Wednesday, February 01, 2006

The People You Acquire

Disney’s got a big task in integrating Pixar – by all accounts, the plan is to keep Pixar independent, or even let the Pixar leadership subsume Disney’s animation department. Standing in the way of this will be countless entrenched Disney minions and the mindset of an acquirer that their ways must be best. Even with the best of intentions these forces can be difficult to overcome.

But Disney – Pixar is the unusual case. The far more common case is where the acquirer simply integrates the acquired company into its operations. There’s lots more I could say about integrations, which is an area I still believe doesn’t get enough attention in the development of deals. But I’m focused at the moment on the “people” issues in an acquisition.

Besides doing acquisitions, I’ve twice been on the receiving end. It’s an interesting and unsettling feeling to be sold – all of the long-term stuff you’re working on becomes, in most cases, moot. You focus instead on the short term, getting the deal done and perhaps helping the buyer with the integration. Everyone at the seller, without exception, wants to know what’s going to happen to their job. Some are simply fearful of losing their jobs; others want to know immediately about opportunities to shine with the new owners; others simply want a severance date so they can move on. There is no end to the amount of worry, gossip and rumor-mongering that goes on at a seller in the weeks after a deal is announced. I think all buyers get this, but have a hard time dealing with it – often because they haven’t really figured out what to do with the people at the time the deal is announced.

In my experience, this causes the buyer to do one of two things with regard to the acquired people: They either clamp down on information or try to put an overly-positive but vague polish on everything. Neither works. When information is restricted, gossip intensifies and people assume the worst. The first time my company was acquired, the buyer went so far as to prohibit us from looking at an employee handbook. The ostensible reason was that our benefits wouldn’t shift to the acquirer plans until the next year, and by then the plans might have changed. This is obviously a trivial concern, and easy to deal with (“here’s our current suite of plans; as you know, by the time you roll onto these plans they may be different”). Instead, my fellow employees assumed the buyer had plans that were far worse than ours, and that’s why they wouldn’t disclose them to us. The senior people felt condescended to, being told we couldn’t answer the specific – and basic – questions our people had about the acquiring company.

Alternatively, the acquirer will repeatedly state their intention to do “best practices” hiring, making everyone at both companies compete for every job so the “best of the best” are staffing the new company. It’s a great goal, but rarely ever done in practice (although I think Sprint and Nextel may have actually implemented it in their merger). If the acquirer doesn’t put a real “best practices” program behind its words, here’s what happens: The acquirer uses the opportunity to push out a few recalcitrant pieces of deadwood, fills in the open spots and a couple of newly-created posts with stars from the acquired company, and then allows the rest of the company to be filled in by its managers. And that’s fine – hell, it’s the acquirer’s prerogative to do whatever it wants with the asset it has just bought. However, if you’ve blown smoke about hiring the “best of the best”, you’re going to have a mightily demoralized employee base when the folks start seeing all of the positions staffed from the acquirer.

Perhaps my experience is shaded by the fact that it has been in telecom, where the people who come with an acquisition are not as important an element as they might be when acquiring a technology company. But you still need people to manage the company through integration, and it’s better to have a pool of reasonably contented potential hires (and customers) than a seething, unproductive mass of resentment. Why not take the time to figure out as much as you can about what’s going to be done with the people? Be candid. Err on the side of providing more information about your company. If you don’t know what’s going to happen with a group of employees, say so, and give them a date by which you’ll know (and meet it). If you know a group won’t have a permanent home, tell them early but also give them parameters on how long their jobs are likely to last. Some HR types may wring their hands over this kind of communication, but it can be managed with little to no risk, and it will greatly benefit your integration while yielding the side benefit of being a decent thing to do.

1 comment:

Zach Coelius said...

Great stuff. Because of how different what we do is I learn a ton from reading your posts. Keep up the good work.