Mergers, how to do it right and wrong with Francia Street

Thomas Kohler:
Today’s guest, Francia Street.

And also on the separation piece, because there will also be separation from employees. How do you do this in a good versus bad way when it’s also happening through a merger? Because there is just a new setup, a new strategy, as you said. Right. We decided to do this, why blah, blah, blah. And then, okay, for you 300 people, we don’t have a job anymore. I’m sorry. How do you communicate this? How do you go about it?

Francia Street:
Yeah, you know, Thomas, I’ve seen it done very well, and I’ve seen it done really poorly. And there is, I would like to say, if nothing else comes out of this discussion, that that separation discussion is something that companies really have to do with a lot of empathy and with a lot of consideration. I think once you’ve made the decision that a certain group of employees do not fit with the new company, you have to appreciate that wherever they were in the journey, they had a contribution to where the company is now. And many employees, when I’ve spoken to people who have left an organization and it’s done really well, often say to me, you know, when we had that discussion, that leader, that manager, really thanked me for my contributions and were aware of the things that I did in order to move the company to this point. That’s the first thing, starting from a place of gratitude. The second thing is really giving an explanation about why this role is no longer there. And I also often hear, I get it. I understand why it is that my job, my role, my position is being eliminated.

The third piece to it is providing fair compensation for the loss. Sometimes I’ve heard, well, in other mergers, speaking to other HR leaders, well, you know, we have to be cost effective. And I get that that is a business strategy, but there is also somebody’s life that you’re impacting. So being fair in terms of what the separation agreements are, and if possible, try to ensure that in the next step of somebody’s career that you give assistance, whether that is a super great reference letter or it might be helping them with out placement, but ensuring that in the next phase that they are supported, I think that’s probably the four steps that I would articulate to really ensuring that the transition for somebody who is displaced is well done.

Thomas Kohler:
Francia and I talked about mergers and how to do them wrong versus right from a due diligence strategic standpoint to how to communicate it. Integrate companies, merge them. Look at the organizational design, the culture, and also how to separate from people.

Today we have Francia here talking about mergers and how to do it right and wrong. And I’m really looking forward to this episode because I think that’s always an interesting topic. And you saw a lot of mergers in your career, but maybe we start with a short introduction about yourself.

Francia Street:
Hi, everyone. I am Francia Street. I have been in the people and culture space for over 20 years. My career has spanned quite a bit of geographies. I really started my career in the United States and was fortunate enough to be a part of a major merger in the insurance space. So I moved to London, and now I’m here in Germany.

Thomas Kohler:
Nice. And what was your experience with mergers? Maybe you can summarize it.

Francia Street:
Yes, definitely. So really, my experience in mergers and acquisitions started really early in my career. One of the first experiences that I had was at CNA when we were merging, a company called CNA Shorty. At that time, it was maybe 450 people. CNA had bought a company in Sioux Falls. The CNA location was in Chicago. And we needed to bring these two companies together. That experience also was the building block for the merger for CNA Hardy in London. And I moved there to be a part of that merger. Also a major merger, transatlantic. It was between the US and a small insurance company, CNA Hardy in London.

Thomas Kohler:
Nice. And in total, how many mergers did you do in your career? Do you know, roughly?

Francia Street:
I would say probably four or five. I’m currently in the middle of one right now for the razor group. The razor group has bought a company in the US called Purge. And we are in the middle of bringing those two companies together. Really quite an exciting time as you start to think about combining cultures between here in Germany and the US. The Razer group also has a presence in India and Latam. And so when you think about that merger, it really is bringing together different geographies, different ways of working, different ways of being to build one fantastic company.

Thomas Kohler:
And from a strategic standpoint, I think there was also another company in that space buying e commerce companies like Fracio. Right. I think these were the first one that started doing that. Maybe not the first one, but I would say known for it, right?

Francia Street:
Yes.

Thomas Kohler:
Is there a certain competition out there in terms of who is getting the next e commerce shop?

