Companies acquire other entities for a variety of reasons: to gain market share, acquire a new technology, or gain an edge on the competition. Not all acquisitions necessarily lead to assimilation of the two entities, but it’s a more common event than not.

Assimilation is a tremendous effort, especially when it relates to tech units and resources. You have a great leverage opportunity, but you must move cautiously. Any time you plan to reorganize and introduce significant change to the IT staff, you create potential damage—to internal staff and operations. Most people don’t want change; the natural tendency is to resist it. You can defuse this resistance, but in so doing you must have a plan that helps stabilize the organization.

In this fifth article of my seven-part series on conducting IT due diligence, I’ll examine the assimilation issues—specifically the people aspect—that CIOs must be aware of in this type of effort.

Missed a part of our Due Diligence Series?

Catch up with the first four articles in the series:
”The art of technology due diligence”: Learn the basic approaches to performing due diligence following a company acquisition.
”Preparing for IT due diligence”: Understand the key assumptions, specifically as they relate to the company’s technological capabilities or dependencies, and the importance of using a Technology Due Diligence Request list.
”IT due diligence: The on-site discovery visit”: Because no two due diligence projects are the same, it’s important to have a plan for the visit. Sisco explains how to formulate a plan of action for the due diligence on-site visit to make sure your investigation is complete.
”Write an effective IT due diligence report”: Creating a concise report that summarizes findings for the CEO and board while including enough detail for future reference isn’t easy. This installment provides a report template to help you organize the details.

Assimilation expectations
People, especially detail-oriented technology employees, don’t like surprises, and they don’t want to be left in the dark. People resist change primarily when they don’t understand what’s going to happen or why the change is occurring. CIOs need to accept this human condition and plan how best to provide information and instill strong communication.

In this article, I make the assumption that two technology organizations will merge—jobs will be eliminated and new organizational reporting structures defined.

Having managed more than 40 IT organization assimilation and reorganizations, I want to hear a two-fold message following reorganization:

From the company: “The company’s assets were protected and the changes were made in a cost-effective manner without losing momentum in achieving our objectives.”

From the employees: “We may not have liked the decisions but appreciate how the transition was handled and that we were given the time and resources to adjust or to find new employment.”

Following these three guiding rules will help you make sure this is the outcome you achieve.

Rule #1: Protect the company
The first rule in conducting a smooth assimilation is to protect the company’s interests. After all, if the company gets hurt, everyone in the company potentially feels the pain.

The best way you can protect the company is to know where the land mines are. In dealing with the staff of a technology organization, those land mines exist in key staff members and managers that have the knowledge and expertise that keep the company operating productively. Losing a strong NT administrator may not do a lot of damage if you have those skills in the parent company. However, losing the chief programming architect of a legacy business application can have dire effects on the ongoing operation of the company. Your plan should include provisions that help you retain two types of key employees and managers:

  • Staff needed until the transition is completed
  • Employees needed for the long term

You also have to protect the company from sabotage. If you treat people indifferently, you can easily create an unstable working environment that invites sabotage.

Rule #2: Protect the employee
I follow four main principles for a smooth transition:

1.      Be honest.

2.      Treat everyone with respect.

3.      Make the tough decisions.

4.      Develop a plan that gives people transition time.

Being honest doesn’t mean you “spill the beans” before you’re positioned to do so. It does mean that you need to develop your transition plans and begin announcing your intentions as soon as you can. The longer you keep people guessing, the more nervous they become.

Treat everyone with respect—especially those that are about to lose their jobs. I’ve found that maintaining a professional demeanor and showing consistency in your approach to everyone pays dividends later. Everyone is watching to see what you’re going to do, how you deliver the news, and how well you implement your decisions. Done properly, everyone wins. “Shoot from the hip” and many can be hurt.

Every CIO must be willing to make tough decisions—and obviously this isn’t just part of an acquisition scenario. Often, these decisions affect people and are simply difficult choices. By doing what’s best for the company and the whole, you are making the decisions that you’re supposed to make at this level of responsibility. When the company becomes stronger and more profitable, it works for the good of the majority of employees remaining with the company.

Rule #3: Define your plan
You need to build a plan to take care of the transition actions and any employee terminations carefully. I usually build an IT merger plan in three phases:

Phase 1: Elimination of employees not needed

Phase 2: Elimination of employees needed for the transition but not needed long term

Phase 3: Team-building actions for the new IT organization

Each group of employees that ends up losing their jobs should have a severance package that helps them make the transition. Since there are two groups of employees that will not be needed for the long term, you should have two severance packages.

The group needed for the transition requires incentive to get through this phase, since they know they don’t have a job long term. You can be very creative and do some things that help this group and reduce the risk of their premature flight. If you plan to depend on their help, make it worth their commitment. It really is inexpensive insurance.

A well-thought-out plan is critical to ensuring a smooth transition of staff and technology responsibilities. There’s nothing worse for morale than to announce a plan and then announce another plan 30 days later because you didn’t anticipate issues that affected financial performance, or you didn’t consider the risks of your merger activities. If you’re going to have to terminate employees, be sure to define these activities clearly and execute them precisely as planned or expect to lose credibility and create a whole new level of uncertainty for your IT staff.

Implement the plan with empathy and conviction
Announce your plan to the staff and lay out the details of its implementation. Everyone in both the acquired company and the parent company has at least three questions:

  • Do I have a job?
  • Will I have to relocate?
  • Are my benefits or pay going to change?

Do all that you can to answer these questions and others that you think may come up as soon as possible. Getting everyone “out of the dark” and onto the same page, focused toward your desired destination, will help you implement a successful transition. Develop a document that spells out severance packages for the different groups of staff. Put a list together of anticipated questions and go through them at the announcement meeting.

The more you can do that shows you have anticipated employee questions and have done everything you can to minimize the disruption in their lives, the more you’ll develop the credibility you need to implement a successful transition.

Don’t be apologetic for having to make merger decisions that are intended to improve the state of the company, but show empathy and be considerate of those that are losing their jobs. Stay positive and focused on the objectives of the future, not the difficult and challenging situation that exists today during the transition. Being decisive and thorough in your delivery are the keys to a successful merger.

In the sixth article of this series, I’ll examine how best to approach assimilation from the technology side and what you need to be aware of before you begin that effort.

What’s coming up

Keep up with this series, which will examine the following issues:
Part 6: Assimilation (the systems side): There is value in being able to eliminate redundant technologies, but it’s not as simple as converting everything to one technology. This article will focus on systems strategy and leverage opportunities.
Part 7: Measurements that make sense: How do you know if the technology organization is focused on leveraging the value of the new company after a merger is complete? This installment covers a few key measurements worth tracking.

Mike Sisco is the CEO of MDE Enterprises, an IT management consulting and training company. For more of Mike’s insight, take a look at his IT Manager Development Series.