Acquisition Aftermath, Part II: Managing Employee Transitions

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By Marteann Bertrand

January, 1999

When purchasing an existing company, there are almost as many different scenarios to explore and think about as there are companies changing hands. Every situation is unique and there are no hard and fast "rules" to follow. However, just as in my last article discussing account transitions, in managing employee transitions, the key is in the planning. Let us explore three possible scenarios and the development of the action plan for each. The first scenario is when the new owner expects to manage the new company and management intact, leaving in place the current system, staff, and management. Second, we will look at planning for a merger within the same geographic area, where accounts and (perhaps) staff will be merged into another location close enough for the existing staff to be offered positions in the newly merged company. And, third, we will look at the long distance merger where accounts will move, but staff members are surely "out of a job."

Without proper planning there is certainly opportunity for disaster in any of these three situations. When do you tell the staff of the change? How great is the risk that key employees will leave before you are ready to have them go? What do you do to ensure quality of service if you lose a significant number of employees? How do you know which employees are "keepers" and which ones you would rather have gone? And how do you protect yourself, legally, when you take the necessary steps to erase out those that you choose not to keep? Planning well in advance for employee transitions will help you answer these questions.

Our first scenario, that of keeping the company intact, may be the easiest to manage. At Com Source, Inc. we believe the old adage "honesty is the best policy." Employees should be told of the change as soon as possible. One of the biggest reasons to tell employees right away is because of another old adage, "If they don't know for sure they will make it up!" We all know that rumors abound in this business. Rumor of an ownership change, without solid fact to back it up, can cause both employee and customer loss. Schedule a series of employee meetings to be conducted jointly by the seller and the buyer, but do your homework first!

The first "homework project" is to anticipate any questions employees may have and be prepared with your answers. We need to understand that at the front line level, the biggest and first question employees ask is "what about ME?" They want to know what happens to their seniority, their benefits, their schedule, their pay scale, their vacations, and all of the myriad of details that concern the hourly wage employee. It is necessary to obtain a copy of the new company's Employee Handbook or company policies and make a comparison to the policies of the acquired company. After comparing policies, decisions will need to be made on those that differ. Will you keep the existing policies or change them to match your own? If you choose to change policies to match your own, what will be the employees' perception of the change? Will they believe the change to be better or worse for them, personally? Be prepared with a full explanation of all changes and be prepared to offer your explanation in the best possible light. If you have to "take something away," be sure you have something just as good, or better, to offer in another area.

The other homework project that should be done before the employee meeting is an employee audit. The new owner should obtain all personnel files and a list of the current wage scale. Familiarize yourself with the history of each employee. When were they last promoted? When was their last raise? Are there any performance evaluations or vacations due immediately? Is anyone in any stage of disciplinary action? Are you going to wipe the slate clean on any of these issues and start from scratch, or are you going to honor or follow through with any promises (or threats) made by the previous owner? Have a conversation with the previous owner about the strengths and weaknesses of each person in a key position. Don't allow yourself to be caught short when, two weeks after the ownership change, a key employee informs you that they have a two week vacation scheduled starting tomorrow, or that they were promised a substantial raise on their next pay check and will quit if they don't get it!

After doing your homework, conducting the meetings, and answering all questions, the best thing the new owner can do is be available. If you are not physically available, be sure your new employees have an easy way to contact you, give them your 800 or direct office number. When they call with questions and concerns, answer honestly and promptly. And don't leave it up to them to contact you. In the early days of the new ownership, employees may be intimidated and have a tendency to cover up problems or hesitate to raise concerns. When you visit your new company, make it a point to do a "walk around" to let your front line know you are there and available for discussion.

With all home work done and all lines of communication kept open, it is often surprising how quickly the employees, at all levels, become comfortable with the new ownership and how smooth the transition will be.

When merging an acquired company into your existing facility in the same geographic area, all of the above suggestions apply. Compare company policies to be able to answer questions about differences, study employee history to be familiar with the talent available to you, and talk to the seller to get recommendations on key personnel. In this situation; however, your homework must be a little more intense. An employee audit should be done in your own company as well. An analysis of traffic and scheduling should be undertaken to plan for your increased staffing needs. (I know an excellent consulting firm that can help you with this one!) You should know in advance of notifying the employees of the sale, exactly how many positions you will have available and how you will interview and hire for those positions. Will you offer positions to all employees who choose to make the move? Or will you offer positions only to operations staff, or only to supervisors or managers, or will you reserve the right to pick and choose? All of these questions must be answered in your own mind before the employee meeting, because they will surely ask. Again, you must be prepared with answers to questions regarding seniority, benefits, schedules, etc. Obviously, the more attractive you can make it sound for them to make the move, the more likely they are to buy in and be happy doing so.

Preparing your existing staff for the merger of new employees is just as important as preparing them for the merger of the accounts. The "us against them" syndrome is a sure killer of morale and will quickly drive away your new employees. Conduct meetings and cheerleading sessions to help your staff understand how important it is to make your new employees feel welcome. Think about developing a "buddy system" to match each new employee with their own personal coach or trainer. After the merger, give your new staff the opportunity to make suggestions and talk about good ideas they may have brought with them from the old company. And be available to answer questions, address concerns, and calm impending conflicts.

Our third scenario, that of merging the newly acquired accounts into a service out of the immediate area, is the trickiest of all when it comes to the employees. How do you enlist the aid of the staff in making the account transition smooth when they all know that this transition means they are going to lose their jobs? How can you be honest with them about the plan, knowing that your honesty could cause them all to immediately jump ship? Unfortunately, the answer to these questions is likely to cost you some money. We still believe honesty will serve you best. In being honest with the employees about the plan for the account transition, you may have to "buy" their cooperation. Set up a timetable for moving of accounts and scaling down of the staff. Then offer a "transition bonus" to all who will sign up to stay for a specified period of time. Be sure your transition bonus offer is in writing, and airtight in that failure to complete the required amount of time will result in forfeiture of the bonus. Quality of service issues may also be a part of your transition bonus agreement.

Another good suggestion, given to us by one of our past clients, is to actually help the employees find other jobs. You may simply offer written letters of recommendation or even go so far as to pay an employment agency or career counselor. If you use this suggestion we would again recommend that the offer be in writing and for a specific amount of time worked during the transition.

Resolving employee issues during times of change is never easy. We ascribe to the notion that information is power and information shared is power multiplied. Know your plan, know your people, and pass on what you know!