Francia Street:
You know, I really can’t say at this time. What I will say is that, of course, you know, considering what happened in Covid, you know, there’s. There’s quite a bit of activity in the space. There’s quite a bit of movement in the space. But what I can say for the Razer group is that we’re also active in that space. And buying perch really makes a combined offering that’s quite significant from a people perspective. What we have to start to think about is culture, processes, ways of working to ensure that the company that we build really is beneficial to the employees and really maximizes our offering in the market.

Thomas Kohler:
And so would you then see that it also makes sense sometimes that you just buy a team doing, let’s say, an equity hire, for instance, versus also buying the revenue. Or how do you view mergers and also maybe the acquisition piece from people or HR perspective?

Francia Street:
Yeah, you know, it’s always very tricky, because when you buy a company, what you have to think about is you’re not simply buying a talent and skillset, but you’re also buying people who have had expectations for their lives and so on. You’re buying a process, you’re buying technology, you’re buying a way of working. So when I think about mergers and acquisitions, one of the things that’s really critical, one of the things that’s really crucial in that process from a people standpoint is to look at the processes that you currently have, look at the people who you currently have, look at the talent that’s there, and look across at the companies that you have acquired. When you look at both landscapes, it’s really important to think through, how do I get the best out of both spaces? In order to build a fantastic company, what you often find is that there’s no company that’s perfect and there’s no company that has everything. So a merger really gives you the opportunity to get to maximize your effectiveness from a people perspective. I’ll give you an example. Two companies may use two completely different Hris systems. But what you may find is that one company has built a more comprehensive system that thinks through things like talent acquisition, rolling talent acquisition systems into the HRIs system, into the development system, into an exit process.

When you evaluate two companies, you look at two things. Does the system work? Is the system integrated into the culture? What is the capability? And then you can start to think through which system, which process to use. That’s also from a talent acquisition perspective. Who has a better system, and how does it flow through the entire employee lifecycle?

Thomas Kohler:
Definitely I also was involved in some mergers back then at a larger scale. Scale up. Scale scale up, yes. We were really back and forth about, okay, what people we can hire into which entities. Also, I think, also which systems to use here and there. Right. But I think totally, at some point, you just need to make a fundamental decision on that and then. So maybe where you can have more leverage.

But I think what I found always really tricky is the consolidation piece, because you maybe have a strategy around. Okay. That’s the overall hypothesis why we do this. Acquisition and integration. And then you have multiple people on one role where you don’t need multiple people.

Francia Street:
Yes.

Thomas Kohler:
So how do you deal with that piece?

Francia Street:
Yeah. And, you know, again, dealing with the people component is always very tricky. And I want to ensure that, you know, that I say in this discussion, mergers and acquisitions are tough because you’re dealing with people’s lives. So there are a couple of things that you do when you have multiple people in a role. There are ways and means that you can look about it. What skill sets and talents do people bring to a role? It really is important to do a thorough talent assessment. You may have two people who are in a role, but when you look at the talents that they have, the skill sets that they bring, how does that fit into the new company that you’re trying to form? That’s the first thing.

The second thing is thinking through, is there an opportunity to leverage the skill sets in a different way? Oftentimes when you think even about people, functions or other functions, people are not one dimensional. So you may be using a particular set of skill sets for one role, but people have the opportunity in a merger to use those skill sets in different roles in different areas where you. That you may not have even have thought about if this merger had occurred. So oftentimes, I think people think about it in a negative way. Does this mean that we lay people off? Does this mean that we remove people from the organization? The way I like to think about it is how do we shift people around? How do we maximize the people potential that we have in order to get the best from a merged company?

Thomas Kohler:
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That’s a great thought. And how do you do that? Because I think that’s really tricky and hard. Because I give an example. For instance, I think at tier back then, where we really were in scaling mode, we bought nextbike, and I think it was a 600, roughly headcount organization in East Germany. And then they are really. They were really located, or I would say focused on Germany.

