When a merger becomes international, the complexity and the stakes increase. How to prevent a potentially lucrative merger from becoming a social and economic quagmire.

Define clear and visible goals for cross-border teams.

To take a recent example, the Air France-KLM merger announced on 30 September 2003 is expected to generate revenues of over USD 22 billion, according to news reports. As an airline serving 226 destinations with an operating fleet of 540 aircraft and over 100,000 people on their payroll, Air France-KLM is now the largest airline in Europe.

The Air France - KLM example - which was finally approved by the European Commission in Brussels in February 2004 under strict conditions - illustrates the high stakes of a major international merger. Such a merger concerns not only billions of dollars but more importantly the careers and lives of tens of thousands of people. Here it becomes important to examine what HR professionals can do to ensure a smooth transition.

Says Paul Melessen, international culture and strategy consultant, "Air France and KLM have made a wise decision to only integrate both airlines at the holding level and leave the operating companies more or less independent from each other. In fact 80 percent of international mergers destroy value instead of creating it. This is largely due to cultural differences."

Melessen knows from previous experience with multinational management teams that it will be tough to accomplish integration in the board. "But once this integration has become successful inevitably the rest of the organisation has to follow the example. It's all about reducing costs and shareholder value. From then on HR managers will 'roll up for a roller-coaster ride'," he says.

Carrie Shearer, a veteran with 25 years in international HR shares her thoughts on how HR professionals can make a difference between synergy and disaster in international mergers. Furthermore, in the last six years, through her own consulting practice, she has specialised in working with companies going international for the first time.

Communication is the key to defusing potential problems according to Shearer who advises, "First and foremost, HR should maintain a steady stream of communication with all employees using various mediums. All too often, managers will shield the truth or make promises that they cannot keep. It is up to HR to be the source of truth, even if it is unpleasant. HR should clarify what will, and will not, occur during the merger."

Along the same line, communication is also the key to avoiding a major pitfall. Shearer warns against the tendency to paint a rosy view and to "gloss over the changes" while in reality the path of a merger is never a smooth road. According to Shearer, simple measures such as telling employees honestly that they will be going through a chaotic period and showing appreciation for their efforts goes a long way towards smoothing tempers.

When it comes to making decisions, Shearer believes it is the role of HR to act as the corporate conscience and caution other areas to keep the employees' interests in mind when making decisions. This also goes for the 'winner' in a not-so-equal merger. She points out that the company doing the takeover may have a tendency to impose their policy and business practices. Such an attitude will no doubt result in a lot of resentment.

Melessen believes that key decisions have to be worked out in functional teams staffed by people from both companies.

"It is important to select the right people for those teams - interculturally skilled people with a cosmopolitan mindset," says Melessen. He also believes that it is important "to help those teams to stay focused and know the team's strengths and weaknesses.  And of course: keep the people 'back home' informed."

According to Melessen this all helps to build trust as mistrust is "the devil in every merger and something which particularly becomes visible when the strongest party tries to impose procedures and gives no say in appointments." Melessen has observed that continental European companies are more sensitive in this respect than both UK and US-based corporations.

To ease the transition, Shearer advises HR to take a role of guiding a company towards setting policies that meet their mission objectives by adopting strategies from both companies or even creating new ones. "Go for what is in the best interest of the new company, not simply picking the best from the old. This is the time to do a 'real needs' assessment and re-think everything. Don't lose sight of this valuable time," she says.

In other words, a merger can be seen as a great opportunity to scrutinise and refresh one's business strategy.

Intercultural management guru Fons Trompenaars observes that there is growing conviction that wealth is created in alliances (including mergers and acquisitions) by reconciling values.

To generate value he advises taking a three-step approach: recognition, respect, reconciliation.

"First you need to help people to recognise the cultural differences - interviews or questionnaires could be used to do this, and, if both sides are respected, everything will turn into a dilemma," he says.

"Very often the emphasis is much more on differences than on sharing," says Trompenaars, who sees cultural due diligence as the means to bring about reconciliation of these seemingly opposing views.

"The role of the HR manager is to be a master in facilitating that process. The key is to be able to link the business issues with the value issues with the cultural issues," he concludes.

 The geographic hurdle is an inevitable feature of an international merger. This often involves closing down one or more offices and relocating people or introducing a new language as the official language to be used across the company.

As corporations become multinational or search for new markets English, perhaps because it is already established as the language for science and technology, is often first choice.

When the French company Rhône Poulenc merged in 1999 with the German Hoechst, Rhône Poulenc executives in Italy, Spain, and the United States had been used to speaking in French. After the merger, personnel were instructed to switch to English as the common language.

According to an English language teacher who was contracted by Rhône Poulenc in France to teach the employees English, "A lot of the French staff found it difficult to adapt to the language change, especially the older secretarial staff.

Quite a few redundancies were made and a lot of them felt they would be picked to leave should they not achieve a certain standard of English within a given period of time. I was asked to test my students regularly and give the results back to HR. Senior management also required coaching in the English language as they had to start giving their presentations in English."

Dirk Buyens, professor at Vlerick Leuven Gent Management School and the head of Vlerick's HRM gives the example of national banks in Belgium, where, prior to an acquisition, people worked in Dutch or French. "Whenever you had to do something, it had to be done in two languages, even at the managerial level," he says. "Some banks have been taken over by Dutch banks, and the company has become English [speaking]. What you see, in less than a year, is that everyone can, more or less, speak English."

Buyens points out that under normal circumstances such a transition could have taken at least 20 years to come about.

Another transition that some staff members will have to deal with is a change of office space, but with good planning HR can considerably ease the relocation.

Shearer advises, "Always make certain that there is a place for the first person who moves. The rumour mill will make a meal out of someone moving into the new area and not having a desk much less a computer! Work overtime to guarantee that the first person who moves is handled well. This then makes others expect to be treated properly."

According to Shearer, HR ensuring that transferees have sufficient time to get settled in the new area is essential. "For single people, this may involve additional assistance," she says. "When possible, create a 'buddy system' between new people and those who have been there for a while. This not only helps smooth the transition, it aids in developing good working relationships."

Good relationships and the cooperation of the workers are key factors to making a merger work. Even a large-scale merger can be potentially derailed by the workers. In the Air France - KLM case, KLM's unions are seen as one of the main potential obstacles that could send the merger deal south.

The Dutch workers however have given their seal of approval. One of the key factors that secured the cooperation of the unions was a guarantee of no forced layoffs among the Dutch workforce for five years.

The main factor towards gaining such trust and cooperation from workers and unions is communication. As Carrie Shearer emphasises, "Communicate, communicate, communicate! I can't say it enough. Hold focus groups - find out what employees like and dislike about their current policies. Find out what they would like to see. Find out what their fears are. In general, this is the time to listen to what your employees have to say and then act upon it. Let them know there is someone they can go to with their questions and concerns. In fact, name an ombudsman so employees feel that they are safe to speak to someone who is on their side."

Consultant Paul Melessen adds, "Keep in mind that an international merger is not only a threat. It also brings new opportunities for an international career. So it is also about influencing the mindsets of the people involved."

Melessen stresses the importance of defining clear and visible goals for cross-border teams. "Those teams are the key. If they perform well the merger will be a success. If they fail billions of euros go down the drain. It is important to have the right personalities on board with the right knowledge. And the team leader has to know where everyone stands. Those team leaders have to be great communicators and inventors - with the right information at hand."

March 2004