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Courting Employees.

Many mergers and acquisitions are doomed to fail because management doesn't enlist the support of its workers.

The majority of mergers and acquisitions in corporate America fail to produce the desired results, often because employees do not buy into the reorganization.

Several academic studies that have chronicled merger-and-acquisition activity across all segments of corporate America suggest that between 60% and 70% of merger-and-acquisition activity can be considered a failure. Often in the long run, the combined operations either fall short of their targeted goals or fail to outperform their respective industry segments. In looking specifically at the financial-services industry, Towers Perrin found that half the mergers and acquisitions it studied substantially eroded shareholder value.

With so many dollars at stake, why are these deals failing to get results? On paper, the companies often look like a perfect match. But in reality, although the merged companies achieve critical mass, they fail to develop the synergy needed to bring that critical mass to bear on the market.

The synergy never develops because companies fail to get the "buy-in" of their employees. Uninspired, unmotivated and, in most cases, fearful of losing their jobs, employees become the weight that drags down newly joined companies.

That is not to say management doesn't devote attention to employees. On the contrary, employee buy-in gets more than its share of lip service. But despite politically correct statements about the importance of employee buy-in, many chief executives believe that "the deal" and their strategy--not their employees--will make or break the company.

Employees are viewed as obstacles that must be overcome, not as the people who drive the success or cement the failure of the new company.

Tell It Like It Is

As a result, most companies resort to the usual barrage of communications to sell the corporate position. The corporate memos, speeches, newsletter articles and CEO branch-office visits they employ usually carry the same message. They claim the union will make the company bigger, stronger and better able to meet its customers' changing needs.

But such messages fail to offer a credible explanation of how the merger will make the company better. They don't explain how the pain the company and its employees are going through because of the merger will pay off.

As a result, employees are left lacking the three factors essential to achieving buy-in: a clear picture of the future of the company; how they will be affected personally; and a shared sense of mission.

Before long, the inevitable cultural differences between organizations become exaggerated. Winning turf wars becomes a pressing objective, and bigger-picture issues, such as making the merger a success, are lost in the battle.

At the same time, critics within the organization and competitors become the major source of employee information. The rumor mill-not the CEO's memo, speech or newsletter article--becomes the real story. More often than not, it is the source employees believe.

Such rumor and speculation crushes productivity. As speculation heats up, employees get nervous. The time and energy they devote to networking and updating resumes comes at the expense of critical business functions. Service lags, clients begin to take a wait-and-see attitude, and before long, financial results begin to deteriorate.

It's the evolution of a failed merger, yet it can be avoided by making employee buy-in a priority.

Gaining Support

Employee buy-in is not an elusive goal. Many companies fail to achieve it because they simply don't make it a priority.

And that is the first key: Management must recognize that it cannot succeed without employee buy-in and that employees, more than any other factor, will make or break the merger. Belief in the importance of employees must be genuine, and it must be clearly visible in management's words and deeds.

Employees have to be brought into the fold--not just because their productivity is essential, but because their attitude and behavior are the company's public face. Millions of advertising dollars and flashy communications cannot overcome a negative attitude front-line employees convey to customers on a daily basis.

Communication plays a significant role in getting buy-in. But flooding employees with vague memos, hollow speeches and newsletter articles that offer no real information will leave employees speculating and reading between the lines.

Communication in times of change is not about volume. It is about getting buy-in, and that requires communication that is timely and credible.

According to a PriceWaterhouseCoopers survey, companies that implemented effective post-deal communication shortly after a change took place reported significantly better results than those that delayed the process.

One of the major objections from management to communicating early is the number of uncertainties that exist in the early stages of a merger. While there are many unknowns from the moment talks begin until well after the ink has dried, they should not get in the way of communicating or getting employee buy-in.

Case in point: When a company with more than 30 offices across the country was recently acquired, management faced a wide range of uncertainties--from little change to the loss of many jobs. Management's reaction was to limit the flow of critical information until all the details were finalized. Rumor and speculation took over from there.

