Mergers and Acquisitions - The Untold Story

Wednesday, January 11, 2006

In conversation with an ex-co-worker of mine, this morning, I realized the psychological impact a merger can cause on its employees.

In 2005, a 4000 people strong Indian organization I worked at for 6 years got merged with a renowned 55,000 people strong Services Firm. Now that's the union of a rat and an elephant. Goes without saying that the Elephant will make the rat dance to its tunes. This is a numbers game and in such a merger it becomes imperative that the policies, rules and regulations set by the stronger side are enforced as it makes logical sense. Here's my take on the untold story of what effect mergers have on the employees of the weaker side - the receiving end (weaker not to be taken literally):

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Advantages :

  1. Career Opportunities : The pipeline just got longer and wider. As a result, a sea of opportunities open up providing avenues to get into greener pastures (read :lines of businesses).

  2. Brand Value : Being an employee of a larger entity has its advantages. Industry-wide Recognition and the Brand Value works for good in the longer run.

What can (or does) go wrong becomes the disadvantages:

  1. Communication : It is very important to over-communicate and keep all channels of communication open. Fear, anxiety and insecurity is at its peak during the merger process. Fear of the unknown can have adverse effects on the employees and in turn on the organization. Productivity would be hit as employees would spend more time discussing the unknown (creativity at play). Voices have to be real. We like listening to the story from people with authority. So townhall meetings should focus on that to alleviate fears.

    Listening to people is as important as the above to keep the psychological impact low. Fears related to compensation, recognition should be addressed in the initial stages. And this is what most mergers are found to lack.

  2. Cultures : When two companies merge, their people are expected to unite transcending cultures. Culture determines how people adapt to changes and how they process information, so it is critical to keep the cultures in mind during the merger process. It could be as trivial as the tendency of a developer to get up and shout to his colleague 3 cubicles away or as serious as the flowdown of information across the rungs of the org. Now after the merger, imagine putting this developer in a glass cube with a talking time quota. Only two things will happen - either he quits or earns himself a place in the mental asylum.

  3. Duration of the merger: This is by far the most critical one. The longer the duration of the merger process, the higher the pain in all the allied areas. Too much time means increasing uncertainties.

  4. Mapping of Roles, Restaffing and Transitions : This must be done with utmost care. Designations is one thing and role another. The visibility and respect you command in a smaller organization wanes when you enter a larger entity. Transitioning top talent into a less significant role will only result in a spike in the attrition rate. Discussions are best here for key people. Keeping the top talent in confidence and letting them be aware of what plans you have in store for them is vital.

  5. Relocation : A few of my former co-workers have had to give up their offices with plush interiors and relocate to a new mediocre facility. I know not many of us care so much about the interiors but the "feel-good-about-work" factor has now suddenly gone. A step-motherly treatment perhaps? Or not? (depends on whose side you take)

  6. Best Practices and Integration Teams: However small an organization is, it has its won best practices. So it would be a worthwhile exercise to identify and seamlessly integrate the best practices during the merger. Forming integration teams to implement policies is healthy. Policies such as restricted Internet access, physical access restrictions due to security reasons at workplace is something everyone understands if done the right way.

  7. Training : training employees on the new policies and keeping them abreast of the changes will facilitate the integration process.

  8. Ownership : It is a team effort. The onus of making every employee feel he/she is a part of this integration falls on the management.

  9. Controlling Attrition : Failure in any of the above leads to attrition. Attrition ins such circumstances is mainly a ripple effect and should be controlled at the grassroots level.

Phew..that was long and I had some more on the list but I'm going to stop.

Change is constant. And it is a human instinct to fear change. It is overwhelming at times. I hope the process will be easier for you all.........

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