members’ individual development and growth.

Working to the slogan "Big, Best and Bold" they focused a lot of energy on internal communications. They also invested time and effort portraying their new global image, securing their position as an employer of choice.

Because they moved from being a partner-based business to a publicly accountable one they had to develop greater transparency and accountability and a strong focus on profit and loss and shareholder value.