Hewitt Associates survey ...Combining work forces after merger creates headaches

Successfully combining two distinct work forces continues to pose difficulties to many human resource directors of recently merged organizations.

According to a Hewitt Associates LLC survey of 218 major organizations, 162 of which had been involved in one or more business combinations in the last two years, integrating organizational cultures presents the top challenge for 69 percent of the surveyed companies.

The challenge of integrating cultures was associated with longer time frames for completing the transaction, and affected the bottom line in the form of unanticipated costs, according to the results of the surveys.

In addition to the difficulties of integrating cultures, companies reported problems with keeping employees focused and integrating employee programs.

"Companies are gaining more experience in making deals happen, but from a people perspective, the companies continue to struggle with making the deals work," said Pete Sanborn, a member of Hewitt's global mergers and acquisitions team.

Despite the known difficulties in combining work forces, more than 60 percent of responding companies tried to create a new or combined culture following the transaction. Of these, 54 percent said they felt they were only somewhat successful at creating the desired culture.

"Up-front, mutual understanding of the ways two companies operate helps make for a successful transaction," Sanborn said. "Defining the unspoken rules of the road for the combined organization is crucial to the integration process and to achieving the anticipated synergies."

The survey showed that communicating early, often and honestly was considered essential to a successful combination of work forces.

Of human resource directors who took part in the survey, 48 percent identified employee communication as a critical contributing factor to the success of the transaction.

Employee reluctance to change was identified as a primary cause of less successful mergers by 48 percent of respondents.

"Effective communication from day one plays an important role in reducing employee resistance, and communicating about the new business structure and the roles people will play is one of the most effective ways to gain employee acceptance," said Lainchen Friese, Hewitt's mergers and acquisitions team leader.

"Also, establishing a connection with leaders and getting them out in front of the troops both at the time of the announcement and during the transition is critical to the success of the deal," Friese added.

Despite its reported importance, survey respondents said they felt that their employee communication programs were the least effectively managed. Too few resources were allocated to employee communication, according to 44 percent of the survey's participants, and 43 percent said communication happened too late in the transaction.

Among the other findings of the survey, organizations generally underestimated the time and resources required to integrate a merged organization. In action, a transaction averaged 9.5 months for completion.

More than half of responding companies about 54 percent followed a strategy of fully integrating organizations and cultures after their mergers. About 15 percent decided to leave acquired companies as stand-alone units.

Hewitt Associates LLC is a global management consulting firm based in Illinois that specializes in human resources.

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