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Alexander Hughes MAURIZIO ZOLLO Post-acquisition Talent CHRISTIAN MERLE Creating a ModelEXECUTIVE SEARCH CONSULTANTS Retention: Art or Craft? in ItalyEuropean Newsletter PAGE 2 PAGE 3 SEARCH [ E D I TO R I A L] N° 24 Post Merger Talent Management C ompanies that do a better job of attracting, developing, exciting, and retaining their talent can boost their performance dramatically, a Every leader at all levels can and should be a people developer. Their companies should make people development a requirement for every leader. twenty-two percentage points higher return to Managing talents in a merger period is crucial, and shareholders than their industry peers (according to yet can prove difficult. recent research done in the US by Mckinsey). Only We at Alexander Hughes have developed a tool used few companies have been managing talent by many of our clients to evaluate the management effectively for some time. team of a company to be acquired, and we often In a merger situation, which can become a key aspect come with a warning signal to our client. of the success, Companies need to fundamentally Through many years of operations, we have expe- shift their perspective on every leaders job. rienced that a tight management of the merged team HR leaders have a much can save months of turmoil more strategic role to play not to mention money. This in the merger, arguably one is the theme of this news equal to that of the CFO. letter. Prof. M Zollo has HR executives should part- gathered his knowledge on ner with line managers who how to do it ideally and will need guidance in we then have interviewed strengthening their talent Dott. Ch Merle to talk to us pool. They should also help about his recent experience forge the link between in Italy where he merged business strategy and talent; 3 banks of very different people want and need to origins. feel valued as a productive part of the institution. When they arent, they become demoralized, they are more likely to leave the company, and their performance invariably suffers. Michel Rosset Amministratore Delegato Alexander Hughes Italia spa
Post-acquisition Talent Retention: MAURIZIO ZOLLO is 3. Communicate frequently and considered “business as usual”? Finally, Associate Professor of rapidly in order to show goodwill, fur- how much of a focus on collective Strategic Management ther reduce anxiety, and build momen- performance exists within the acqui- (INSEAD) tum by leveraging examples of early ring firm, so that differences in indi- successes. vidual rewards can be accepted as Some of the problems with fast long as they are balanced by corres- A nyone who has been involved decision-making processes are pretty ponding advantages in performance in a post-acquisition integra- obvious: the quality of the selection for the combined company? tion process does not need any process is directly dependent on the These questions betray one of the convincing: the retention of talent is quality of the information on which least appreciated facts in the mana- one of the hardest parts of the process, decisions are based. Gathering high gement of post-acquisition integration and one for which we have probably quality information about people’s processes: success depends more on the least amount of guidelines. From skills and relationships, requires time the acquirer’s traits than on the acqui- a personnel standpoint, acquisitions and dedicated efforts. Also, the qua- red company’s ones. It is not only a are essentially a huge hiring exercise, lity (and the speed) of the results in question of the acquirer’s cultural with thousands of simultaneous the implementation phase might be traits, but also, and perhaps primarily, recruits without any interview, without inversely related to the time invested on the acquirer’s integration capabi- any evaluation of skills and attitudes, in the decision-making process. lities. For example, an important factor and in most cases without any clear Other problems related to decision- that influences talent retention lies in idea of what all these people will be making speed are less obvious. Tai- the acquirer’s capacity to anticipate supposed to do once the merger is fina- loring the highly powered incentive the design of the integration process lized. A nightmare (including the new organizational struc- for any discriminate HR manager. “From a personnel standpoint, ture, the degree of alignment in the operations, the overall timeline of the Now add to this the well-known fact acquisitions are essentially expected events). This is only possible, however, if the acquiring firm has deve- that the best peo- ple in the acquired a huge hiring exercise.” loped procedures and specialized skills related to the management of the inte- company will be the most attractive systems to the interests and profiles of gration phase. Have they developed on the labour market, and will there- the key staff is by no means a fast (or a process, an effective communica- fore be the first ones to leave, should easy) process. Even more importantly, tion plan, an adequate set of perfor- they decide to do so, leaving there- one of the best way to retain people mance metrics, which would allow fore the worst behind (a phenomenon is to credibly show that they have a them to control the process as it is academics call “adverse selection”), voice and that their opinions are paid being implemented and capture the and one has a sense of the magnitude attention to. Hard to do of the challenge. The extreme example when the