And here was this massive scaling company, just three years old and operating in plus 25 countries. Different pace, different mentality, but a lot of leverage. Also from an.org perspective, right. And also from a product and revenue perspective, because the growth needs to be accomplished and so on. And the goal there was to build the single provider because I think back then, Uber already acquired lime. Then I think there was also bold. That did a spec. No, not bolt, that did a spec. And bold. That was just bold. And then you don’t have really more options. Right. So if you want to become the biggest, you better buy and grow, for instance. Or just grow, grow.

Francia Street:
Right.

Thomas Kohler:
So I found this piece really tricky back then to find people for a certain role because we had open positions and we needed to hire, but then we also sometimes had people already in a role from the company that was acquired and it was 600 people. Do you prefer that people? Do you give them an advantage over people hiring externally or also internal mobility that would maybe get a promotion? Decision making criteria you define right. So, and why and how. I think that’s really individual and really important. And I found this really hard and tricky because everybody was over the place in terms of what do we do next, and we still have our business running and need to run our business. Right. But then there’s also this integration. Everybody is kind of aligning, but on what and how do we think about it, right.

And who is making the ultimate decision. I found this, this, this process really hard to define, to understand, and also to commit to something, because I think you don’t make the right decision for everyone.

Francia Street:
Let’s start by saying that I think you’re right again. When you think about people and you think about people’s lives, it’s always important. That’s always something that’s really tricky. But I think the first step is to really examine your people capability within an organization and then make a decision on where do you want the business to go. So it always starts with what is the business strategy and what is the intended outcome. So if there is a business strategy, you can work backwards from there. You want to be in certain markets, you need certain skill sets, certain languages to be in certain markets. In two companies, you’ve already been operating in two spaces.

So you have to think about the employee pop, very much like when you go recruiting for a role. When you go recruiting for a role, you think about, here is the job spec. Here is what we need from a talent perspective in order to move the business forward, you have to essentially go back to fundamentals in that way. When you do a merger, think through what are we trying to achieve across departments? How is it impacting the business in the long term? And actually, there is some amount of advantage because you have an employee population that is already there. So my preference is always to look internally within the company and look at the talent pool that you currently have. Do the people who are there fit the criteria that you need? What you oftentimes find because you’re creating a new business with a merger is maybe they do up to 50%, 60% something. If there is a skill gap, how do we then develop the people who are there and in what time, in order to meet that skill gap? Can we do that? Can we not do that? So that has to be an intentional decision. You also mentioned promotions and development.

In smaller organizations, there are sometimes people top out. You don’t have that opportunity. When you do a merger and acquisition, you can actually redraw your organizational structure to create those opportunities. Matching the business strategy. If you figure out that with the talent pool that you currently have and the opportunities that you have and the new organization that you’ve created, there are going to be people who don’t necessarily fit to the new model. We haven’t talked about culture. That’s also one of the things that you have to think through. What is the culture and the mindset of the new organization? If after you’ve gone through several iterations and looking at Culture mindset, skill set, where we want to go from a business perspective, do we have the right people, then you also have to think empathetically about the workforce that you have and helping them to transition with the people that you do have.

You have to set them up for success. Set a new set of expectations, train appropriately, ensure that you give the right feedback and support so that they can meet the new expectations. Only at that point, when you realize we have done everything that we can do with our current employee population, do you look externally, and that’s fine as well, because you are creating opportunity for people who might be out there in the market, who would be perfect for this new company that you’ve created.

Thomas Kohler:
And how do you make sure that everybody, of the 600 people, for instance, when we take this example, know what the culture looks like and what does it mean for them in change of behavior, for instance?

Francia Street:
Yeah, I can’t say how important that question is. You have to be very intentional around what your new culture is. One of the things that I often say is, and we’ve heard it a lot. When you talk about mergers and acquisitions, people often talk about the failure of Daimler Fiat. Sorry, of the Daimler failure. Why did that not work? Daimler Chrysler, why did that not work? And really, I often say that that is a culture, a people and a culture question. I think that before you go into any merger, you really have to look at what the culture is across both organizations. You must, because at the end of the day, it’s people who make culture.

