It all made sense to Bryan Bedford. He was confident that the move Republic Airways Holdings Inc. had made to buy Frontier Airline Holdings Inc. and Midwest Air Group Inc., acquisitions meant to help Republic remain competitive in the volatile airline industry, would result in a smooth cultural integration.
After all, each of the companies had a pretty strong culture before the move was made.
“Our assumption was that it would just continue,” says Bedford, chairman, president and CEO at the 10,340-employee Republic Airways. “We weren’t doing anything to change it negatively, therefore it shouldn’t be negatively affected. But that’s not what happened. What really happened is the management team was waiting for us to tell them how the new regime was going to work.
“We were assuming that by not telling them to change anything, they would continue to do things the way they always did it. And essentially what happened was things just stopped.”
Unfortunately for Bedford, it wasn’t the first miscalculation he and his team had made in the acquisition of Frontier and Midwest. Republic’s team had also assumed that one of the company’s technology platforms, either Frontier or Midwest, would be suitable to serve as a template for the combined entity.
“But as it turned out, neither one was robust enough to do the work for the consolidated airline,” Bedford says. “That was a huge distraction and a fairly substantial setback for us in the integration process.”
Faced with a group of employees uncertain about their future and a question about how to integrate different technologies, Bedford had a lot of work to do to keep this important transaction on course.
“We knew there was going to be some pain due to these technology limitations we were saddled with,” Bedford says. “The question was: Could we retain loyalty while we worked through this transition process?”Get the word out
Bedford began by being up front with his people about the unexpected problems with integrating the technology platforms of the two companies that Republic acquired.
“The long-term objective doesn’t change,” Bedford says. “The timeline and perhaps the path to get there changes. So you need to reorient your short-term thinking in order to work around, in this case, the technology obstacles. You have to communicate that consistently and strongly to your front-line employees so they understand why it is their jobs are harder to accomplish.”
Your goal is not to explain every last detail of the challenge you’re facing. That will only create more confusion.
“Getting people to understand detailed technology challenges, frankly, we just avoid it,” Bedford says. “We don’t go into the nuts and bolts of what’s the bitmapping process to move PNRs from platform A to platform B. We don’t feel we have to get into the esoteric computerese of why the technology migration is more challenging or more daunting. We simply have to tell them that it is, and, ‘Here’s what we’re doing to overcome it, and here’s the timeline.’”
Bedford’s goal was simply to explain that because of the technology integration issues, it was going to take a bit longer to finish that part of the deal with Frontier and Midwest. But that wasn’t going to be easy either.
“We have 11,000 employees but at over 74 different locations,” Bedford says. “Probably closer to 5,000 of our employees are flight crews that are on 1,600 flights a day flying all over the country. It’s not like you could just call a team meeting and gather everybody in the conference room.”
So Bedford put together a series of opportunities for employees to hear about what was being done to resolve the problem.
There were group meetings attended by 150 to 200 people each that were recorded for rebroadcast on the website.
“Some of those podcasts were interactive, and we actually did open phone lines so people from across the country could listen in to the presentation and ask questions and everyone could hear the answers,” Bedford says. “We stored the podcasts on the website so employees that couldn’t listen to it real time could listen to the exchange and understand what was going on.”
Bedford also made trips to the company’s new locations in Denver and Milwaukee and continued his weekly letter to employees. The goal was to provide a multitude of opportunities for employees to get information.
It’s important that you find various ways to communicate, because your people will respond to it in different ways.
“If you put 10 people in a room and they listen to the exact same presentation, chances are they are going to walk out with 10 different assessments of what they heard,” Bedford says. “People just hear and process information differently, even if it’s identical information. Our goal wasn’t that people should walk away with the exact same understanding. Our goal was to present everybody with a consistent and transparent update with how we were progressing with the goal of getting through this short-term technology challenge.”
The more methods you use to talk to your people, whether it’s town-hall meetings, newsletters or even social media, your goal is to make it a challenge for your people not to hear your message.
“I’m not suggesting that they get it on the first go-around or even the second or the third,” Bedford says. “But if you continue to have this open dialogue and if from the top all the way down to middle management, if they are speaking consistently, sooner or later, they are going to figure it out.