priority is to get of this situation, is when the acquirer all decisions done within a selects the functions of the acquired few weeks.This requires company that are deemed to be redun- time and the investment of dant (and therefore rapidly dismissed) skilled resources. but cannot keep the people in the func- The second piece of tions (such as R&D, in this case) which “common wisdom” lies with are the key reason for the acquisition. the resulting diversity that What can be done, therefore, to limit this creates within the com- the risk of finding out one day that the bined organization. Can the key value creators in the acquired com- acquirer afford to reward pany have left and the remaining ones people differently depen- are those that you were not quite sure ding on whether they were to keep. “acquired” or internally It can be summarized as follows: bred? How much tolerance 1. Make keep/drop decisions super- for diversity really exists fast to minimize uncertainty and anxiety within the acquiring orga- in the acquired company’s personnel nization so that these diffe- 2. Build highly powered incentives rences are more likely to be for those you decide to keep and can- not afford to loose Maurizio Zollo2
Art orCraft? ALEXANDER HUGHES EUROPEAN NEWSLETTER Printed August 2002 • n ° 2 4 graphic designer firstname.lastname@example.org All Rights Reserved for All the Photographs Editor in Chief. Maurice Rozet Editorial Committee. Richard Aeschmann, Gérard Arnold, Robert Baldwin, Miguel Codina, Michel Garretta, Dick Hawkes, Tony Inglis-Arkell, Michel Rosset, Elizabeth Thomaskey learning points afterwards? to the level of expertise in the mana- International Coordination. Emmanuelle Denis The other major message that comes gement of the integration process deve- 57, bd de Montmorency – 75016 PARISstrong from some recent empirical loped by the acquiring firm. Tel.: +33 (0) 1 44 30 22 00 Fax: +33 (0) 1 42 88 33 95studies is one of tailoring. There is Talent retention will probably never www.alexanderhughes.comobviously no one best way to manage become a “non-issue” for any acqui- e-mail: email@example.com complexities of the post-acquisi- rer who rely on revenue enhancement Offices in Europe. Amersfoort, Barcelona, Berlin, Brussels, Frankfurt, Geneva, London, Lyons, Madrid,tion phase, particularly when subtle as an important source of value crea- Milan, Paris, Rome, Seville, Turin, Zurichissues such as talent retention are of tion. It is clear, however, that manyprimary importance. Each key decision acquirers such as Cisco, 3Com, GEmaking up the integration approach, Capital and Banc One, have maste- learning activities, therefore, any acqui-whether it is about the degree or the red the “art” of retaining the wanted rer can become sufficiently skilled tospeed of integration or the decision- talent and have been able to turn it avoid major surprises in both the quan-making style adopted, needs to be into a learnable managerial process, tity and, even more importantly, thetailored to the primary mechanisms much more of a craft than an art. By quality of the personnel targeted forfor value creation, to the business and paying attention to tailoring their inte- retention who actually stays and acti-cultural characteristics of the acquired, gration approach and devoting suffi- vely contributes to the success of theas well as of the acquiring, company, cient resources to the post-integration combined organization. Creating a Model in Italy [ I N T E RV I E W ] Interview by M. Rosset and S. Orlando, June 19, 2002 Christian Merle is solution to create a new identity – in the domestic European market. Amministratore Delegato the identity of IntesaBci. This implies a realistic re-definition for the Group IntesaBCI Of course, by deciding to merge of the company’s identity and the three banks, we accepted plans, in line with its the risk that people who could not characteristics and possibilities – You’ve carried out a number adapt to the new situation would a difficult exercise, since it has also of mergers to create IntesaBci. gradually leave the bank. For sure, to be demonstrated that refocusing Can you tell us about the the last two or three years marked does not mean downsizing the difficulties you encountered? a turning point for all the banks company’s role and image. IntesaBci was created between in the Group. the end of 1997 and the beginning We had many problems to solve How did it translate into people of 1998 by merging CARIPLO and many difficulties to overcome, management? and Banco Ambrosiano Veneto; but we also had great satisfactions The initial reaction was trying COMIT (Banca Commerciale – first of all, that of creating to ignore the fait accompli and Italiana) joined the group a very the largest banking group in Italy, continue acting as if nothing short time after (i.e. in the spring and the first one organized had changed, yielding to the of 1999), following a stock market according to a modern divisional temptation of the “reverse warfare. model. takeover” – that is to say: For a long time, COMIT had been “Ok, we have merged, but considered the “jewel” of the And what about in reality we are still in command Italian banking system, because of at the international level? in our internal fortress”. its dimensions and its international The events on September the 11th We are in the process of coping mentality and projection. It had all clearly complicated the scenario, with this attitude, to create a truly the characteristics to become the but there are few doubts that new and integrated company. main actor in a merger operation; IntesaBci has never enjoyed Even if it could sound like a but, as a matter of fact, things the status of a global player – paradox, the resignation of some went differently. even Crédit Agricole, which is senior managers could help When COMIT joined the Group, ten times bigger than IntesaBci, overcome the “fortress problem”. it became clear that the federal could not be defined as “global”. At present, we probably still have model we had used to integrate We have to concentrate in Europe: some key vacancies in the CARIPLO and Banco Ambrosiano there is little scope in being specialized divisions, since could no longer work: a real present in Latin America, a few people left to join e-banking merger was the only viable if the bank is not strong enough start-ups. 3
