Case Study: Emerging Differences:  When two organizations merge, there are always challenges

THE MERE MENTION of the word “merger” causes stress for some and excitement for others. But it usually comes as a surprise, since most employees are not aware of the situation until just before the announcement is made public. Since job security and access to resources are at stake, employees in both organizations can experience de-motivation when they learn that a merger is about to take place.
Like a courtship between two individuals, a merger involves the lawful wedding of entities, the sharing of assets and the potential alienation of family members. It is quite possible that, without the cooperation of the organization’s children (those employees who helped build the company) the merger might end up, not unlike some marriages, with problematic tension or adaptive friction. Great care and diligence from the start can result in a happy combination of acceptance, prosperity and growth.

At the outset, HR professionals at both of the merging organizations must take on the task of determining what the newly formed entity will look like, whether it will share one culture, vision and strategic plan, or if there will be some level of fragmentation and division. Contingency planning must be taken seriously at all levels to avoid crises. The principle of a merger is to unite, however, in many cases the opposite results. The HR department should be a dominating force in the change process. Unfortunately, it is often called in after the fact to administer the integration and “help” with the change.

Inevitably, the merger results in the overlap of activities—resources in all areas can become redundant, creating inefficient situations. HR is no exception. The reason the organizations merged in the first place was to create economies of scale and efficiencies by combining resources. In the new organization, facilities need to be closed or run at reduced capacities, information/manufacturing systems integrated and redundant staff downsized. The environment of uncertainty can have a real impact on employee motivation and morale, as people in both organizations come to question what their place is in the new family.

Here is the case of two organizations—Extra Inc. and Intra Corp. Before their merger was approved by regulators, both of these companies started the process of determining which areas overlapped among their various operations. Senior HR staffers from each organization were chosen to form an integration committee. The team was charged with planning the change process as it related to the workforce and developing the best strategies to achieve the goal. It was unanimously decided to make use of technology to help with the effort. The first step was to create a hybrid human resource information management system (HRIMS) to integrate employee data from both organizations into one system. There would be a transitional liaison person responsible for privacy and security of the information.

It was found that a majority of jobs were Level 2 or 3, with about 25% of the workforce being Level 1. Knowing this, the HR consultants set out to determine who, among the Level 1 employees, would go and who would stay (a similar process was conducted for level 2).

To achieve this, a three-year history of attendance, performance reviews (cumulative score) and education levels became the main criteria for targeting individuals for potential downsizing—the lower the score, the greater the chance of termination. All targeted employees were asked to defend their score and provide evidence why they should not be downsized. Evidence included factors such as popularity, extraordinary circumstances, geographic location, high recommendation from supervisors, etc. Employees had the opportunity to present in front of a panel consisting of supervisors, HR advisors and consultants or they could state their position in writing. It was expected that individual employees would create alliances with co-workers and defend each other to remain as a group.

The defences were reviewed by third-party consultants to determine a final list of potential downsize candidates. More than the 25% of targeted employees were given the chance to take a premium settlement package (higher than planned exit compensation). Employees who elected to take their chances and not take the premium package when offered, were chosen to stay or leave at a reduced package at a later time.

A more unique program was introduced for some Level 1 and all Level 2 candidates. Employees were given the chance to participate in a work maintenance program where they could work share. Under this plan, an employee would be able to work 40% or 60% of a job if they could find a person to match the balance. An employee would earn 40 to 60% of the full-time salary and be eligible for reduced benefits. The work-share program was received with mixed results and the decision was made by senior managers to cancel it after three months.

One year has passed since the merger process began. Like many marriages, the first few months were difficult, but the overall result is that the two organizations emerged as a strong single entity from a market and sales point of view. The financial position of the company is now stable and steady growth is expected. The new HR department, made up of selected staff members from both organizations, is still trying to establish a common mindset. Decisions by the director of HR (initially with Intra Corp.) often conflict with decisions made by the HR manager (initially with Extra Inc.). For example, originally there were plans to survey the entire staff to see how they were feeling about the merger, but now the director doesn’t see the need for it.

“The new company seems to be doing well now,” the HR director says, “so there’s no urgency to measure the motivation levels of our employees.”

Ash D. Patel (patel3211@rogers.com), M.Ed., CHRP, is a professor in the Centre for Human Resources and International Business at Seneca College and a consultant with CenterPoint Training.

What are your thoughts on this approach? Is all well with this new company or do they have more work to do?

