Vol. 52, No. 6
Sprint Nextel's two-year-old merger still requires lots of stamina, communications and plain old hard work to combine two very different companies and cultures.
Merging two companies “is not a journey for the faint of heart,” according to Sandra Price, Sprint Nextel Corp.’s senior vice president of human resources.
Price speaks from personal experience. She has been involved from the beginning in the highly complex merger of telecommunications giant Sprint, headquartered in Overland Park, Kan., and Nextel, whose corporate offices were located halfway across the country in Reston, Va.
While all mergers are complicated, this one may be more so than most. In fact, the two telecoms could hardly have been more dissimilar when they announced plans to merge in August 2005. Nextel was young, with an intrapreneurial, free-spirited culture, while Sprint was well-established, more process-oriented and traditionally corporate in its operations.
Another big hurdle was the incompatible technology. The two telecoms had different networks, products, technologies and processes; even internal payroll systems, HR infrastructure, and compensation and benefits systems were completely different at each organization. Add to these dissimilarities the fact that the two companies were at different places in their business cycles—with different customer bases and different cultures—and the stage was set for multiple problems and challenges.
‘Both Sides of the Coin’
Despite the differences, “We discovered that the two companies were more similar than many believed,” says Sprint Nextel’s CEO Gary Forsee, who formerly headed Sprint.
In fact, says Price, “Both sides of the coin are true.” Indeed, the companies were very different, but, after all, “we were both in the same business.” In the volatile telecom industry, “both companies had known boom times and bust times.” And “our employees loved what they were doing and they loved their companies.”
But there is no question that challenges abounded. For instance, says Price, “we had to [create] two companies simultaneously,” spinning off Sprint’s local phone division, now known as EMBARQ, while merging Sprint and Nextel into a new national entity. In addition, the new Sprint Nextel Corp. was acquiring more companies.
Before becoming Sprint Nextel’s senior vice president for human resources, Price was senior vice president of HR for EMBARQ Corp., before the local phone service was spun off.
Her early responsibilities included working with the HR heads from Sprint and Nextel to select the talent—18,000 employees—who would go to EMBARQ. In addition, she worked with the CEOs of Sprint and Nextel and the CEO for EMBARQ to design the structure and operating model for the new organization.
As the plans proceeded, Forsee kept in mind that “You can never overemphasize the people aspect of a merger. In creating Sprint Nextel, we tackled the integration from a holistic perspective—systems, processes—but the most important asset … was our employees.
“We brought together a group of passionate, driven employees who have banded together for the good of our customers to make this merger work.”
“I’ve never seen anything quite like [the merger],” says Price. The process was “taxing both physically and emotionally at the same time that it was extraordinarily exhilarating and invigorating.”
Price admits to being “humbled by what we didn’t know at the time, and what we couldn’t have known.” The learning experience has been “like going to graduate school every day,” she says. But in spite of the long hours and hard work, “I like the challenge and the complexity of turning opportunity into promise. I’m having a blast!”
Just as Forsee knows the importance of people during a merger, he also understands that “you can never overemphasize the importance of ensuring these employees receive timely, accurate information.” That was particularly critical in this merger, he says, because of the “significant changes to the employee experience from both companies in every area from HR policies to procedures to compensation. Whenever possible, we looked internally at both companies and benchmarked best practices to develop what would be best for the employees of the merged organization.”
Forsee views HR as “the driving force that will enable seemingly disparate groups of people to become one. … From a big-picture perspective, HR is the catalyst organization that can take a holistic look at both legacy companies, see what was best from each, and guide the assimilation and integration needed to become a new company.”
Telling the Employees
As the proposed merger wound its way through the regulatory process required for government approval, HR worked closely with the corporate communications department to plan the pre-merger announcement to employees. To ratchet up enthusiasm, says Susan Waldron, director of employee experience for corporate communications, “We took a rolling thunder” approach, beginning with a high-energy webcast shown in December 2004 to all employees. The broadcast featured the CEOs of both companies.
“We wanted to help employees make personal connections with the executives of both companies,” she says, “so we scheduled executive roadshows” at which executives visited the opposite company’s facilities to talk about the merger and answer questions. The goal was to have very visible leadership at the top and from managers throughout the company, says Waldron.
As “we did the dance of the merger,” Waldron says, it was important to have a consistent message for everyone. Together, HR and the communications team developed a program that featured toolboxes for managers, including biweekly newsletters. Webcasts and online information help update employees as the new company moves forward. A “rumor mill” icon on the company intranets gives employees a place to get accurate answers to questions and correct misinformation.
Do I Still Have a Job?
The first question in employees’ minds when a merger is in the works is, “But what about me? Do I still have a job?” Ron Gier, vice president of HR operations and a longtime Sprint employee, says there was a lot of angst among employees at both companies after the announcement.
Gier, who led the merger integration team along with his counterpart at Nextel during the pre-public announcement period (February to August 2005), was involved in five previous mergers during his 23 years with Sprint and its earlier iterations. One, the attempted merger of Sprint and WorldCom in 2000, was not approved by federal regulators, so he was well aware that the pre-merger stage was a delicate one in which the best-laid plans could go awry.
Employees understood the business reasons for the current merger, says Gier, but the “me” question is a natural reaction. The challenge during the pre-merger period was to “manage stereotypes,” he says. Employees of the two companies “weren't yet building any shared experiences,” and as they proceeded through the regulatory hoops, there were many questions that could not yet be answered. As a result, says Gier, “employees were drawing conclusions from a small amount of information,” conclusions that often were wrong.
Gier was well aware that “companies must be managed at a personal level.” He adds that “the fun part of the merger was recognizing the passion from the employees of both companies.” While hearing from the CEO about a proposed merger is important, employees really want to get answers from the supervisors they work with daily, he says.
