By Jon Buttriss, Executive Director, Thomson NETg

Tough economic times over the past five years have seen an unprecedented number of companies going through the mergers and acquisitions process, however, according to Robert J. Thomas, 50-80% of companies that have merged fail to match their previous performance.

In many cases, the failure is caused by a cultural clash.

In the Outlook Journal, Thomas suggests that many recently failed mergers and acquisitions such as Daimler-Benz and Chrysler and Citicorp and Travelers Group can be attributed to cultural incompatibility.

Potentially, a culture clash is something that can be overcome during a merger or acquisition but to tackle it requires strong leadership from above and continual collaboration with HR to create a common set of goals to which all employees can work towards.

Managing the cultural change associated with a merger or acquisition is difficult and needs to be approached from many levels. Strong leadership and guidance from senior executives during a time of change is crucial.

According to research from The Change Partnership in February 2004, more than a third of senior UK executives said that ‘embedding the culture’ was the single most difficult task they faced while more than half of those surveyed claimed that ‘changing mindsets and behaviours’ was a key leadership challenge.

Many companies, however, do not put an onus on leadership training and often executives do not have the skills they need to manage and motivate their teams, let alone to effectively communicate and guide employees during the merger or acquisition process.

According to a recent survey by Adecco and the Chartered Management Institute (Business Energy Survey, October 2004), of 1,500 managers, one in three said they had received no training in the last 12 months, despite 53% of managers claiming they were aware of the existence of a training budget. Clearly, senior executives are crying out for training to provide them with critical leadership skills which could help drive the new company forward and help ensure the merger or acquisition is successful.

This desire for more focused training seems to be falling on deaf ears. Many organisations in the UK continue to tighten their training budgets spending significantly less on management training and development than their counterparts in Europe.

According to research by the Chartered Management Institute, the University of London and the DTI in June 2004, the average UK company spend per head for management training is only £1,085; less than half the amount spent by German companies.

This is placing UK companies in a precarious position because senior management do not have the right mix of skills to ensure the long term success of their company, especially if this involves a challenging process such as a merger or acquisition.

This presents an opportunity for HR to step in and emphasise the need for specialised training for senior management. HR must ensure that these vital training needs are being met to ensure the company’s continued profitability, especially if a merger or acquisition is on the cards.

Secondly, HR professionals need to ensure that all employees are quickly made to feel part of the new company culture following a merger or acquisition. An ideal way to achieve this is through a comprehensive and personalised training programme which supports business goals and strategies.

This type of approach can bring stability during a period of uncertainty, such as following a merger and acquisition, providing unity by ensuring all employees are working towards a common goal. It can also help employees feel more valued, as well as giving them confidence to take on new roles, as they gain valuable skills.

It is essential that businesses do not overlook the needs of their employees while undergoing a merger or acquisition. If they do, many highly skilled employees might jump ship and move to a competitor business.

According to new research from Reed Consulting (October 2004), fitting into their employer’s workplace culture is more important to most staff than earning a higher salary. The survey also found that two out of every five workers say they have personally experienced cultures where their own workplace style clashed with that of the organisation.

While half of the respondents would stay and try to make a success of a role, in spite of a misfit between their own style and the culture of the organisation, more than two out of five would plan to leave. This type of behaviour can be exacerbated during the mergers and acquisition process when employees can feel uncertain of their future career, their position within the new organisation and the long term success of the organisation.

HR professionals play a valuable role in mergers and acquisitions, actively contributing to organisational success by making sure that tailored training is available to all levels of the organisation, from senior executives through to employees at all levels within the business.

They can ensure senior executives are equipped with the leadership skills needed to successfully manage organisational change, and that the needs of employees are carefully managed. If they can balance these needs, the chance of merger and acquisition success will be greatly enhanced.