Prescription for consolidation success: don't forget your people

Modern Brewery Age, Nov 11, 2002 by Karl Edmunds

As simple as a merger, acquisition or consolidation may seem on the surface, for most people who have actually experienced one, it is a life-changing event. Sure, if you are the seller and you get the price you wanted, you can enjoy your good fortune. But if you are the buyer who must pay the debt off, grovel to new supplier demands, and operate in a new business environment, then failing to do a few core things may jeopardize your success. One of those critical success factors that is often handled poorly is tending to the needs your people.

Clearly, the objective is to have your current employees and the new employees you "acquire" embrace the change in a positive manner and minimize the negative behavior that can become a cancer in the organisation.

Regardless of how well you manage a transaction, your employees-and that includes current employees, key managers and newly acquired employees-will all experience a diverse range of emotions. Some of the critical emotions to expect are as follows:

* Shattered Expectations: Within a short time of joining a company, virtually all employees begin to develop expectations and personal goals including management opportunities, potential ownership, participation in a 401(k), retirement benefits and profit sharing. Many buyers fail to prepare for the disappointment or perhaps bitterness that occurs when hopes, dreams, benefits and seniority are lost in a merger or acquisition.

* Fear of What's Coming: Not only must all employees deal with loss of status and changes in their benefits, but most experience a real fear for their futures. "What will happen to me?" is the question foremost in their minds. Since most of the beer industry consolidation activities involve vertical integration, employees know there will likely be job losses. When the future is uncertain and they are afraid, they will do just about anything to fill the information gaps and regain control. Without preparation and informative communication by owners and managers, groups of employees will spontaneously convene, speculate about what may occur that could be good or bad, and even start looking for other jobs. Nobody performs well when fear is pervasive-productivity takes a big hit, which angers managers and further increases employee fear.

* Resistance and Anger Toward the Acquiring Firm: Beer distributors are highly competitive. Some owners and managers have promoted aggressive tactics and war-like communication for years when talking about their competitors. Don't expect employees to let go of the resistance and anger quickly now that you are all "on the same team." the tone of the new culture is paramount Failure to prepare for this emotional upheaval can result in the loss of key people, significant loss of productivity, angry supplier responses and loss of market focus.

Owners and managers often get sucked into the banking arrangements and details of structuring the transaction. It is not uncommon to think the business can run on autopilot for a short time. This is a very dangerous time to rely on autopilot Watch for the signs-procrastination, increased absenteeism, wild gossip and rumors, long coffee and lunch breaks, less attention to customers and a general malaise.

In addition, you may find normally decisive staff being hesitant and unwilling to take risks. Visible people suddenly become low profile and small problems may erupt into major confrontations fueled by impatience, anger with management and general burnout and stress factors.

TAKE PROACTIVE ACTION! DUH.

Who would question the need to step up communication to every person in the firm during the announcement phase of the deal? When the deal is officially announced, the ship is suddenly in rough waters. The ship needs a strong captain with a steady hand. A steadying influence must be delivered under the umbrella of strong empathetic leadership.

Emphasize to your people the following:

* Be prepared for changes but stay focused on the job at hand- "Selling Beer!"

* Stress the need for good people and strong performers

* Remember to maintain rewards and recognition systems

* Heap praise for doing things right and with a good attitude

* Minimize anything that can cause significant disruptions

*Manage communication between key employees and suppliers

Owners and managers must make time for one-on-one personal contact with employees. Don't diminish or dismiss their feelings. You probably don't know how it feels, since how it feels is very personal. Be open, honest and consistent in your message, then do what you say. Dropping the ball is anathema. Most of all, listen constructively. Employees know you can't give them all the answers, but they do expect to be heard.

GET READY FOR THE TRANSITION PHASE: "MARE IT SO!"

As you enter the transition phase of the deal, the announcement shock will be subsiding. The immediate emotions begin to be replaced by a need for additional meaningful information. Some of the questions often heard are:

* Who will be our leaders?

* How do benefits and compensation plans compare? How will they be impacted?