“Then they’re out in the field saying, ‘Look, I know what these guys are trying to do. You may not get it, but I get it. Just be patient. We’re moving in the right direction.’”Get others involved
The actual process that was undertaken to resolve the technology issue and the resulting barrage of communication also played a role in fixing the cultural confusion that was hampering the company that was trying to come together.
“While we had this thing called technology, in the background, were still all of these cultural dynamics and something as simple as trust,” Bedford says. “You may be the new owner, but the employees still don’t know you from Adam. They have no basis to trust you. It’s not that they don’t trust you, but you have no track record with them on what you can say.”
Employees were confused about what they were supposed to be doing and Bedford needed them to start working together as one cohesive unit.
“We had to get the management team talking and functioning together and build the management team up so they could actually continue to run the business and then push that communication down to the front-line employees,” Bedford says. “So we pulled together some management committees to just look at the three different companies in terms of their policies, procedures and operating practices and really decide, ‘Let’s just pick the best of the best and have everybody do it the same way.’”
Your approach is critical to making this work. Even if you’re the one acquiring the other company, if you come off like you’re dictating how things are going to be done, you’re just asking for trouble.
“If you happen to be an employee of Frontier and your manager comes out and says, ‘Hey, we’re changing procedures,’ your manager can respond one of two ways. They can say, ‘Republic told us to do it this way.’ Or they can say, ‘Well, we sat down as a group and looked at the three different practices and we all agreed that this is the better way and here’s how it’s better.’ You can get management to buy in to the changes and sell the changes and understand that employees will ask questions and deserve thoughtful answers as opposed to, ‘Well, this is how Republic told us to do it.’”
It’s another step in bringing two or, in this case, three, different cultures together into one. That’s not something that typically happens on its own.
“The expectation was that they should just automatically behave the same way we behave,” Bedford says. “Not understanding the psychology of an acquisition, the management teams at these companies were fearful of how they could operate.”
It may seem obvious to you that you want the managers of the company you’re acquiring to continue to act like managers, but in the case of Republic, it wasn’t.
“We had to reassure them that they were in fact part of the team,” Bedford says. “We very much valued their contribution. They needed to manage and lead directly as opposed to waiting for us to tell them what to do.”
This effort takes time and Bedford says it has still hit a few speed bumps along the way.
“We’re clearly spending a lot more one-on-one time with employees to answer their questions so they understand that we are listening to them,” Bedford says. “We want them to see some measured change based on their feedback.”
Bedford says it’s a matter of building the trust and respect that everybody needs to truly feel part of a team and not like an outsider. That teamwork is important for the team itself but also for the way your employees interact with customers.
“Our employees are already working hard,” Bedford says. “But working hard is different than being passionate about what you do. A passionate employee is going to create that emotional connection with customers that we desire.”Focus on your employees
It hasn’t always been easy, but little by little, the merger of Republic, Frontier and Midwest is working out. The company ended 2009 with $1.6 billion in revenue but already had $1.3 billion through the first six months of 2010.
“We’ve been putting up record load factors for the last five months, so it feels like customers have been sticking with us,” Bedford says.
The technology problem is nearing resolution and Bedford says the company’s cultures are continuing to come closer together.
The most important lesson he takes from the experience is that you need to focus on your employees first, even if it comes at the expense of your customers.
“Naturally our inclination is to focus on the customer first,” Bedford says. “I’d probably flip it and say focus on your employees first. If it means delaying your customer initiatives by 90 days, it’s probably 90 days well spent. Just get to the acquisition and start immediately focusing on answering the why question to the employees: Why are we here? How did we get here? Where are we going from here?
“One of the biggest mistakes we made in the acquisition process was we became so focused on the customer experience, so focused on fixing the technology challenges that we knew were leading to a bad customer experience, that the employee emotions and psychology and this nebulous concept of trust, we did not spend the time we probably should have to develop that trust.”
It’s a lesson learned that Bedford believes will be valuable going forward.
“When people understand the why of what we’re trying to accomplish and why we’re trying to accomplish it and why it’s so important that we do it better than others, they get pretty jazzed up about it,” Bedford says. “But then as a management team, you have to deliver the why.”
How to reach: Republic Airways Holdings Inc., (317) 484-6000 or www.rjet.com