Arizant Healthcare, a $63 million private Eden Prairie company that was sold by auction to Citigroup Venture Capital Equity Partners on July 30, also found solace in informing its employees early on. “I could see how it could be distracting, but we have always been very open with our employees,” says CEO John Thomas, whose position, along with all 250 staffers, remained intact after the merger. “Even if you try to withhold information for good reasons, it creates more problems.”
Maravelas agrees. When executives don’t inform the worker bees in the early stages, often a buzz in the air can be heard anyway about a potential merger, and that can only escalate fears. “People start catastrophizing,” she says. “They run through [in their minds] a typical catastrophe of ‘I am going to get a new boss. I am going to lose a boss that I love. I am going to acquire a boss that doesn’t appreciate my work or will consider my work to be redundant. Then I’ll get laid off and I won’t be able to find another job. My kids will start using drugs. I’ll get divorced and I’ll end up alone with no home.’ In that void of information, every little scrap can get examined, and typically to the negative.”
“Catastrophizing” can occur even in the 15 seconds or days after employees are informed, Maravelas says. “It’s not hysteria; it is a sense of hopelessness and cynicism about the future. It’s best to give people a heads up, but also give them the skills on how to manage it.”
Lowering the Axe ~ Plato Learning, a 40-year-old $85 million Kindergarten to Adult computer-based learning solutions provider is a veteran when it comes to acquisitions. In December it paid cash for UK-based New Media, and a month earlier it closed a deal exchanging shares with San Diego-based educational software maker Lightspan.
“You hear a lot about ‘merger of equals’ and that’s important from a psychological standpoint,” says VP-CFO Melson. “When dealing with a target, their employees don’t want to be acquired, but at the end of the day someone is in control and they are the ones running things. With Lightspan it was that way. Because of the size of the company we talked merger, but at the end of the day we really acquired them. It’s our management team and our board who are making the strategic directions and are responsible for integrating.”
Bain & Co surveyed 250 global executives involved in M&A about the factors most important to integration success. The response “cultural integration addressed early on and actively” topped the list, cited by 83 percent of the respondents as an important factor. Yet, many companies will still botch the HR and people side of the deal, even after successfully completing the business and financial transactions because they overlook the “soft” issues.
“Too often acquirers think it is their job to come in with a new name, new logo, new t-shirt and coffee mug and plan a celebration complete with caterer,” says Maravelas. “If they do that, they are disconnected from the emotional reality. Managers can’t pull an [acquired] employee into the future with time and donuts; what they need is to include them in a vision for the future. Employees want some involvement in what is going to happen to their work group.” It is important to be sensitive to the emotional needs of the target employees, she says.
©MinnesotaBusiness – October 2004 |
