… after a takeover, that is, when two groups of staff, and two cultures have to be integrated. And as an economic uplift will trigger a round of corporate activity, it’s a problem that employers may be facing soon
Those of you with really good memories may recall that happy, healthy markets present their own HR challenges. Give yourself a break from worrying about redundancies and shrinking pay packets, and spare a thought for what you’ll face when the upturn comes and the frantic merry-go-round of mergers and acquisitions begins anew.
During the boom years, corporate activity in construction was frenzied. Acquisitions cut swaths through whole tiers of the industry as the larger consultants and contractors gobbled up smaller prey in pursuit of turnover and headcount. Ripples were felt around the world, as firms went on the 21st-century equivalent of a colonial land grab, scrambling to buy native firms and prise open fresh markets.
For top executives, deal-making is enormous fun. For the employees of the company they’re buying and selling, it can be unsettling, traumatic and exciting. This is where HR departments have their work cut out: they must reassure staff old and new and integrate teams so the benefits the deals were supposed to bring can actually be realised.
So, now the dust has settled from the last round of transactions, it’s a good time to ask how the more acquisitive companies among our top 50 good employers managed to keep their staff happy and productive.
The rights of staff who work for a company that has been taken over are protected by the TUPE regulations. This says staff are entitled to retain their salaries, benefits and job titles, and their employment is regarded as continuous for the purposes of any perks linked to long service. The new employer also has a duty to “consult meaningfully” with staff about the implications of the new situation, although what this means in practice is vague.
“Some organisations are TUPEing in and out all the time, and people become a bit blasé,” says Kath Knight, Mace’s HR director. “You can do it in a mechanistic way. But you get the best work out of people if they feel you care about them.”
She should know. Mace has recently absorbed whole teams of project managers, designers and facilities managers from client organisations in a variety of sectors – water and utilities, local authorities, big corporates and even legal practices. Knight estimates that it has taken on about 250 staff in the past six years in this way, and that about 200 are still working for the company, often after moving to other divisions. “I don’t think it makes an awful lot of difference whether it’s via TUPE or a merger,” she says. “Somebody has decided to work for one employer and then, through no fault of their own, they’re going to end up working for someone else. You’ve got all the same issues.”
When you ask HR directors what the most important part of the integration process is, they are unanimous that communication is at the heart of it. The best employers start early and carry on long after the deal is done. They also make sure it’s a two-way process. “You can’t do too much in these situations,” says Knight. “Staff are naturally concerned about who their new employer is. We get them in front of us as soon as possible so they find out we’re not some faceless organisation.” The first people the new employees will meet are Mace’s owners: “This is so they realise how important they are to us, they’re not some insignificant part joining a huge business.”
There will also be one-to-one meetings where people can discuss their personal circumstances and the Mace team can reassure them that they will be looked after. “Particularly in the facilities management market, there are some organisations that are perhaps not as reasonable with staff as they might be. In this sector, there can be a fast turnover. We want to reassure them we’re not a hire-and-fire company, and that we’re in it for the long-term.
“I think the most challenging bit is making sure you do all you can to get employees to trust your organisation. There’s a very personal relationship between an individual and their employer, and if trust breaks down it’s not going to work. It’s the stuff you do upfront that creates the greatest impression.”
This is something that Elizabeth Kavanagh, HR manager at Bristol-based architect Stride Treglown, is conscious of. The firm bought Chapman Robinson in Manchester in January 2007 and Bath practice Tektus in October 2008. Though both deals were technically acquisitions, the HR team decided to refer to them as mergers. “We didn’t want to set up a power balance with us as the big bad employer,” she says.
“People who’ve worked for smaller practices often like working for small practices. They may have concerns about working for a large practice – it’s not what they signed up for. We wanted to do as much communication as if we were recruiting.”
After group sessions, Kavanagh also organised one-to-ones for every member of staff. “Everyone’s got different things they want to talk about. One person wants to know about their pension, another might ask ‘what’s your design ethos?’ One of the key things people always ask is ‘are you going to come in and impose loads of change?’ As soon as we said that wasn’t our aim, everyone relaxed. We said, ‘you’re a good business as you are, that’s why we want to merge’.”
She found that it helped that the directors of the businesses it was acquiring had been open with their staff from the earliest stages of the deal, and remained with the merged practices for a period afterwards too. “It wasn’t all behind closed doors, which helped build trust.”
New staff may need a lot of TLC. Kavanagh made sure they knew she was available to talk and created opportunities to meet them – for example, by doing exam support with Chapman Robinson’s Part III students or involving staff from the new business in existing projects.
Communicating the values and vision of the new company is very well, but you’ve got to pay attention to the more prosaic aspects too, such as admin and IT access. “The worst thing that can happen is that we take them over and don’t pay them correctly in the first month,” says Knight. “It wouldn’t be a major disaster, but that’s the time when you don’t want it to go wrong. The first impression of a new employer is very important.”
