Press Release: Managers underutilized in M&A integration


NEW YORK, February 8, 2011 -- Companies are underutilizing frontline managers in key phases of the integration process in corporate transactions, according to a recent study by Towers Watson (NYSE, NASDAQ: TW). This creates a more difficult transition for employees, with consequences like turnover of key talent, disengagement and reduced productivity, indifferent or even hostile customer service, and greater incidence of errors or waste.

The Towers Watson study, involving more than 700 managers worldwide, examined the role managers at all levels play in the change process in an acquisition, merger or other corporate transaction. It found that companies generally are not doing a good enough job of engaging and mobilizing frontline managers, despite widespread acknowledgement that they are a particularly crucial element in bringing employees successfully through a transaction. When managers are insufficiently prepared and equipped to help employees, this can lead to ambiguity and confusion, resulting in disengagement and needless loss in productivity.

"Every deal is unique, and therefore each company's approach to people transition must be equally individualized," said Mary Cianni, Towers Watson's global leader of mergers and acquisitions. "What is consistent, though, is the need for companies to look beyond senior leadership -- and engage and mobilize lower levels of management, because those are the people who are key to sustaining employee engagement and performance. Frontline managers can either be the greatest asset -- a multiplier of engagement -- or one of the greatest detractors."

Related research from Towers Watson's 2010 Global Workforce Study underscores this point, with results showing that the employee-manager relationship is an important component of engagement. That research also confirms that positive and sustained engagement has a measurable impact on a company's financial performance, which is particularly critical during a transaction, when dips in productivity become the norm and results are under greater scrutiny.

Despite clear evidence of the impact of a strong employee-manager relationship in keeping employees engaged and productive, the current study shows that during a transaction, frontline managers are not heavily involved in integration planning. Only 17% of these respondents indicated they were a member of any integration team, and only 25% indicated they had any formal communication role with their employee group. Just about four out of 10 (39%) said they were not involved in any of the integration activities tested in the study. Further -- and perhaps most significantly -- roughly three-quarters of all respondents indicated that employee engagement was not even measured as part of the integration process.

"Bottom line, even with good support, a transaction weakens ties to the company and makes people more open to leaving," said Tom Davenport, senior practitioner in Towers Watson's Talent and Rewards practice and author of Manager Redefined. "Without a clear understanding of what people need from different levels of management during a change process, companies risk putting money, time and energy into the wrong things, with less than optimal results."

In fact, this current research shows that the leading reason employees leave a company during or after a transaction is that they were uncomfortable with the new organizational culture.

"Effective managers will clear the obstacles in the way of employees doing their jobs," said Cianni. "They will provide basic direction on how to operate with clients and customers in the new environment, and they will effectively and efficiently translate what they are hearing from upper levels of management. The problem, as our study shows, is that not enough managers, especially at the supervisory level, are getting the tools and training to do that well."

According to the study, only a third or fewer frontline managers had access to various informational and support tools from their companies. While access was greater at more senior levels of management, just 56% of the senior-most respondent group indicated they had access to change management workshops, which was the most prevalent support tactic among the array the study tested.

Towers Watson says there are five steps to success for companies going through a transaction:

1. Make key talent selections early. Senior leadership should identify which frontline managers they want to lead in the new organization as quickly as possible, so these individuals can join the process early.

2. Onboard the new management team quickly. Ensure managers understand their roles in the new environment, and that they are engaged and understand the transaction rationale. Give management the opportunity to "kick the tires" on the integration details.

3. Arm and mobilize management. Equip managers with the tools and support needed to effectively communicate about the transaction: FAQs, messaging, decision-making flowcharts, organizational plans, toolkits and training. They will be the first point of contact for employees.

4. Ensure management is effectively communicating. Ensure there is consistency in messaging across the organization, that the processes are clear, and that the lines of communication between managers and employees are open.

5. Establish rewards and recognition. Reinforce the value of contribution to integration success through a set of customized incentives aligned to key integration targets and metrics.

About the Survey
The Towers Watson study on managerial roles in a corporate transaction was conducted in October 2010 and includes responses from 700 people managers (those responsible for managing five or more employees) in medium to large organizations that went through a merger or acquisition within the past three years. The participants represent a wide range of industries and are based in Canada, China, Germany, Japan, and the U.K. and U.S.

About Towers Watson
Towers Watson (NYSE, NASDAQ: TW) is a leading global professional services company that helps organizations improve performance through effective people, risk and financial management. The company offers solutions in the areas of employee benefits, talent management, rewards, and risk and capital management. Towers Watson has 14,000 associates around the world and is located on the web at www.towerswatson.com.

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