Introduction to Human Resource Management and Leadership Assessment

Case Study Mismatched cultures can wreak havoc

When it comes to mergers and acquisitions, barrels of midnight oil are burnt getting the arithmetic right but often less thought is put into a company's most important resource - its people. When one company melds with another, be it a friendly merger or an aggressive takeover, staff can be apprehensive about their future - will they still have a job; will their position be redundant; will they fit in with new management?

With big-end-of town marriages common, a leading executive recruitment company has warned of the dangers of ignoring employees.

Greg Smith, Executive Group Manager at Lloyd Morgan, points to recent takeovers and merger proposals including Westpac/St. George, Commonwealth Bank/Bankwest, Vodafone/ Crazy John's and Hospitals Contribution Fund of Aust./Manchester Unity Aust to illustrate that the corporate world is littered with mergers and acquisitions (MA) that can potentially go sour because the crucial element of corporate culture and the human factors were not considered on integration.

[He says,] 'ASIC figures show that takeovers have been on the increase for the past 10 years . . . Research by A. T. Kearney shows organisations that neglect (these aspects) are destined for failure. Of 115 global MA deals researched, failed merger integration was not due to poor operational, financial or commercial planning.' Smith says that often management realises cultural matters too late; for example, when core revenue base is under threat by failed attempts at sales force integration or high employee turnover. He cites the example of sales force integration between Foster's and Southcorp.

'The consolidation did not fully appreciate the dynamics of the wine business, merging sales teams from wines with beer and ready-to-drink products. The idea was to have a one-stop shop, from beer to premium wines, but salespeople who could sell beer found they could not sell high-end wines.'

A decade or so ago when the giant internet access service America Online (AOL) acquired the fast-moving Netscape, many thought that it was a marriage made in heaven. But within a year following the takeover AOL lost 36 per cent of its market share.

'Many good people left because AOL didn't understand the uniqueness of Netscape: AOL was a centralised and controlling bureaucracy while Netscape was casual, independent and somewhat informal organisation,' says Smith.

He adds, 'There is often fear, anxiety and suspicion at these times and it's up to the leaders to be clear about the why and the what, and then communicate it. There is always ''water cooler'' talk and too often that talk is wrong. People will make up their own story . . . if they don't have the right information or feel they've been left out of the process.' Smith says that the psychological contract between employer and employee - both stated and implied - is as real as if it were written, and just as crucial. 'Once that contract is broken then trust is broken, learning stops and information is withheld.'

Survivor sickness is another human factor: an employee may feel guilt at being the last one standing if others in the department or group have been given their marching orders. 'Lean and mean can often translate as sad and angry,' Smith says. Some people could feel disconnected, particularly if it's happened more than once, as well as conflicted; they're glad to have a job, but sad to see others go.

'Organisations should up the learning, provide interventions for those who survive the upheaval, develop trust and deliver on the psychological engagement. Leaders need to be change agents: doing the arithmetic isn't enough . . . Merging companies is merging people and if those people walk instead of being engaged then it's a hit to the bottom line. After all, talent sells.'

Questions:

a. Why do some companies fail to develop HR plans as part of their mergers and acquisition strategies?

b. What roles should HR professionals play in these processes?