A decision that eased one concern—that of being asked to move—was Forsee’s announcement that the new company would retain both company headquarters. The former Nextel facility in Reston, Va., became Sprint Nextel’s executive headquarters, and Sprint’s Overland Park, Kan., campus is the operational headquarters. In the end, only 78 employees relocated—42 to Virginia and 36 to Kansas.
Communications is our business, says Gier, so it’s not essential to have all employees in one location. Three-quarters of Sprint Nextel employees don’t work at either headquarters, so those employees “really don’t care where headquarters is located.”
‘Legacy Sprint’ and ‘Legacy Nextel’
Tanya Cowperthwaite is “legacy Nextel.” She’s an environmental scientist who joined Nextel in 2000. Today she works as a legal analyst in the environmental health and safety division of the new company.
Like many Sprint Nextel employees, Cowperthwaite’s title has changed since the merger, although she was not required to re-interview for her job. Many higher-level managers did re-interview, and titles throughout the organization were revised to conform to a single companywide standard.
Cowperthwaite remembers her first contact with her peers at Sprint after the merger. “Nextel was young and freewheeling,” she says, and she was accustomed to going directly to the people she needed to talk to rather than following a chain of command. She learned right away that her peers expected her to follow “the Sprint way” and were surprised to hear from her directly.
Cowperthwaite adjusted and has observed “some loosening up on both sides.”
Antone Porter, a briefing and demonstration manager, is another former Nextel employee (he joined Nextel in 2001) who lived through the merger and continues to enjoy his work.
Although rumors about potential mergers abound in the telecom field, says Porter, this one caught him by surprise. He admits that he worried a bit about the learning curve, “which increased significantly.”
After working exclusively with wireless technology at Nextel, Porter realized that he would now be expected to learn about wireline networks as well. “How am I going to learn all this so fast?” he asked himself.
Today, that is no longer a worry, and Porter is excited about the possibilities that lie ahead. He conducts briefings about both technologies for executives who make buying decisions for their companies. During the first year, clients asked many questions about the merger, but today, he says, those questions are disappearing.
However, the fact remains that it is challenging and time-consuming to integrate the legacy systems from each company. In the beginning, “Sprint legacy” employees continued to use their existing systems and technology, and “Nextel legacy” employees continued with their systems while the new firm worked its way through the laborious process of change. Although much progress has been made, plenty of work remains to complete the integration of technology.
A customer’s primary concern is whether Sprint Nextel can solve their communications technology problems, says Porter.
“Unless they felt that the company was in dire straits, they don’t have the same concern about finances that the financial analysts have.”
Porter and his colleagues did have some apprehensions about the merger at first, but he soon realized that combining Nextel’s strong federal market with Sprint’s brand awareness gave the new company “an enormous portfolio all of a sudden,” and opened up new possibilities.
Employees from each company “had a lot to learn about each other,” Porter says, and he discovered that there were misconceptions on both sides. “I’m not saying that everything was always just peachy. [It’s upsetting] when you see people that were part of your day leave.” However, he says he’s enthusiastic about the direction of the new organization and has no plans to leave.
As the merger nears the two-year mark, there is no denying that employee morale will continue to be buffeted by uncertainty and ongoing change. In March, with Sprint Nextel’s stock price still depressed, Forsee announced a restructuring that included a layoff of 5,000 of its approximately 65,000 employees.
“Unfortunately, job force reductions are necessary in just about any major merger,” Forsee says. “Duplications are natural when you combine two companies operating on a similar playing field. In addition, once you begin to successfully integrate internal systems, even more duplications and redundancies are identified.”
Forsee says the company has tried to be “as respectful as possible with our reductions, offering a very fair separation package—a package that was taken voluntarily in many cases.”
Severance benefits for non-sales employees below the director level included eight weeks of salary plus two additional weeks for every year worked and a $1,000 payment.
The buyouts offered to executives when the merger was first announced were also generous. That was particularly true at Nextel, where execs were offered a change-of-control plan with two main components. Those who were staying received a retention bonus based on the salary grade level, base salary and target bonus that were in effect before the merger date. The retention bonus was paid in two installments, half after the merger and half a year later.
Those who chose to leave received severance pay based on the same criteria immediately before the merge date or the termination date, whichever would result in the higher payout for the departing employee.
The Journey Continues
Sprint Nextel’s current management team is “a good hybrid of both companies,” says Price. This assessment is reflected in employee surveys, which consistently show “remarkably high ratings for management quality and for engagement—employees love what they do.” At the other end of the scale, however, there is work to be done to raise the lower scores for commitment and for retention.
In spite of current difficulties, many employees seem to feel that the tide is turning. For Price, one test of Sprint Nextel’s progress toward developing a strong new cultural identity has been tracking how often she hears the word “legacy” attached to employees from the former companies. “I listen keenly for references to ‘legacy’ employees,” says Price. “Sometime between the 12th and the 15th months, I began hearing that word less.” Today, she says, “I seldom hear it anymore [as applied to employees].” Price says she feels fortunate to work closely with a CEO who understands that “if the culture doesn’t work, the business won’t work.”
“This is really a story about change, business dynamics and leading change,” says Price. Undoubtedly more difficulties and challenges lie ahead. In the midst of the current layoff, “Employees watch—and should watch—how we treat those who are going. You treat people as well on the last day as you do on the first day,” she says. “If you want to continue to heal from sadness, to build a culture, and to motivate and excite about the future, you don’t treat people poorly.”
Cowperthwaite takes a long-term view, looking at the merger as one of an ongoing series of life challenges. She fully expects the company’s future to be bright. “But when we get through this, there will be something else,” she says philosophically.
It seems a healthy attitude to take as the merger journey continues.
Ann Pomeroy is senior writer for HR Magazine.