Ep. 51 — Crucial HR Moves that Make or Break Mergers with Lora Cheatum

Welcome to the "Show Me The Way" podcast with David Seitter

In this episode of "Show Me the Way," Dave and guest Lora Cheatum, the recently retired SVP and Chief HR Officer at KC Southern Railway, dive into the complexities of HR integration during mergers and acquisitions. They give insights into how to effectively manage cultural integrations and operational synergies, the critical phases of decision-making, closing day preparations, and post-merger strategies.

Ep. 51 — Crucial HR Moves that Make or Break Mergers with Lora Cheatum

Lora begins by sharing her extensive career journey. Over her 25-year HR career, she has navigated numerous corporate changes, including mergers, acquisitions, divestitures, and even bankruptcies.

The Dual Role of HR in M&A

Dave prompts Lora to discuss the specific roles HR plays during the acquisition of a business. Lora explains that HR’s responsibility is to ensure a smooth transition and integration. She emphasizes that the integration of people is as crucial as operational synergies, and that effective communication with employees is key to achieving success.

Due Diligence in M&A from an HR Perspective

Lora shares insights on the due diligence process from an HR standpoint. In heavily regulated, publicly traded companies, the information that can be shared is limited. However, ensuring cultural and operational alignment through methods like cultural gap analysis is essential. This process involves surveying employees from both merging companies to identify similarities and differences, helping to foresee and manage challenges.

Managing Cultural Integration

Culture is often cited as a critical factor in M&A success. Lora notes that cultural clashes can lead to failed transactions and decreased business performance. Recognizing and transparently addressing cultural differences can mitigate these risks. Lora shares an example of a successful cultural integration process involving a thorough cultural gap analysis that helped her understanding and managing integration challenges effectively.

Communication and Transparency: Cornerstones of Successful M&A

Lora cannot overemphasize the importance of communication and transparency. She stresses that employees are the greatest assets in any company, and their concerns need to be addressed clearly and promptly. Sharing relevant data and having open conversations about the future can prevent uncertainty, which often leads to insecurity among employees.

Decision-Making and Day One Post-Merger

Dave and Lora discuss the critical decisions HR professionals need to make leading up to and immediately after closing a deal. Lora recounts examples from her experiences, including a successful transition spinning off Yum! brands from PepsiCo. The new company made a significant effort to celebrate the change and ensure employees felt valued and integral to the new organization, setting a positive tone from day one.

The Sell Side vs. The Buy Side

Lora explains the nuanced differences between managing M&A from the sell side versus the buy side. While the sell side focuses on advocating for the outgoing employees, the buy side must assess the skills and culture of the incoming employees to ensure a smooth integration. Both sides, however, must rely on data-driven decisions to manage the transition effectively.

The Long-Term Integration Process

Integration is a lengthy process. Lora emphasizes that mergers and acquisitions can take years to fully integrate and that maintaining a positive mindset throughout is crucial. Viewing change as an opportunity rather than a hurdle can lead to personal and professional growth.

Key Takeaways for HR Professionals and Business Owners

Lora wraps up the episode by summarizing the key points:

1. Transparency: Be transparent about what you know and what you do not know.
2. Communication: Over-communicate and maintain open lines of dialogue with employees.
3. Positive Mindset: Approach the M&A process with a positive and proactive attitude.

 

Lora adds that HR professionals must put themselves in the shoes of the employees to understand their concerns and focus on building a new, cohesive culture.

 

 

 

 

To reach out to Dave for advice or consultation, please visit www.davidseitter.com or email him at dseitter@spencerfane.com

 

Disclosure

This podcast is provided for educational purposes. It does not constitute legal advice and is not intended to establish an attorney-client relationship. The recommendations contained in this podcast are not necessarily appropriate for every individual or business. In determining the best course of action, business owners should consult with an attorney on their distinct circumstances.