Post merger integration - Part 3: Personal & cultural integration

No sustainable business success without proper analysis and consistent strategy:

Part 1 of our "Post-Merger Integration" series is dedicated to the individual building blocks and core phases in the M&A and due diligence process. Part 2 deals with the nature and structure of a sustainable integration strategy . 

The third and concluding part of this series focuses on personnel integration:How can companies take the workforce through the PMI process, guide them through the transition and motivate them to perform at their best? 

TRANSPARENCY & COMMUNICATION IN THE PMI PROCESSProducts, technologies, and markets - they are all defined by a rapid pace and increasingly modern developments. As a company, it is a challenge in itself to help shape progress in these areas - or to keep pace with it. Companies that attempt to restore normal business operations, especially after an acquisition, often face a double burden. "Especially when it comes to personnel integration, many companies underestimate both the duration and the effort of integration", says Florian Tretau, partner at enomyc. What is important to take note of here?A special feature of these types of transactions is that the employees and the public are often only informed about them after the company purchase contracts have long already been signed. The workforce is confronted with a fait accompli, uncertainty and is looking for answers to the question of what impact the merger will probably have on their personal situation. From now on there is the risk that employees "mentally drop-out" and wait and see what the change really means for them.Here it is of great importance - and also decisive for the future success of the business - to inform the workforce from the outset what the merger means for them and how things will continue. 

Which components are involved?

PERSONNEL INTEGRATIONPersonnel management is faced with various challenges in the PMI process. Among other things, the position of works councils needs to be clarified, compensation structures and systems need to be aligned, creative personnel instruments need to be harmonized and more.

As far as the integration of salary and bonus systems is concerned, for example, personnel integration is supposedly easy. In practice, however, it is a difficult issue: Often, the existing salary structures cannot be adjusted so easily. There is a protection of the status quo and often employees in identical functions receive different salaries. The discrepancy in working hours is also an issue that can lead to atmospheric disturbances after the takeover.

The decisive factor for success is that communication and decision-making structures, such as the organization chart, must be in place by the first day of the merger. The employees should be able to "locate" themselves from the beginning on.KEY QUESTIONS AND ACTIONSThe following key questions can help to establish communication and decision-making structures:

• To what extent are the employees themselves affected by the integration?

• Who will take on which key functions at management or specialist level in future?

• How can redundancies be absorbed - for example through outplacement?

• Which measures are necessary to develop employees professionally or personally?

• What measures can the teams use to grow together?

Timely definition of content, conscientious planning and the most precise timing possible are also crucial for the communication of M&A processes. This applies equally to the preparatory and integration phases of the transformation. The following actions are an integral part of successfully bringing together different corporate cultures:

• The internal and external announcement of a possible merger

• The formulation of a common vision and strategy

• The sustainable staging of day 1 to mobilize all common forces

• The presentation of the so-called "quick wins" in the first 100 days.

 CULTURAL INTEGRATIONAfter an acquisition, different corporate cultures come together. The success of transactions here depends crucially on how well the people of the companies involved work together. The cultural integration of companies is an often underestimated and therefore often not explicitly considered success factor in an M&A process. If communication and change management measures are implemented promptly, the uncertainties among employees can be reduced and the workforce can be prepared for the upcoming changes.Communication plays an important role throughout all phases of the PMI process. A successful integration is only possible if the top management level provides orientation in the integration process through open and regular communication, reduces fears and takes the interests of the employees into account.

If the management is able to communicate the integration as an opportunity, it is easier to implement. Incidentally, this also includes openly communicating from the outset who the lead company will be. If the merging companies initially start out as supposedly equal partners and later on the buying company takes over the leading role, the process loses the necessary credibility.

EXTERNAL COMMUNICATIONCorporate communication that is well coordinated in terms of timing and content is another key to the success of a PMI process. Through well-coordinated communication, all stakeholders - whether customers, suppliers, analysts or banks - can be actively informed first-hand and brought "on board". 

A professional external communication