And I can’t underscore that point enough. You can have the best strategy in the world. If the people don’t fit together, it is going to be problematic, and it is going to be challenging for the merger to occur. Once you make the decision that we are merging and we are becoming one company, the employees who are currently there, they have to know what the new culture will be. And much like you onboard new employees, you have to onboard all of your current population into what the expectations are, what the new culture is, and why it fits the business objectives moving forward. People also vote with their feet. Go ahead.

Thomas Kohler:
Yes. And from a due diligence perspective, I think it’s hard to do a cultural due diligence, right. Because you, in theory, you maybe need to talk to a bunch of employees and people, but you also don’t want to do this because this is highly confidential, and this can then also really shake up the mood and everything. So how do you do a due diligence to also assess if the culture is right or not or a fit or a value add? Because usually in m and a, you think about one plus one is three.

Francia Street:
Right. I think that there are ways and means of doing it. Oftentimes, I’ve heard and I’ve, you know, when I talk to other people who are in the m and a space, and they’re going through the, you know, the different gyrations of putting two companies together, you will hear things like, they communicate differently over there, they do things differently over there. I think one of the things that you have to keep in mind is how are people making decisions? How are people thinking through decisions? And culture starts from the very top of the organization, and it goes all through the organization. So you start to get a sense, even in the very early discussions, of how people do things and how people think. One of the things that you can also do is take a look at LinkedIn. You can see how employees react to posts, how the company is positioning itself externally. That gives you a big sense of what the culture is.

So you may not be able you cannot actually have in depth discussions with employees, but you can definitely get a sense of what the culture is from how it’s positioning itself externally, intentionally via LinkedIn, what employees are saying. Look at Glassdoor and Kanunu and you can get a sense of, are people highly engaged? Do people buy in to what’s going on across both companies? There are ways and means of taking a look at what the culture feels like. Are the values pronounced? How are people reacting to it? And that gives you a sense?

Thomas Kohler:
Yes. And when you are in an integration, for instance. Right. How would you then organize a process of cultural integration? And also that you make sure that everybody is aligned, everybody knows what the end state will be. Everybody knows, is my job now secure or redundant? And do I have the same role or another, do I have the same role in my company or a new company? When does this process usually finish? Because this can take years, no?

Francia Street:
This can take years. This can take many, many, many years. And the thing is, it’s not black and white, it’s not binary. So as you start that process, you may start in one place and you may end in another. So I would say once there is always a celebration of when two companies merge. Yea, we’ve merged. But then I believe from a people perspective, the hard work really begins after that process where you start to meet your colleagues and you start to get a sense of who’s there. So there are a couple of ways that I take a look at.

I normally take a look at it when you decide, okay, two companies are merged, you start to look at the organizational structure once again, and you start to look at different departments and figure out what the end state is. Take a look at the skill sets and you start making decisions and having conversations. And those conversations have to be really intentional and give people a reason why certain decisions have been made. As an example, you start putting, when you put two departments together and you assign a leader or you make the decision that that person will be the leader. It’s very important to go through the different levels of the organization and start communicating to people. Okay, we’ve merged a department. As an example, let’s take HR, for instance. You may have two head offs because you’re across two companies. You may have two directors.

There has to be a decision, okay, what is the scope, scale, complexity of the new organization and what we’re trying to do and who is the better fit? Because there are feelings involved and it’s past the due diligence phase. People’s emotions, people’s plans for their futures. The conversation has to be here is what I need the selected director as an example to do here is why they may be an awesome fit for the department. And then there’s a collaboration process that needs to take place to talk about who else is in the organization and what role they will be playing. That’s just dealing with the design and development part of the merger. There is the other piece, which is more holistic, where both companies need to come together. And the messaging, the communication strategy has to be that we are now one company.