Those first communications with staff may be the most conspicuous part of the HR role, but the work will have begun many months before. At WSP, for example, which has made many acquisitions worldwide in recent years, HR considerations have been part of the due diligence carried out before any deal since 2005. This will cover such aspects as IT, culture and leadership in parallel with more traditional financial considerations. “I wouldn’t say we’ve come to the level where we can compete with the accountants, but we’re trying to get better, step by step,” says group HR director Siv Axelsson, who is also on the board. “This is a growing element of what we do, I think it’s the way forward.” A key aspect is terms and conditions – if they’re too different, it could even derail the deal. With such a large company, the aim is to eventually harmonise employee benefits rather than ending up with a patchwork of deals. “We want to treat all staff the same,” she says.
WSP’s plan includes “twinning” staff members in the new company with existing employees to begin the integration early, and discover synergies throughout the business. They may be working on similar projects or in similar sectors. “Staff start feeling like it could be interesting; they find that people aren’t so different.”
But one of the biggest concerns for staff, existing and new, is that these synergies will render their jobs redundant. This is most common among support functions such as IT, HR and admin. Axelsson says WSP tries to take the best from each organisation, so it’s not only the acquired company that suffers. During her career, she estimates she’s done about 1,000 redundancies, though few were related to acquisitions, and she found speed was of the essence. “Don’t prolong the process, nobody is helped. Address it as early as possible, as quickly as possible. Be as humane as you can, but don’t have a long process. The worry before it’s sorted is much worse than the deed itself.”
Another sticking point is the brand of the company being acquired, something that can be very important to the employees. WSP tries to rebrand all acquisitions within two years, but Axelsson admits it has not always been easy. “When we acquire a company, it’s normally highly regarded with a strong brand in its market. Our policy is that we want WSP to be the brand we invest in but the old brand is dear to these companies. The problem is not the customers – they don’t care, they’re accustomed to brands changing – but staff are extremely attached to it. They’re going to sell the brand and they don’t want to sell one nobody knows.”
From a chief executive’s point of view, the integration starts even earlier – before the deal is even signed. Turner & Townsend’s Vincent Clancy has made seven acquisitions in the past five years in such diverse countries as Ireland, China, Australia, Hong Kong, Dubai, Canada and Germany, and regards it as a mark of success that many of the staff from those businesses are still working for T&T, and have progressed up the ranks. As you might expect, he spent quite a lot of his time on planes during the acquisition process and for many months afterwards, too.
T&T integrates all the new companies it buys under one brand, and Clancy says he wouldn’t even think about acquiring a company that wouldn’t fit with the overall ethos of the business. “We’re very selective about the type of company we look to acquire. It sounds a bit obvious, but we have to be confident that from a culture and values point of view, they’re going to fit into our business. It leads us to have quite long relationships with businesses before acquisition. Some we’ve known for years.”
For each acquisition, a specially formed team from throughout the business will work on integrating the new company. “We put a lot of effort into sharing knowledge about the business. We run a global system that connects everyone worldwide, so if someone wants a particular skill or type of building, they can type in, say, ‘hospitality’ and see all the people worldwide who work on that.”
Clancy has found this is a powerful way to immediately demonstrate to new staff the benefits of being part of a global company, something he tries to do as early as possible. “We try to bring in a new client, or a new service or new opportunities for staff.” He also sets up a programme of staff transfers, both in and out of the new company. “One of the biggest selling points is the opportunities for staff. We work hard at demonstrating that it is really very exciting, for people at any level right across the business.” The brightest junior members of staff, for example, could end up on a shadow board drawn from around the world, working with the chairman.
Clancy himself gets face-to-face with as many people as possible in the new business, and carries on long after the deal is done – for 12 or even 24 months. “It’s not a one-off event – you need to keep investing in integration. Where I see a lot of businesses make mistakes is in acquiring and then not spending time and money on integration.”
As you might expect, integration is more difficult to do at a distance, geographically and culturally. “In each market around the world there are different drivers for people. In China, for example, for staff joining a global business, it’s important to learn and develop new skills, so if you want to retain them, you have to have extensive learning and development programmes and invest a lot in the people. You’d want do that everywhere but it’s particularly important in China.”
No two staff transfers are the same, whether they’re in the UK or on the other side of the world, but there is perhaps one guiding principle that all employers would do well to follow: Axelsson says: “You’re acquiring a company with highly professional people, not just a production facility. These are human beings, so you need to be humble about how you treat them. They have their history and you need to respect that.”
Come to think of it, that’s probably a pretty good rule of thumb for any challenges HR departments are facing in the recession, too.