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Alvarez & Marsal (A&M) - Jeff Shaffer: Merger Integration
Jeff Shaffer: Multi-model approach to on-boarding a large competitor acquisition - quickly, effectively and without customer attrition
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Over the last few months, I spoke with my private equity clients and portfolio company executives about my experience leading merger integration projects. Like many of us in the industry, we tend to agree on the traditional core behaviors that lead to successful merger integrations.  These key behaviors include: 1) as early as possible, clearly articulate the high-level vision and strategy to employees, customer and suppliers; 2) develop an “80/20” mindset where you focus on speed of execution over perfection; 3) establish a PMO to oversee and run the integration; and 4) deliver the right blend of simple yet frequent dialogue with both the project team and affected employees.

Each of these components is an important factor in successfully running an integration; however, in reflecting on recent engagements, I realize that what is often overlooked is change management at the operational level.  By operational level, I am referring to the work that takes place out in the field, on the shop floor, or directly in front of customers.  After all, this is where the actual day-to-day work happens and where “integration” is truly visible.  And, in my experience, it is these employees who will determine the overall success of the integration. 

An A&M Case Study
On one such integration, I had responsibility for onboarding hundreds of geographically distributed branch level employees to the merged entity’s new systems and business processes. This particular group of employees had responsibility for the scheduling of tens of thousands of service workers who made up the core of the business.  As you can imagine, success was measured not only in the speed of onboarding these employees, but also in the accuracy of their work product. Errors made in the field could have had a ripple effect on billing and collections, resulting in alienated customers and diminished enterprise value.  Failure was not an option.  External perception in this process was key. Our integration efforts needed to be viewed as a success in order to maintain momentum.

As an integration team, we agreed at the outset on the tenet that everyone learns in different ways. Therefore, onboarding employees required taking an approach that leveraged multiple modes of communication.  We had to account for a range of concerns that impact an individual’s ability to stay focused during an integration, such as “will I keep my job?” “will my benefits change?,” and “who will I report to?” The integration team had a challenging task in front of us to determine the most effective way to execute the change.  

Here is what we learned along our journey…

  1. Be respectful of the culture of the company you are acquiring.  In our situation, our employees went from a “suit and tie” environment to one that was primarily business casual.  While this may seem minor, with so many other changes happening, we approached this adjustment with respect and patience.  The issue wasn’t so much the change in apparel. It was the fact that the entire culture was changing. 

    So, on our first day meeting the new employees, we wore suits and ties as a sign of respect. 
    Over the next few weeks, we delivered a number of webinars to the teams that focused on culture and cultural expectations. On top of this, we provided several methods for employees to anonymously capture and respond to questions and feedback. Quickly addressing issues and not dodging concerns was part of the new culture model we sought to enforce.  As such, we walked the walk, which made it easier to onboard employees to the new model.
  2. Don’t underestimate the effort to execute change management in the field, especially when facing a double-whammy of change in process, coupled with a change in technology. In our situation, we took a multi-modal approach to training staff. Faced with a nationwide rollout of our operational technology to a group coming from a more traditional pencil and paper environment, we leveraged the following techniques:

i. Mandatory pre-requisite training. We developed customized computer-based training modules as a means to introduce employees to our systems and processes. The reason for custom developing vs. using generic programs was to reinforce the importance of teaching our business processes. While computer-based training can be perceived as boring and with easily distracted users, we chose to combat this issue by making our content shorter in nature, highly interactive, and directly associated to specific job duties. Those who took advantage of the on-line training were better prepared to face the subject matter when they arrived in the classroom than those who took the traditional approach.

ii. Hands-on classroom experience. To further advance the usage of our new systems and processes, we took the employees off site for a multi-day hands-on training class. During the training, we included experienced systems users to actively engage with our students during the sessions. Our objective was to provide proactive interaction to ensure that no one fell behind.  This had a two-fold effect: 1) making sure the more senior employees were refreshed in our standards, and 2) placing experienced users in the classroom to support the new users.

iii. Post-training live support- Understanding the difficulty in putting new procedures and supporting tools to immediate use; we followed our employees back to their offices with a small army of support staff. Our approach was to transition employees to our processes and technology immediately following our training.  So, we deployed resources to the branches to provide real-time help desk support. And, for the branches we could not visit, we deployed a dedicated call center to provide support. While this effort was a costly investment, the alternative of error-prone data or distracted, experienced staff providing the support would have quickly diminished value.  As we gained comfort in a branch’s capabilities, we would move the support team to other locations. Essentially, we had a “milk-run” of support staff across the county, all managed by a central operations group that kept tabs on the enterprise.

iv. Follow-up, and more follow-up- Following the classroom training and live support, we pushed out subject-specific training webinars to the employees. Understanding that there are always process exceptions we made sure to stay closely connected with the newly trained employees via these webinars and maintained a continuous feedback loop from established trainers as well as the employees themselves. No one was ever left alone to fend for themselves.

Extensive investment in training may appear overboard, however, this multi-modal approach to change management allowed us to strike quickly and positively affect the integration in a very short period of time – as well as  to monitor the adoption and acceptance of the training content. 

  1. Details matter - In reflecting on the factors that make integrations work, one of the things that truly stands out is how paying attention to small details correlates to success. For instance, making sure all travel logistics are clearly communicated and understood goes a long way to making someone feel welcome in the organization. Having assets (e.g. new laptops) ready to go on-time will make an employee feel that they are part of the team. Things like badges, PCs, uniforms and email ready at the onset - all show a level of professionalism that makes new employees want to be on the team and feel respected. Even the most successful integration teams don’t get all of this perfect - but making every effort to communicate the hiccups as quickly as possible also goes a long way towards integration success.

Success in merger integration is not a foregone conclusion – regardless of your level of experience in integrations, or who you hire to lead the integration. In fact, many mergers fail to deliver the value that funded the deal in the first place. I believe a significant reason for these failures is due to ignoring or underinvesting in change management at the operating level – including efforts that reach down to the individual employee. Those of us leading efforts to combine two cultures or operations should spend the time and invest the extra effort and financial commitment to reach those who interact with the customers and vendors on a daily basis. It is at that most granular level of the organization where a real sweet spot for value-creation lives and success thrives.