By Chris Bayne, CEO for Access UK
Managing human capital in the wake of a management buyout or M&A activity is a delicate balancing act. Here, I examine how having the right framework in place is central to achieving a successful outcome.
Any merger and acquisition (M&A) or management buyout (MBO) situation is an intensive process for everyone involved from staff through to the boardroom. However, it should be viewed as a catalyst for positive change in the business, driving out poor culture and behaviours; in essence, an opportunity to look at things afresh.
Having a structured framework to underpin the M&A process will allow the business to employ a systematic approach to change, at the same time keeping the business flexible and agile. This makes it possible, for example, to turn around an MBO in just a few months and merge together five companies into one in around 18 months — and most importantly get the staff on side. This is exactly what Access was able to achieve when it went through its change management programme, which culminated in the recent MBO and private equity investment in the company.
With any business change programme it is important to draw a line in the sand from day one and look at the situation with fresh eyes. Turn the spotlight on every single area of the business and review it in an open and objective manner. What is the business aiming to achieve — not only in the short term — but also what aspirations and targets is it striving towards?
All members of the senior team need to have a full understanding of the business objectives in order to positively influence the process and to use the M&A/MBO as a driver for change. Every decision should be aligned with the business strategy, at every level. Hence having a clear vision will focus everyone’s attention and will make the job of communicating the change to staff much easier.
Providing a clear explanation of what is happening within the business cannot be underestimated. After all, people need to understand why they are being asked to do certain things; as the famous Chinese proverb says, "Tell me and I'll forget; show me and I may remember; involve me and I'll understand”." That is so true in any M&A/MBO situation, to really engage with people and bring them along for the journey. This is very much about having an open dialogue and not being afraid to discuss difficult topics and tackling issues head on, avoiding speculation and rumour.
So identify the framework, understand the objectives and ensure that everyone ‘gets it’. Because once the deal has been signed, the business needs to move at lightning speed to communicate the changes throughout the organisation. This ensures that the right message gets out to staff in a controlled manner so people understand what the changes are, and of course, if there are any restructuring or redundancies. Incorporating the communications plan within the M&A framework will minimise any unnecessary anxiety and impact on the business.
Migrating to new business systems
As with any change management programme, it is not always possible — or desirable — to have all the intended changes in place from day one. In fact a phased approach is often the most sensible route. It is important to make the physical, practical changes first, keeping staff focussed on the task in hand. Getting them involved - and understanding why the changes are being made — helps the business achieve its goals faster. There is also an increased sense of belonging to the initiative, and in turn the company.
An added benefit is that these changes are easy for people to accept; in other words focus on what people identify with, that doesn’t impact on them personally. Whilst there are the obvious immediate compliance obligations such as TUPE letters, where possible, deal with less critical employment terms and policies later. And don’t make change for changes sake — the aim is to make everyone feel integrated as quickly as possible, using common platforms and systems.
By taking this approach, businesses will be able to implement operational and systems changes at record speed. The time and cost efficiencies to be had by aligning systems and identifying the benefits in implementing them can be huge; this is a good conversation starter to involve all stakeholders. Talk to staff about what is difficult now, what will help them and build a picture of the practical benefits they will experience of any resultant changes; there has to be a commitment by business to be as inclusive as possible.
For Access, when the five companies merged this meant that the payroll administrator no longer had to run five separate payrolls, making utilisation efficiencies and just as importantly, creating job satisfaction for the individual who was running them all. The firm was also able to have support services stationed over multiple sites due to phone system technologies, tools such as Communicator and Yammer helped staff collaborate easily and implementing a new HR system, using Access’ own HR software, empowered staff to take control of their own information.
Aligning company policy
With systems in place, the next phase is to evaluate the different policies and procedures. The aim is to ensure that everyone is able to identify with a part of their legacy. Making elements identifiable gives the companies recognition for their initiatives and facilitates bringing the best that each firm has to offer into the new phase. This sends out a clear message that they are valued by the business. It’s a great way to get employees engaged and it shows a mutual respect; staff will buy into that.
A merger or acquisition is also a perfect opportunity to let go of legacy policies and procedures that don’t serve the business anymore. Start by conducting a thorough audit of each company’s terms and conditions and staff handbook in discussion with stakeholders and employees. As this potentially means not carrying on certain practices, it’s very important to have an open and constructive conversation.
This two-way process is about give and take on both sides; any benefits need to be aligned with business objectives. Access successfully negotiated out incentives that benefited a few and moved the costs to schemes which benefited more staff. For instance, the business dropped a commercial legacy bonus scheme and paid expenses for lunches. In its place, amongst other things, came Big Thanks, a company-wide bonus scheme in recognition of everyone’s efforts, a 5% matched pension contribution (in line with upcoming pension regulations), two weeks paid paternity and up to 12 weeks paid maternity leave. The bottom line is that any incentives are scalable, cost effective and build in forthcoming changes to legislation. When these changes are conducted in the right manner, people can see clearly what the business is looking to achieve and how they are being rewarded for helping the business reach these aims.
The result is a blueprint for employment contracts, policies and standard practices. Policy documentation should be living documents, becoming a part of people’s lives from family, equality and career policies to codes of conducts and the business’ commitment to staff. Make these policies readily available on the company intranet so staff can easily access them.
Merging different cultures
Aligning company policies and creating unified best of breed systems goes a long way to successfully merging different cultures. The process of consultation cannot be underestimated to fully understanding the ‘personality’ of each business. Access’ own management team were proactive in speaking directly to staff, reassuring them and helping them integrate with the rest of the team from day one. Just being there to answer questions as openly and honestly as possible can help to break down barriers.
With any M&A or MBO, it is important that the lines of communication are kept open even after the change has taken place to monitor employee sentiment and gather and respond to feedback; there are a number of ways this can be achieved including staff engagement surveys, Q&A sessions and roadshows. Incorporating this within the systematic framework for M&A activity will make sure nothing is overlooked. Poor integration leads to reduced productivity and employee morale, which will impact on the business reaching its financial goals. With careful planning this can be avoided. If it does happen, it needs to be rectified — immediately. Nurture your human capital — they are ambassadors for the business.
Every business needs to create its own change management model as one size doesn’t fit all. It is important to map this out before going through any M&A activity, paying close attention to how human capital will be managed throughout the process. By learning from each acquisition or merger, the framework will be improved and fine tuned as a result.
This ‘living’ document should also be completely scalable and transferable. It means that anyone involved in the M&A process has a framework to abide by; it helps them to understand what is required and to cope with any unexpected issues outside of the plan, which will inevitably occur, especially where people are concerned.
Essentially, it provides structure in what can be highly charged times, helping the HR team deal with the conflicting needs of the different stakeholders. This is a time where process doesn’t hinder but can bring order and calm to the situation; it ensures everyone remains focused throughout and that the organisation’s most valuable resource — it’s people — are not forgotten in the process.