Things really heated up when the CEO went to the West Coast on personal business and decided to visit the local office while he was in the area. His innocuous drop-in touched off a companywide surge of speculation--from the sure closure of the office he visited to its general manager being named the new division head.

None of the speculation was true. But the time and productivity lost on speculation cannot be recaptured, and employee buy-in remained a major challenge six months after the deal closed.

In this case management's tightlipped approach did nothing to build its credibility among employees, which is another essential factor in achieving buy-in.

It is a fact of today's business world that management often lacks credibility among employees. And without that credibility, buy-in is impossible.

Credibility stems from being up-front about conditions and not waiting until the facts and consequences are cast in stone to communicate. Corporate lawyers should not dictate a company's communication strategy. There is nothing wrong with admitting uncertainties. Employees have much more respect for the CEO who recognizes and discusses uncertainties than the one who remains silent and allows the rumor mill to answer.

Another practice that is paramount to building credibility is "no secrets, no surprises and no empty promises."

To gain the trust of employees, management must be truthful with them, even if the truth is hard to swallow. Saying there's a 50% chance that jobs will be lost may produce a short-term drop in morale and productivity, but that is outweighed by the long-term benefits. When management communicates openly and honestly, employees are much more likely to buy into its current strategy and follow its leadership in future initiatives.

Another key component of buy-in is management's understanding of what is important to employees. The CEO who stands before the assembled staff and goes on and on about the global reach of the combined organization looks immensely foolish and disconnected if employees are chiefly concerned about whether they will have jobs in a month.

Most CEOs are well aware of the big issues facing the company and its employees. But more often than not they lack a feel for the subtle nuances of the issues and how they impact employees.

On the Front Line

Something that appears to be a small issue from the executive suite may be huge on the front lines. Staying in touch with issues is a challenge every CEO faces, and it is an essential part of communicating effectively and getting buy-in.

One way to stay in touch with front-line issues also happens to be the best way to communicate with employees: Use immediate supervisors as a communication vehicle.

The basis of this approach lies in the credibility of supervisors. Ninety-two percent of front-line employees rank their supervisors--not senior management--as the preferred source of information. Companies could easily leverage the power of that credibility by using supervisors as a channel of communication, yet few do.

Using supervisors to maximize the communications process and facilitate employee buy-in is a three-step process. First, management should rely on supervisors to get a feel for the perspective of front-line employees. Supervisors are in the trenches every day, and they know better than anyone what their people are thinking. That's valuable insight that management can use to craft a message that is most palatable to employees.

For this approach to be successful, supervisors must be taken into management's confidence. Before announcing anything to the company at large, management should discuss the details of the situation with supervisors. And, management should arm supervisors with answers to the questions they are likely to get from front-line employees once the news breaks.

When the news does break, supervisors should be the ones breaking it. They should take management's message directly to front-line employees. In addition to facilitating effective communication, this approach also solidifies the supervisors' position with their people. They have the answers their people are looking for and can sell management's position. Ultimately, they can be the factor that solidifies employee support.

Gauging Communication

The final part of any attempt to get employee buy-in is ongoing testing to gauge whether the message is getting through.

It is not enough for management to rely on gut feelings or anecdotal evidence. Employees should be asked specific questions to determine what they took away from the communication. While specific, this kind of testing doesn't have to be complex. A simple true/false questionnaire can give a quick and accurate read on what employees are understanding and what further clarification is needed.

In the end, the cost of not getting employees to support the merger can appear on the bottom line as eroded shareholder value, and that alone is reason to make getting buy-in a priority.

Kimberly Paterson is founder and president of Creative Insurance Marketing Co., Red Bank, N.J.
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Title Annotation:enlisting support of workers during mergers and acquisitions
Comment:Courting Employees.(enlisting support of workers during mergers and acquisitions)
Author:Paterson, Kimberly
Publication:Best's Review
Geographic Code:1USA
Date:Apr 1, 2000
Previous Article:Many Formulas For Success.
Next Article:Standing Out In the Crowd.

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