Managing Mergers Successfully

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Merger mania is a rage that is not abating. As the business world continues to find like-minded organizations bent on success contingent on complementary abilities, successful managers must learn how to manage through the turmoil of change.

While much has been written about the financial aspects of merging companies, far less attention has been paid to the human element. In order for a newly-founded company of two to thrive and prosper, management has to be skilled at working with all the people involved in the newfound operation.

Key Elements of Company Merger Success

In the Ottawa Citizen online article "Managing post-merger consolidation," human resources guru Jeffrey Sonnenfeld says: "Take at least as much time as you spend with your financial analysts and spend it with your employees. People care about where they work. Make them strategic partners."

Get People to Talk. Get people in both the merging company and the company being absorbed together as early as possible. Openly and frankly discuss the perceived benefits of the merger. If Company A has strength in sales and they are absorbing Company B because of Company B's distribution network, make sure the distribution people with Company A listen to (and learn from) Company B's distribution people. Likewise, Company B's sales force needs to listen to, and benefit from, the salespeople with Company A.

Cut Staff. Despite your best efforts to make your employees strategic partners invested in the business, there will be overlap. unfortunately, you'll probably need to reduce the number of people working for the new company because of the cost savings inherent in combining redundant tasks. The idea is to let go of those individuals least equipped to contribute to the new organization while retaining those best equipped. Make sure the evaluation of "best" looks at both companies' people equally. After all, you don't want to lose a great person from Company B so you can keep a mediocre person from Company A.

Be Honest. We all appreciate the frankness and while it's painful to find out that you'll be out of a job, it's much kinder to hear about it upfront than to find simply find a "pink slip" in your next paycheck. 

People Drive the Company. The article "Mergers and Acquisitions: The Human Equation" from The Change Management Group says: "Progressive corporations have realized that a merger is in name only without the positive support of the newly acquired human resources."

Merging two companies with their different policies, procedures, and culture creates stress for all involved. The 'survivors' from both companies have to deal with new people, new procedures, possibly more work, and the loss of co-workers who had become You need to be realistic in your workflow planning. Plan for people to be less productive than normal as they deal with the changes. Expect to lose some good people who are not comfortable with the new organization. Give yourself and your department time to work through the changes and get back up to full speed.

Departmental Perspectives

A merger affects different functions differently. Each function is important to the success of a merger. Consider the way a merger affects these other departments and then use those lessons to minimize the same effects in your department.

  • IT/IS/MIS: Merged companies may need to get their systems harmonized in record time, and smooth integration of operations can be critical to the company's new public image.
  • Human Resources/HR/Personnel: The first issue to resolve is whether to combine your company's plan with the merging company's. Your answer in most cases will be yes.
  • Product Management/Operations/Marketing: It should be noted that after a major merger, the product management function in the controlling bank is usually knocked off stride a bit.

Walk the Talk

Engaged managers truly believe that people are their most important asset and need to treat them as such. A merger, or an acquisition, gives managers an opportunity to do well by their people by being honest with them, keeping them informed, and giving them all the information they can as early as they can. If you keep these things in mind, you'll keep more of the good people from both Company A and Company B.