The phrase "people are our most important asset" has often been said, but rarely understood. Ross Hall and Barry Hammond of consultancy GAROL look at the cultural impact of mergers and acquisitions...

A merger or acquisition can be an ideal way to grow your business fast. The newly-acquired business will have an established brand that is trusted by its clients, a client base that is bringing in revenue, and structures and processes in place to support it. Doing the deal is the easy part, getting it to work is much, much harder.

Integrating new business into the old is about more than a data transfer and printing some new letterheads. There are many factors, all interacting with each other in subtle ways, and all focused on the fear, uncertainty and doubt of the people who now work for you.

The financial analysis will prove you have purchased x amount of desks, filing cabinets and a lease. It will demonstrate the profit, the revenue and other financial factors. What it will not tell you is the value of the people you are now responsible for, or how they feel about what has happened to "their" company.

What makes a good purchase?
Perhaps the most important factor in a purchase is shared vision. When companies with little in common combine enormous stress is created. The focus should be on unification and integration, but in organisations created from companies without a common goal, all out political warfare can break out.

Who wins and when is another major factor. Mergers which reward staff in the short term are more likely to succeed than those where the staff payout is "just around the corner". For other stakeholders, whether directors, clients or shareholders, they have to feel they will win in the long term - within two or three years.

The final factor relates to the value that the resulting business generates. When two businesses join there is duplicated effort, which needs to be removed. Simple job cutting, however, gives rise to other problems as the costs have not been removed from the business, only redistributed - and it can alienate the staff. Furthermore, a business should be able to leverage the entire product or service range across the entire client base, not limit what can be offered to whom based on legacy.

Finances do play a role, but that role is often overplayed. A business in dire financial difficulty can still be a good buy if it has assets which you can exploit.

Culture clash
Not all cultures are the same, and the nature of your business's culture will come to the fore when you start to integrate. Where the cultures of the two organisations do not align, Conflict Zones will appear. While a rational outsider may view the question of whether staff do or do not pay for coffee as a trivial non-issue, for the people involved it is another demonstration of their culture coming under threat.

Where these conflicts exist they must be identified quickly and dealt with promptly. A simple issue, such as a manager driving a Vectra while some of his reportees drive BMW 320s, can simmer under the surface for a considerable time. When it does come to the surface it can come with such unexpected force and intensity that no one is ready to deal with it.

At a personal level people, will probably be feeling uncertain and fearful of the future. Where the staff were particularly strongly bonded there can even be feelings of guilt and remorse, and as the head count is "adjusted" grief can even enter the workplace. So-called "survivor syndrome" can be crippling, turning a productive and effective team in to a group of unco-ordinated, unproductive individuals. What is more, those who have a strong vested interest in the way things are now will fight against the change as their powerbases are eroded. Someone who has invested the past ten years in learning the intricacies of the accounting system, for example, will feel neutered as new systems are put in place which destroy their powerbase.

In the beginning it may be difficult to detect stress creeping in. A natural reaction amongst most people is to start competing with each other. Instead of becoming more productive, work creation is adopted, with individuals taking on more and more (and working longer hours) as a sign of their commitment. In an office always full of people and buzzing with activity it can seem at first that the office has just taken to the changes and people are getting on with it. Do not be fooled!

Another reaction is for people to leave, particularly when redundancy payments and support is on offer. However, care needs to be exercised here. There is potential for the wrong people to leave. Negotiation with specific individuals may be necessary if that individual is one of the cornerstones of the business.

It is easy to focus at this time on the business that is being purchased, but care also needs to be taken with the existing company. Jealousy can start to enter the workplace as the time spent with the new people is time not spent with them. Those involved in duplicated functions will see the same threats that their counterparts in the new purchase see.

Bringing businesses together needs clear planning. Without a project plan, appropriate investment and a holistic view of the process of integration, important aspects will be missed. The direction of the new entity will become confused and any good that has been done will be undone. The aim should be to hit the ground running, announcing the broad outline of the integration process at the same time as the acquisition or merger is announced.

Tackling integration requires attention at three levels: the company's data, its "business as usual" structure and the informal structure that swings in to action when "business as UNusual" strikes.

From a data perspective there is the obvious task of integrating computer systems. Having a single database with information about ALL clients is much easier to manage, and presents the client with a better level of service. However, it also goes beyond this formal and structured information into the realms of informal, unstructured knowledge - the kind which walks out of the door at 5pm!

