M&A integration: “I hope your firings go really well”

using hr consultants for post-merger reorganization - Kraft/Cadbury example

Layoffs are often a necessary evil of post-merger integration. While some companies handle this ugly task well, many don’t. As layoffs typically occur early in the integration process (when confusion and stress are at fever pitch), it sometimes makes sense to hire HR consultants to help ease the load and prevent missteps. [Note: we are not HR consultants so this is not a blog post masquerading as an advertorial]. The important thing is to use consultants appropriately.

The stakes are especially high with Kraft’s recent, tumultous acquisition of Cadbury and therefore it’s not surprising that Kraft CEO Irene Rosenfeld turned to outside HR help as noted in a recent article from the Chicago Tribune:

Going forward, Rosenfeld said, Kraft will cull from the “best of both worlds,” Kraft and Cadbury, when it makes strategic decisions, including hiring top managers. Rosenfeld said Kraft has hired an independent human resources firm to help with selecting those managers.

The reason: There’s a tendency within any organization to gravitate toward the people you know best, not necessarily the people who are best for a job.

“It’s human nature that if you know someone for 10 years versus 10 minutes, you can’t make an objective assessment,” Rosenfeld said.

While Rosenfeld puts a positive spin on the reorganization as a search for top talent, implicit in her words is the need to divest talent as well.

With Cadbury Chairman Roger Carr’s stinging criticism of Kraft as an “unfocused conglomerate” still ringing in employees’ ears, the worst thing Kraft could do is to live up to this charge by implementing an impersonal, disjointed reorganization process by relying too heavily on consultants. Here are some thoughts on how Kraft can avoid an integration debacle during reorganization:

• Make sure the information flow is 2-way. The above clip from the movie “Office Space” is an iconic one in which the protagonist, Peter, turns the table on the HR consultants by pointing out how the corporate structure is leading to poor employee performance (and not the other way round). This is essential information that any acquiring company would love to have but they rarely try to elicit it during reorganization interviews and typically have no process in place to channel it to those who need it. Additionally, a merger-related interview is like a normal job interview for an external hire — there should be equal give and take, and there should definitely be someone present who can answer employee questions about the acquiring company (a staff member in addition to the consultant).
• Sell the merger to everyone. Even if you know certain people do not have a shot at being retained, it is imperative that they are given equal treatment in being on the receiving end of the merger “sales pitch.” Just because their employment ends does not mean that all of the ties are severed. They may still be customers, or investors, or even future employees. And the best “salespeople” of the merger will always be employees — not consultants.
• Keep the process fast but not cursory. There are a number of reasons to hurry up the reorganization process, most notably financial ones. But, too often companies approach the task like it is a speed test and zoom through interviews, decisions, and logistics, leaving a wake of poor hires, miscommunication, and low morale. Pick reasonable deadlines and do the job right.
• “Man up” and do the dirty work yourself. Nobody wants to be the person to tell another that they’re not wanted — it is without a doubt the cruelest act in business. But when it must be done, it is important that it is done with respect and dignity. And that means the message needs to directly (and personally) come from an employee of the company doing the firing — not a consultant. Using consultants for such a task signals weak management. And it’s just plain tacky.

Reorganization is, without a doubt, the most difficult integration task. But it is also the most critical as it sets the tone for the entire merger. If handled well, merger integrations execute more smoothly. If handled poorly, well, there’s a good chance that the stated merger synergies will not be realized.

As the character Peter in “Office Space” ironically bids goodbye to “the Bobs” (HR consultants) after his interview, “Good luck with your layoffs, all right? I hope your firings go really well. ”

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The Kraft-Cadbury marriage — will it work?

What role does “cultural fit” play in M&A?

- A.B.