( ) Did you put in place people who can First, the internal context: the resources “This means that take the right acquisitions and mergers – to retain human every manager must decisions; top to accelerate the process, we had potential? management to turn to consultants for Generally speaking, build and manage must ensure assistance. Second, the external we have been a talent pool” that carriers one: in the Italian banking system successful in retaining do not depend there have been more changes in the executives we were most on being “near the sun” (i.e. on the last few years than in the interested in. Mostly, losses being part of the M.D.’s staff). preceding forty (privatisations, in human resources were due deregulation, consolidation, etc.). to market conditions; it is not Has the rate of departures Consider also that interest rates easy to retain people whose changed over these last few fell from 12% to 3% in two years, professional profiles are very years of turmoil? in order to align to core-European much in demand, especially We had a certain acceleration, levels and enter the Euro area, when they feel uncertain about but not of unmanageable putting pressure on banks’ profits. their future in the company. proportions; we also did some Italians sometimes forget that We currently have enough recruiting, as I explained earlier. these goals (i.e. convergence and “generalists” – but need the transformation of the system) “specialists” to manage Is the management of a talent have been reached in France, the divisions we have pool among the criteria you for example, in ten years; doing created. judge your different grades on? in just three or four years what This is a sensitive area, since others have done in ten is bound Have you created young talents joining the bank to create some turmoil. a reservoir of talents? have high expectations. Yes, we have a Evaluation is a delicate problem. What are the areas on which reservoir of young Giving senior executives the the merger had a negative graduates to perform impression that they had been impact? centralized and selected to be part of an elite The main difficulties are with specialized functions; does not improve performance; the clients, who initially perceive to this scope, the world we “deify” them. only the external aspects and of consultancy proved Evaluation is a subject we are drawbacks of the changes (such an interesting basin paying great attention to. as changes in procedures, etc.); of talents. Reforms are under way; this can lead to losing some The real difficulty is the systems are probably not clients. But it is only a matter Christian Merle in the retail network. as detailed and constraining as of the time needed to complete Young people at the branch know in the consulting job, but it’s still the reorganization and cultural much more about the Internet, a major objective. change. Having said this, I want for example, than the branch to add that Italian people proved manager himself; moreover, It’s also linked to variable pay. very efficient in managing the it is difficult to find exactly Yes, and this principle is well complexity of the integration the kind of managers we need, established, both for the front process. I have an explanation for since we (and other competitors) desk and the staff personnel. this, maybe too simplistic: having are creating a model that is There has always been variable this lucidity, this creativity, absolutely new for Italy. pay. The problem is to make it Italians can reach remarkable really variable, not only for performances in a context that is Do you have a system whereby managers but also for future highly organized – like the you delegate responsibilities to managers – and this means that Anglo-American model. managers to create a reservoir? every manager must build and It is a kind of safeguard, which This is obviously our goal – manage a talent pool. In doing allows them to control their to create management skills but this, each department individualism, so they can use also to effectively manage a huge is autonomous. it to serve the structure. and widespread group of people Leveraging on this – let us say – and activities. All this took several years? “disciplined creativity”, we have At the dimensional level of the Certainly, but it is essential been able to reach important typical operating unit, managerial to keep in mind the context. results in a very short tikme span: responsibilities are by merging the three banks, delegated, not only with regard to human resource “Creating we created a single and modern institution, management. For instance, the M.D. has the largest banking multispecialist and with the largest multichannel to be sure to have appointed group in Italy” distribution network in Italy.4