Company sale: "You need someone who speaks the language of investors and HR"

Post-merger integrations (PMIs) following acquisitions are often tricky. It can happen that the workforce of the sold company does not want to make friends with the buyer - especially when it comes to organizational and corporate culture aspects. But what do you do if almost the entire HR department resigns? Our interim manager reports on an extraordinary challenge.

You specialize in restructuring HR departments in the course of company sales and post-merger integrations. Tell us about your last mandate.

Interim Manager: Yes, that was quite a special project. My actual task as Global Group Head of HR was to restructure the global HR department of a portfolio group in the private equity environment as a result of a merger. The US company had already sold its entire European business to an investor in 2020. It had not been possible to manage the branches from the USA because the corporate cultural differences were too great. Over the following two and a half years, the investor spun off several companies from the sold company. For these carve-outs, the finance and sales departments were restructured in order to make the company more attractive to potential buyers. The HR department was left behind. As a result of the restructuring, the entire HR department at the headquarters in Germany resigned. Only one employee remained to take care of Payroll.

How did this unpleasant situation come about? And what did you do about it?

IM: After the carve-outs, 150 employees in Germany and 500 people working in various national companies worldwide remained. The fact that the German HR staff had resigned was partly due to a failure to address their needs. On the other hand, there was a great deal of momentum during the carve-out phase - there was a lot of uncertainty. Because there was no communication with HR in this regard and the company's situation put a lot of pressure on the administrative staff, the company lost one person after another.

When I joined, I first had to get an overview: Which national companies have HR professionals? How long have they been there? What skills do they have? What exactly do they do? And does this even make sense? Only in the second step did I reorganize the HR department at the German headquarters. There was nothing left that I could have restructured.

How did this reorganization take place?

IM: First, we developed a new organizational structure: The head office in Germany sets the strategy, while the employees at the branches in Poland and Bulgaria act as local HR Business Partners. We expanded this concept as the project progressed. It always makes sense to have experts who are familiar with national law on site. It was also necessary to define roles and positions. We then derived job descriptions from this and recruited new employees - not only for the HR departments in Germany, Bulgaria and Poland, but also for the branches in Brazil, Japan and the USA.

The next important step was to bring HR closer to the marketing department and to professionalize communication. It is very important that the marketing and communications professionals work together with HR. This starts with the design and publication of job advertisements and ends with transparent internal communication. Especially in delicate phases such as carve-outs and restructurings, it is important to avoid whispers and communicate openly instead. This is the only way to avoid rumors, which in turn lead to uncertainty.

What happened next?

IM: Now that I had formed a new HR department, my team and I were able to take care of what HR actually has to do during a merger: manage and drive the integration. Whether this succeeds is always a question of how well the corporate culture and management fit together. In this case, the rifts were particularly deep. On the one hand, there were the companies that had been carved out of the traditional and highly hierarchical US group, which operate in the conservative energy sector. On the other side was the investor, who brought a lot of dynamism because he wanted to achieve success as quickly as possible, but also sustainably. My task was to unite both sides in organizational, structural and human terms without losing the respective corporate culture. To achieve this, I brought the second management level on board - in addition to the Group CEO installed by the investor, to whom I reported: the department heads.

Why was this measure important to you?

IM: You know, for a successful post-merger integration, the people have to go along with it. This was not successful here at first - as the loss of the HR department shows. It was extremely important for me to convince the department heads of my plan and my goals. They are key multipliers when it comes to winning over the workforce to your plan. As a sparring partner for the Group CEO and the investor, I was able to change a lot for the better.

What, for example?

IM: External HR professionals like me have to act as strategic business partners for such complicated PMIs. For example, we analyzed and redesigned all HR processes. We also aligned employment contracts, harmonized the remuneration systems and developed a talent management concept for the targeted development of employees. We have also introduced modern software that maps and supports all HR processes. Thanks to these and other measures, we have succeeded in increasing staff loyalty to the company globally - even though the investor insisted on cost neutrality. And then there were two works council committees in two of the Group's German companies. They were anything but cooperative.

So it was a complicated and tricky overall situation.

IM: Exactly. Unfortunately, such extensive change is often accompanied by resistance. To make matters worse, the US company had initially not handed over important personnel data. We did not have complete personnel data. In some cases, we did not know the history of the employees. And other master data was also not available or only incomplete. This led to the absurd situation that we, as the HR department, were unable to issue references or conduct feedback interviews. Without this data, our hands were tied.

That's why I can only appeal to companies: Get an experienced and competent person on board who not only has an entrepreneurial mindset, but is also close to management and a member of relevant steering committees. Why? Because employees are usually against selling the company. And this is where the dilemma begins: staff and the works council want to maintain the status quo, but investors want to sell the company at the best possible price. It is therefore primarily a question of the key business figures. The divisions to be sold must perform. A numbers-driven department such as sales often copes well with this. But not HR. It's usually not about KPIs, but about "people and culture".

That sounds like an insurmountable hurdle.

IM: With a person who mediates between the two camps, the hurdle becomes much lower. This person must speak the language of the investor and management so that they are able to translate their goals for the HR department. This is precisely why many investors today are pushing for external consultants to act as mediators and facilitators. I advocate human due diligence here: buyers should urgently consider whether the structure and corporate culture of the acquired company are suitable. It is also important: Who are the key employees? What skills and abilities do they have? What are they responsible for? And so on. This is already widespread internationally, but human due diligence has not yet really arrived in Germany.

What other advice do you have for companies to ensure that PMI is also successful in the HR area? But it is just as important to be able to present valid figures - from the HR organization, for example as an organizational chart, to important KPIs such as fluctuation and sickness rates, average age of the workforce, pension obligations, success rate in recruiting and so on. If you don't have this information to hand, you should compile it urgently and prepare it in such a way that potential buyers can do something with it. In the vast majority of cases, the result is that companies seek external help.

I see time and time again that "HR managers" do not understand the concerns of CEOs and investors and are therefore unable to provide the desired key figures. Interim professionals like me have a big advantage here: we come into the company to fulfill a specific mission. What counts is our mission. That's why we can - better than internal HR professionals - "sweep through with a wire brush" and transform the HR department in the direction of performance. In return, it is a must that I, as an external HR manager, stand unconditionally in front of my team and take responsibility - even in the event of failure. My people absolutely have to be able to rely on me. Because I demand a lot from a department that is normally all about feeling good.

At the end, do you have three tips for our readers?

IM: In principle, a PMI is always about three aspects: Structure, processes and digitalization. Buyers and investors expect me to tackle these aspects and bring about a measurable improvement. To achieve this, I need to know the vision and goals of my clients. And I need to have a good relationship with the HR team. If both are in place, nothing stands in the way of a successful restructuring of HR.

This interview first appeared in our theme special "Ways out of the crisis". It provides you with proven best practices and first-hand expert tips for reorganization, restructuring and turnaround. Download now for free!