In my role as general manager at Allegra Marketing • Print • Mail in Tucson, I have been directly involved as we completed the acquisition of five other printing companies in the local area over the past three years. While all of these acquisitions involved the purchase of the book of business, there were some instances where equipment was involved. However, in all cases, there were people issues to deal with.
In the typical acquisition most of the planning effort is focused on the numbers, the equipment, and the legal implications. Later, rather than sooner, the acquiring owners realize that significant human resources problems can emerge. A study from the Society for Human Resource Management identified that:
• Three out of four mergers and acquisitions fail to achieve the anticipated strategic and financial objectives
• Only 43 percent reported success in achieving the expected pre-deal synergies
• Only 49 percent reported achieving growth in market share
The major obstacles to merger and acquisition success were:
• Inability to sustain financial performance (64 percent)
• Loss of productivity (62 percent)
• Incompatible cultures (56 percent)
• Loss of key talent (53 percent)
• Clash of management styles
Three of the five obstacles listed above fall squarely within the people management arena. Selecting the right mix of talents, skills, and abilities is a complex undertaking. In any acquisition it is critical to determine if employees need to be dismissed, added, or upgraded.
In our acquisitions, we assessed the skills, capabilities, potential, and motivations of key employees involved in the acquisition. We interviewed and evaluated all employees. We used personality profiling and Wonderlic testing to identify the behaviors and intelligence of all personnel. We took immediate steps to “re-recruit” and place these employees into key positions of our newly merged entity.
As important as it is to retain the right people, it is just as critical to eliminate employees who are not a good fit or are no longer needed. This is not an easy thing to do, but essential to keeping sales per employee and profitability in line.
In my consulting work, one of the major mistakes I have seen in other companies is an attempt to bring the management of the acquired company into the newly merged company. While that may sound like a good approach, those personnel should be evaluated like all the other employees, including Wonderlic and personality profiling.
We have seen too many examples where the owners and managers of the acquired company were put into key positions of the merged company. The problem is that the acquired company had been in decline and its managers were instrumental in that decline. The usual outcome is that the newly formed company enters into a death spiral as the acquired managers follow the same behaviors that forced them to sell in the first place.
Address Insecurity with Honesty
The employees’ initial reaction to the merger or acquisition will be preoccupation with their personal security and identity and what the deal means for their future. Managers, on the other hand, close the deal with anticipation, ready to get on with running the new business. If left unrecognized, this vast difference in emotional states can be disruptive to the integration process and can lead to failure.
Critical to a successful integration effort is open and honest communication about what is happening and what is planned. The one thing that the employees of both companies will appreciate most is the truth. The truth also means acknowledging some of the stress and other emotions that are undeniably present.
Merging companies is difficult—period. To minimize this point is setting up false expectations. Never tell employees that everything will be “business as usual.” The reality is that change is occurring. Most importantly, don’t call the deal a “merger of equals” when only one company is the stakeholder and will drive the decisions.
If you are considering a merger or an acquisition, much of the emphasis in the beginning should be focused on people issues. Showing genuine respect for the people involved and treating employees with honesty, dignity, and fairness—even if the truth sometimes hurts—are key strategies that will drive success. Remember, it’s your people that make it happy—or not.
Debra Thompson is president of TG & Associates (MyPRINTResource.com/10139915), a consulting firm specializing in Human Resources for the Graphics Industry. Debra can be reached toll free at 877-842-7762 or firstname.lastname@example.org.