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EMPLOYEES NEED TO FEEL THAT THEY ARE SUPPORTED

ALESSANDRA AVERSA

A MERGER IS like a “second marriage” with each party bringing in their own children. The company leaders from the separate companies are the parents who have decided to unite with new partners. The employees are the children from both sides who are disappointed, fearful of losing what they had and what lies in their ambiguous future. If neglected, the children, although tolerating their new situation, may have a lot of buried resentment that can have negative repercussions later on.

Despite the lack of collaboration within HR, some common ground must be established to support employees. First, an employee assistance program (EAP) should be made available and, second, the survey should be conducted as a tool to gauge employee concerns. Many lives are affected by workplace change and this can lead to feelings of depression and anxiety. Employees who have been terminated and/or employees who are remaining with the company may have to alter their lifestyles to either accommodate different working conditions or take steps to find other employment. Although change can also be positive, it is times like these where people may need someone to talk to.

My current workplace is affiliated with an EAP that is provided by an outside counselling service. The company markets this program to employees on their orientation day to encourage employee well being. Employees can call the counselling company to discuss private matters confidentially. The bottom line is the employee has someone to talk to and a vehicle to obtain some type of support. EAPs can be called into the workplace to set up in private areas where they can counsel employees after they have been terminated or affected by a change. This can be valuable because the employee, who may be experiencing emotional trauma, is given an opportunity to talk, as well as possibly obtain dates and times for possible career counselling sessions to help them get back into the workplace.

Distribution of a survey must not be overlooked in this case. The HR manager should illustrate the following points to the director to persuade him/her to re-implement the initiative. The survey would provide an opportunity for employees to express what they thought of the merger process, how they felt through it all and their input for the future. The survey would have to include some explicit multiple choice questions and a comment section. When administering the survey, employees should be made aware of its purpose and reassured by the department manager or HR representative that it’s completely anonymous and confidential, that their feedback will be taken into serious consideration and they should be encouraged to be open and honest. Once the results are tabulated, the department managers must go over the results with the employees and foster interaction by asking questions and following up with any concerns that are raised in the survey sessions. Sharing the results will display to the employees that their feedback was acknowledged and that, moving forward, they can work with their manager to improve their workplace. The survey results will also be beneficial to corporate HR to identify trends in order to better design future programs.

Although employees may not always be satisfied with the state of their career, it’s important that they feel they can obtain support and feel confident that their concerns are being heard.

Alessandra Aversa (alessandra_aversa@hotmail.com) works for one of Canada’s largest Retailers. She started her career four years ago, after she obtained a Certificate of HR Management from Seneca and obtained an internship at the Retailers’ Headquarters office. She has since worked as a Human Resources Leader at two stores in the Greater Toronto Area.

THERE IS A MISSED OPPORTUNITY TO CREATE A BRIGHTER FUTURE FOR THE NEW COMPANY

ED HALTRECHT

THE APPROACH TAKEN has precious little to speak for itself—the company is likely heading into very troubled waters.

The way the redeployment of staff is being handled does not create an enthusiastic atmosphere for the bright future a merger has the potential of realizing. Senior management, with strong HR support, is responsible for painting that future and seems to have been asleep at the wheel. They either have not thought about the importance of creating such a picture, or HR did not capture their thoughts—an opportunity missed that will likely have negative consequences on the long-term performance of the new company. Had such a future been created, HR would be in a position to help establish the positions required to realize that future state, and then focus on identifying those capable employees from both organizations who would want to be part of building and working in the new organization.

The redeployment approach taken simply “tells” employees that the whole exercise was to make more money for the company doing the same old things in the same old way. At the very least, there is a missed opportunity to create a brighter future for the new company. Had a new future been presented, employees could have been encouraged to apply for these “new” positions, instead of being put into the very cynical and destructive position of defending themselves in doing their old job. Employees would have to come to grips with their willingness to move forward and expand their capabilities. The current approach creates a destructive atmosphere of self-defence and competition with fellow employees, and potentially new teammates from the merging companies. With the pending second downsizing for Level 2 redundant positions scheduled to begin within two years, the new organization would likely see a fend-for-yourself culture growing—supported by the actions taken by management during the merger.

Having reflected on the big picture, we have some issues with specific questionable practices employed in the merger. The primary criteria used for the selection of potential “downsize” employees included a three-year history of attendance, cumulative performance reviews, and education level. All three are somewhat suspect for reasons of relevance (attendance and education) or reliability/validity (annual performance reviews). In defending their right to positions, employees were asked to provide evidence related to popularity—another irrelevant criteria. These processes are not benign—they help define desired behaviour in an organization. Moving forward, the company can expect many employees to behave in a very competitive, (vs. co-operative) manner (such as coming to work, even when they’re sick).

