Orchestrating a Mega-Merger

By Ann Pomeroy

A Fitting Role

Orchestrating a Mega-Merger

HR Magazine, June 2005

Feature article: A Fitting Role

On Sept. 4, 2001, HP and Compaq announced their intent to merge. It was the largest-ever high-tech merger, says Susan Bowick, executive vice president of HR and workforce development at HP at the time. Bowick retired in January 2004 after 27 years with the Palo Alto, Calif.-based company.

Only days after the merger announcement, while the country was reeling from the Sept. 11 terrorist attacks, I was asked to take the lead in thinking about the culture and bringing the two organizations together, says Bowick. She represented HR as one of eight members of the central management team that began the work of merging two companies into one.

The time from September 2001 until both companies closed the deal and began operating as one company in May 2002 was a period of intense, round-the-clock activity for the merger team. There were more than 1,000 people from all business functions working full time on the merger by May 2002, Bowick says. Like Noahs Ark, we had at least one HP person and one Compaq person co-leading each stream of work.

Team members collected data and examined cost, quality and such issues as what technical infrastructure was already in place, the degree of change required and how fast the change must happen.

I think the most useful thing I did after the announcement, says Bowick, was that I really laid out the 12-month road map for integrating the organizations, people practices and programs for the whole company. Within five months after the legal merger, she says, HR offered a voluntary severance and early retirement package to employees in every country where it was legally possible, which involved coordinating with works councils and other local groups in the 55 countries in which HP was incorporated. (For information on working with European Union works councils, see Working Together.) We wanted to keep as much of HPs highly regarded people practices as possible intact, Bowick says, so we started with voluntary programs before we had to resort to layoffs. As a result, about 4,000 people left voluntarily.

Then HR set about answering the first question employees at merging companies ask: Do I still have a job? We committed to each one of the combined total of 155,000 employees at the two companies that they would know within five months whether or not their jobs were being cut and, if so, what their severance package would beand we did it globally, Bowick says. Because there were many duplicate positions at the two companies, nearly 16,000 layoffs were conducted between May 2002 and May 2003.

Programs needed to be up and running right away, says Bowick, so HR focused on the new organization design, the selection of employees for the new HP and those who would be leaving HP. We conducted a total of 16,584 fast start workshops for managers and their team members, she says, describing the workshops as one of the most effective programs for getting new teams focused on working together on 90-day goals. The daylong sessions, led by trained facilitators, were conducted within 30 days for every new team named.

As managers are selected, they want to know their go-forward head count and their budget immediately, says Bowick. We were able to provide that information within three months of the deals close. HR worked with the line teams to deploy the organization structure, and finance moved the money into the go-forward structure. Because the managers had good information on which to base their business decisions, says Bowick, we accelerated the integration and saved the company a lot of money.

Culture, organization design and selection of the executive team are the biggest long-term issues in a major merger, says Bowick. Issues with the biggest cost impact are health care, pensions and affordable head countjust how many people can you afford to hire? She says HR was able to spot problemsmost of them around culture and accountabilitythat, if not addressed, would have jeopardized the success of the merger.

HR had a good relationship with finance, says Bowick. I worked hand in hand with HPs chief financial officer, Robert Weyman. Throughout the integration process, HR was driving the organizations structure, re-forming the organizations and building them out of people. Finance was building the financial data we used in the new HPs performance management systems. Managers knew their balanced scorecard, and we had the metrics out within 60 days of the merger.

If we [HR] werent there, I really dont know what would have happened, Bowick adds. Waiting to bring HR in at the end means you get whipsawed around trying to implement something [that has already been decided]. Instead, we were able to shape decisions along with finance and the line teams.

What Worked And What Didnt

Bowick says most successful mergers happen between two like companies, and HP and Compaq had that. Both companies knew the lines of business, what our customers needed and what cost structure we were going after. As a result, we were able to move fast on decisions and then implement those decisions globally.

In retrospect, Bowick says one big thing she would do differently is to manage the organization design as it was cascaded globally. We ended up with too many parallel organizations, which complicated decision-making and led to an unaffordable cost structure in some lines of business.

There is active debate to this day on whether the HP/Compaq merger made sense from a strategic standpoint, says Bowick, but most people also say that the execution was done very well in terms of speed, thoroughness and meeting the companys goals of forming one new operating company.

Looking back, Bowick has a sense of satisfaction about her role in the deal. I know the things we did and the things we led in HR were critical to HPs success. To my knowledge, no global company of HPs size had ever integrated their organization, all HR practices and HR technology in less than 12 months. Many of us felt that it was one of the best projects and best teamwork examples of our career, she says.

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