In Their Rush To Buy/Merge, High-Tech Firms Often Lack All-Important 'People' Plan

EDP Weekly's IT Monitor, Feb 1, 1999

Only 28 Percent Of IT Execs Surveyed Did A Good Job Of 'Culture' Due Diligence

An overwhelming majority of top-ranking high technology company executives surved recently agree that not having a leadership, culture, and placement plan for key employees and executives is a critical, underlying problem in the 50-70 percent of mergers and acquisitions failures that occur.

In an industry where companies routinely engage in several mergers and/or acquisitions a year, many of them initiated for the purpose of bringing in people with special talents and skills, executives reported that resources were grossly inadequate during all points in the process for assessing the culture "fit" of the deal, communicating the reasons behind the merger, and developing and executing an ongoing "people strategy." (Continued on Page 6)

Management consulting firm Hay Group asked executives from companies such as Microsoft, IBM Information Technology Solutions, Cisco Systems, Sun Microsystems and America On-Line how well they had addressed critical people issues before, during, and after a merger or acquisition.

According to Art Geis, Hay's leading expert on high-tech mergers and acquisitions, "In the rush to deal with the obvious issues and keep Wall Street happy, a detailed 'people plan' spelling out strategies and tactics is omitted or glossed over. This can be catastrophic, because when people who have talents and hot skills crucial to the business plan are underutilized, the result is paralysis, delayed new products, stalled sales, and restless top talent looking at career options. These are costly, high-impact, long-term problems, not just temporary performance dips."

Executives reported in the Hay study that: before the deal, only 28 percent felt they had done a good job of cultural due diligence, although 72 percent considered such an assessment of critical importance; during the merger, 74 percent believe they did not do a good job of placing the right people in the right roles; and, after the deal was made, only 15 percent said they had successfully communicated the vision and goals.

Editor's Note: The study was conducted among CEOs, Presidents, CIOs, COOs, CFOs, Sr. VPs and senior HR professionals at more than 60 US high technology firms who experienced both successful and not so successful merger integration results.