A body of stories has to be created that reflect the importance of the new organisation and places emphasis on the new culture. Stories are a powerful tool to reinforce beliefs, as has been witnessed throughout history. They can work in very subtle ways, such as shifting the emphasis from hero worship to team spirit by emphasising the role of the "sales team" in closing a big deal rather than the effort of the lone salesman.

Resolving issues in the "business as usual" layer of the business is potentially where the greatest open conflicts will arise. Changing the way that people do things can upset happy lives, while at the same time exposing redundancies and duplications in the way things are done. Inevitably this leads to job cuts. However, it is important that the formal structure is resolved quickly as it shows people where they sit in the organisation, giving them a sense of stability.

Within this needs to be addressed the question of governance, or how the business is going to be run. What means will be used to gauge performance, what criteria will be defined for promotion and competence, how will strategy be formulated? Unless addressed explicitly and communicated accordingly, it is possible to create an organisation where the pre-integration methods are still in use by different parts of the business, making it impossible to determine the overall performance of the organisation.

Getting the informal business structure integrated takes more effort and time as this is built less on the need to work together and more on trust and personal relationships. Network events, such as informal dinners, are essential, but so too are challenging projects. Using a cross-organisation team to co-ordinate various parts of the integration is a powerful way to unite the informal networks that exist.

The rule of thumb often used is that the first 100 days are critical, much less for a smaller firm. If people do not have a clear sense of direction, of belonging and of involvement, within 100 days of the announcement the merger will fail to achieve it's potential.

In all of this communication is essential. Staff have to know what is happening, and they need constant reassurance that the whole deal is a "good thing" and that it will work! However, communication requires a lot more than just sending out a weekly memo. It requires thought, planning and involvement.

Start with the vision for the business. It has to be communicable, and it has to be understood. Soundbites with populist jargon will not win people's hearts and minds over, but clear, simple, understandable statements will.

Focus on what the staff want. They have a vision too, and that is not always in line with the business. One manager could not understand the laughter that followed this attempt to sell the new organisation to his staff. He declared "the customer comes first, then the company, then yourself". This did nothing to reassure the staff who were facing enormous personal stress.

Make sure the short-term vision for the staff is communicated. They are more concerned about whether they have a job next week than the projected benefits two or three years down the line. Without clarity and reassurance they could descend into stress-induced chaos.

Communication needs to spread downward. There is a danger that the CEO may end up being the only one communicating without a clear communication plan set in place. Managers have to take responsibility for taking the message from the top and framing it in the context of those they manage.

However, the top also needs to take responsibility for getting out on the ground and communicating their story to the workforce in person. A corporate video will not suffice when people are worried and scared.

Communication needs to flow upwards as well. People have to have an outlet for their frustrations, and any issue that arises has to be addressed quickly or there is a danger that it will snowball out of control. When concerns about the new charges for coffee are not dealt with in a caring manner they can quickly become challenges to the whole way the takeover is handled.

A constant flow of communication to and from those involved is essential to reduce the stress and uncertainty in the business.

Proactive, planned communication, perhaps prepared with the assistance of the new marketing teams, is vital if damaging rumours are not to escape.

The phrase "people are our most important asset" is often said, but rarely understood (practice is rarer still). While a company operating in its normal environment may be able to muddle through without valuing the feelings of its staff, when it comes to a merger or acquisition ignoring their fears, doubts and uncertainties will bring disaster.

Due diligence, contract negotiations and data transfers all have their place in the process of bringing two businesses together, but it is attention to the people in the companies that will ensure future success. If their fears are not identified, their doubts understood and their issues addressed the result could be a fragmented group of individuals fighting turf wars.

Success will come from making sure the purchase is the right one in the first place, from being aware of the difficulties that people will face and from planning the integration of the two businesses from the outset with care and attention to the needs of people.

Conflict Zones.
Conflict Zone Your Culture Their Culture
Co-worker attitudes Team spirit Hero worship
Company cars BMW 3 series Vauxhall Vectra 1.8
Offices Open plan Personal offices
Targets Profit Revenue
Timekeeping 9-5ish Timecards
Service Short and sharp Involved relationships
Power structure Informal networks Formal reporting
Pay OK salary + bonus Salary
Technology Windows "green screen"