If that’s the decision that you’ve decided to take, there are some companies that make a decision that the two merged companies will remain separate, and there’s a different strategy for that. But if you take a decision that you’re putting together both companies, the messaging needs to be intentional. Within the organization. That comes from the very top. It comes from the CEO, it comes from the leadership brass buying into that message and intentionally showing that they buy into that message and then rewarding behaviors that show that we’re one company or in some cases, having conversations and taking the appropriate actions if people are not buying in.

Thomas Kohler:
In case you have any feedback or anything you want to share with me, please send me an email on thomas@pplwise.com or hit me up on LinkedIn. And in case you really enjoy the show, please subscribe. I would really appreciate it.

What would be a good messaging versus a bad one?

Francia Street:
Yeah, a really good. You know, that’s a good question. A really good message is around why have we taken the decision? And here are the opportunities that being together create for both companies a really bad message. Just super, basically, is we’ve taken the decision and this is the way it’s going to be. And you sometimes hear that, or, you know, when I’ve spoken to other HR leaders or people who have been a part of two companies, that’s the way it is, because this is the way that we’ve done it. If you have a situation where you have a dominant culture, or the company or one of the companies has bought the other one, this is the way that we’re going to do it. This has always been the way it’s been done. You just need to learn it that way.

That creates toxicity within an environment, within any company. People have to understand, why are we doing it this way? What is the advantage of doing it in a particular way? Have we assessed whether the other company is also doing it well? Can we fold in some best practices from both simply being dogmatic and saying, we’re just going to do it this way is bad messaging, or there is something else where potentially you don’t fully explain the new culture and people start to create their own. If there is not a clear direction about what the new culture is and why we’re doing things in a particular way, people will invent their own rules. People will invent their own best practice. And that also leads to a certain chaos and confusion within the new company.

Thomas Kohler:
And also on the separation piece, because there will also be separation from employees. How do you do this in a good versus bad way when it’s also happening through a merger? Because there is just a new setup, a new strategy. As you said, we decided to do this, why blah, blah, blah, and then, okay, for you 300 people, we don’t have a job anymore. I’m sorry. How do you communicate this? How do you go about it?

Francia Street:
Yeah, you know, Thomas, I’ve seen it done very well, and I’ve seen it done really poorly. And there is, I would like to say, if nothing else comes out of this discussion, that that separation discussion is something that companies really have to do with a lot of empathy and with a lot of consideration. I think once you’ve made the decision that a certain group of employees do not fit with the new company, you have to appreciate that wherever they were in the journey, they had a contribution to where the company is now. And many employees, when I’ve spoken to people who have left an organization and it’s done really well, often say to me, you know, when we had that discussion, that leader, that manager, really thanked me for my contributions and were aware of the things that I did in order to move the company to this point. That’s the first thing, starting from a place of gratitude. The second thing is really giving an explanation about why this role is no longer there. And I also often hear, I get it. I understand why it is that my job, my role, my position is being eliminated.

The third piece to it is providing fair compensation for the loss. Sometimes I’ve heard, well, in other mergers, speaking to other HR leaders, well, you know, we have to be cost effective. And I get that that is a business strategy, but there is also somebody’s life that you’re impacting. So being fair in terms of what the separation agreements are, and if possible, try to ensure that in the next step of somebody’s career that you give assistance, whether that is a super great reference letter or it might be helping them without placement, but ensuring that in the next phase that they are supported. I think that’s probably the four steps that I would articulate to really ensuring that the transition for somebody who is displaced, is well done.

Thomas Kohler:
Great value. Any final words from your end to summarizing? Give tips on doing a good versus bad merger.

Francia Street:
Yeah, for sure. I would say when you combine two companies, it doesn’t happen automatically. You have to be really intentional and planned about the process. There are a few things that I think that you really have to consider. Please consider your organizational design. Culture. Culture. Culture. Culture. Culture.

Consider the culture that you’re trying to create and really consider the messaging. Be really intentional about the messaging. People need to understand what is this new culture, what is this new organization, and how we all benefit from the new company that has been created.

Thomas Kohler:
Thank you so much. It was really great to get you on the show and have some insights. Thank you.

Francia Street:
Thank you very much.