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Mergers Can Quickly Go Wrong When Employees Are Ignored

This article is more than 10 years old.

Employees main concern during a merger: will I have a job? (Photo credit: TheeErin)

By Monique Antonette Lewis

Michael Dell recently released a letter to his company’s 100,000-plus employees, urging them to keep calm, continue business as usual, and take media speculation with a grain of salt.

Although he laid out a FAQ about the deal from how a take-private transaction operates to whether employees can sell shares of Dell, the letter missed the one question that creeps up in every employee’s mind during a merger: will I still have a job?

Since the start of the year, multiple megadeals have been announced, from Berkshire Hathaway’s $23 billion purchase of H.J. Heinz to American Airlines and US Airways’ $11 billion merger. It is becoming more common for companies to be forced to make big changes, because costs are still tight, says Shari Yocum, managing partner of San Francisco-based Tasman Consulting.

Tasman advises companies on integrating human capital after mergers and acquisitions, and such consultants are seeing more demand for their services following the uptick in deal flow. Tasman enters the scene at the term sheet stage and helps companies make the tough human resource decisions. Yocum says she likes clients who can sit down and consider those M&A consequences first.

But for some, it is a difficult task to tackle. One particular chief executive officer suggested posting the names of laid off employees on a board. “All I could think of was high school, when you’re going through a list and you don’t want to be on the list. And I thought there is no possible way I’m going to post three lists and people can find their name,” Yocum says. “Then they were supposed to go to a separate room.”

Yocum’s team presented a different idea: First the company would celebrate the acquisition at which time the CEO would admit organizational changes were on the horizon. Employees got a night to let it sink in and the next day, managers talked to them one-on-one about who was staying and who was leaving. The company even set up a career center for the employees whose positions were cut, Yocum says.

A clean, fair selection process is the best way to engage with employees, versus the slow, painful cut, she says.

Tasman lays out five HR mistakes companies make in mergers and acquisitions:

  1. Not being involved early enough
  2. Not understanding the employees’ needs and concerns
  3. Not involving the incoming leadership team
  4. Not working with the receiving business unit(s)
  5. Underestimating the time and amount of work acquisitions require

Many companies ignore the importance of assessing their human capital because “it’s a painful and horrendous process” that is not simply black and white. However, those that effectively implement good strategies can avoid leaving an acquisition in financial and emotional disarray.

Monique Antonette Lewis is the assistant editor and Americas Head of Technology, Media & Telecommunications for mergermarket. She is based in New York and can be reached by email - monique.lewis@mergermarket.com - or via Twitter: @MoniqueALewis