On the positive side of the approach taken, I appreciated the timing of the formation of the HR integrating committee—prior to the merger approval. The privacy and security of sensitive information is notable.

In spite of the positive one-year financial status of the company, senior management likely does not know about the stability of their workforce. Mergers and acquisitions at the best of times are stressful and are often taken as an opportunity for employees to rethink their future. While many employees would initially be relieved to have been saved from downsizing, and work very hard to protect themselves from the announced future downsizing exercise, they may be considering opportunities elsewhere. Sufficient time has passed from the merger to strongly consider a survey designed to measure employee attitude and commitment. Coupled with this, employees should be asked if they understand the strategic direction of the new organization—given the comment that HR is still trying to establish a common mindset (an accountability of senior management we might add.) An extended survey could also capture employee opinion about the organizations’ resource capability moving forward. Careful positioning of the survey and emphasizing anonymity will be important, given the pending additional downsizing that is expected.

The bottom line is that this is a weak plan, questionably executed, and lacking a compelling vision of the future.

Ed Haltrecht (ed.haltrecht@sympatico.ca), PhD, CHRP, is currently a senior partner with the Extraordinary Performance Group (Canada) focusing on individual performance measurement and improvement, staff capability analysis, and organizational surveys. He also teaches at York University.

WE NEED TO TAKE OUR OWN ADVICE WHEN MANAGING ORGANIZATIONAL CHANGE

MARIA MALCHIONDO

I BELIEVE THAT the approach taken by the two organizations as part of the merger process was a good one. It appears that a great deal of thought and planning was put into the change management process to ensure alignment, consistency, elimination of redundancy and an overall common vision. It seems that the plan was both systematic and thoughtful in its design. Effort was put forward to address not only the structure and the business processes, but also the needs of the employees during this transition period. The ultimate success of this change management effort is evident in how well the organization is doing, post merger, from a business perspective. Results, although shaky at first, have stabilized and are on their way up. It would appear that roles and responsibilities have been defined in the “new world” of this newly emerged organization. Thanks to a thorough change management process, there is alignment to common goals and objectives as well as the right blend of skills and capabilities, which have been identified and are in place to help move the organization forward.

What is troubling at this point is that, while the rest of the organization seems to be blending together effectively, the HR personnel needs have not been well addressed. In my experience, this is not an uncommon phenomenon. Not unlike the old phrase “the shoemaker’s children go barefoot,” it is not uncommon to see the HR department staff left out of the detail and thoughtful restructuring, merger or any change management process. At times, we as human resources professionals in senior positions, assume that our HR staff members are well aligned to what we are trying to accomplish within the organization because, after all, they are on “our team.” We often don’t take the time to obtain that same buy-in that we would expect others in the organization to obtain from their staff or that we would spend the time designing and implementing in other organizations.

It is also not uncommon for HR professionals in senior positions to take our own staff for granted while managing the change process, even while we are helping the rest of the organization with managing their staff members. Too often, we as senior HR staff do not take our own advice when it comes to managing organizational change. It seems that this new organization has some significant work still left to do to re-align all the HR staff members to a common set of goals and objectives that everyone in the HR department can stand behind.

In order for this to happen, senior HR leadership must work to ensure that there is a common vision and alignment to the vision that exists within the HR department and among all HR staff members. There might be a need to re-engineer some of the roles within the HR department. It is possible that there may be a need to re-assess the skills and capabilities of the HR staff members and to re-align the team to the needs of the “new world” that the new merged organization has created for itself. Failure on the part of the senior HR leaders to manage the change process within the HR organization itself, could lead to further misalignment, confusion, duplication of effort, and inconsistency of messaging to the rest of the organization. If not managed well, all of this could have significant ripple effects throughout the organization far beyond the HR department itself.

It is my belief, however, that it is never too late. There is still time to gain alignment and buy-in. There is still time to redesign and restructure the HR department in order to have it emerge as a true business partner within the merged organization that can help to move the business forward in a supportive and positive fashion.  

Maria Malchiondo (mmalchiondo@kohlandfrisch.com), MSc, CRSP, CHRP, is an HR Manager with Kohl & Frisch Limited, and has worked in HR for the past 14 years. She holds a Certificate in HR management from York University.