The M&A Effect on Human Capital
By Chris van Melle Kamp
Open, honest and effective communication with all employees from the moment that the merger is announced is imperative because people are often insecure and anxious about their future within the new company.
Any information that can be shared with employees in terms of the vision of the new company will help to limit confusion. It is particularly important to provide key managers with as much information as possible about their roles in the new organisation to promote a greater sense of security. Every effort should be made to maintain an orderly, rational process.
Great products and services don’t develop and sell themselves, and the people behind these successes must be systematically identified and assessed for fit in the new company.
The baseline for all these evaluations is the overall vision and strategy of the new company. The new leadership must include those who are capable managers in their own right and also have the right skills and experience to propel that strategy.
Companies must clearly define and then maintain a steady focus on the strategy of the combined enterprise. Reaffirming the business case for the merger or acquisition, and identifying those who will be important in executing the strategy, will help identify who should stay on board. Once the company has determined who these people should be, it should make an effort to retain them by implementing a variety of retention tools, including compensation and quality of life issues.
For mergers that are subject to regulatory approval, the process can exact an additional toll on a human level as well as a business level. Beginning to merge as soon as the merger is announced is therefore critical to the future success of the combined company.
The culture that emerges from a merger ideally should not represent the legacy of either individual company but should be compatible with the vision and goals of the new company. Defining the vision as well as the culture in which it will be realised in day-to-day operational terms is a complex process. Critical decisions must be made about the more obvious elements that comprise the personality of a company as well as the less obvious idiosyncratic elements, such as dress and communication.
All of the integration activity must be addressed in a merger – all myriad of cultural, systems and compensation elements – must be accomplished efficiently if the new company is to hit the ground running and retain the key people.
From the point of view of building a formidable board of directors – both adding and replacing directors and implementing best practices – a merger or acquisition can present a rare opportunity.
Companies should resist simply throwing boards together to create a bigger board – it is better to properly plan well ahead of time for the board that will best help fulfill the vision of the merger, than to take the path of least resistance early on and then be saddled with the consequences. Planning against a matrix of best governance practices as well as a company’s specific strategic goals is still the best way to shape the new board.
Chris van Melle Kamp is a partner at Spencer Stuart, a leading privately held, global executive search firm at the forefront of transformation in South Africa.
He can be contacted at Spencer Stuart on +27 (11) 880 2217