A merger takes flight: The LAN and TAM merger from an HR perspective

The challenges of bringing together two large companies are endless. Just ask Debbie Hernandez, a veteran at LAN Airlines and vice president of Human Resources and Administration at the merged airline created when LAN merged with TAM.

How HR executives manage the integration process begins long before a deal is finalized, she said at WorldCity’s HR Connections event on May 17, and can set the stage for a successful future.

WorldCity51713 1 of 3Debbie Hernandez of LATAM: Propers steps must be taken before mergers begin. Photos by Carlos Miller

The merger made sense for a number of reasons, she said. The two airlines were similar in size, based on revenues and fleet size. LAN was a family-run, Spanish-speaking, Chile-based airline that had spread to neighboring Latin American countries. TAM was a family-owned Portuguese-speaking airline that was strong in Brazil. Overlap was not a significant issue.

One of the first steps came when each firm hired a top-shelf consulting firm to pay attention to their client’s interests. The airlines also created a “clean team” that served as a go-between for the two airlines. Communications outside the established channels were limited.

It seemed interminable but eventually the airlines gained approval from their respective governments and the merger moved forward with integration efforts.

The lengthy process was familiar to other HR directors attending the meeting.

Said Level 3’s Monica Garcia, in discussing the acquisition of Global Crossing, “ started with consultants in 2008.” The “official acquisition was Oct. 4, 2010.” The time it takes to close a merger becomes even longer when two firms operate in multiple counties, and the new venture needs approval from each government where it plans to operate.

Once the two human resources departments can speak and work together freely is when the bulk of the work begins.

In the LATAM merger, the initial challenges included finding the best way to communicate in a company with tens of thousands of employees strewn across several countries.

Even simple, everyday procedures such as “meeting etiquette, being on time, how to begin a sentence in an email,” had to be considered, Hernandez said.

“I’m from Mexico and it’s pretty polite and after some chit-chat, you go into the conversation,” she added, recounting how she had to adjust to the Chilean style. “In Chile, they’re very straightforward.”

A more complex decision: Language. The new company, now with Spanish and Portuguese-speaking employees, decided that all meetings would be held in English.

We “observed interactions with employees. The Brazilians spoke Portuguese and the Chileans spoke Spanish,” Hernandez said. “Then, when you send an email at the end of the meeting, no one can agree.”

While human resources executives will sometimes focus on relaying corporate values or high-level strategies and goals to the rank-and-file workers, sometimes it’s little changes that affect staff the most.

It could be new computer systems. “It could be how you fill out a voucher,” said Pena Belkis, vice president of human resources for Alcatel-Lucent in the Caribbean and Latin America. “It has a tremendous impact.”

WorldCity51713 1 of 1Pena Belkis: The little changes are just as important as the big changes

The main goal for LATAM’s human resources team both after the merger and in the current moment is to relay an emotional message to employees to get everyone on the same team.

“From a social point of view, the most important thing is to build a system together,” said Carlos Forlenza, managing director for the European Institute of Social Capital, an event sponsor, “because if you work alone on the values without a system or framework, you lose the values.”

Hernandez said the airline is looking to build the new company by discuss how the merger was an opportunity for both companies to grow in markets where they weren’t previously operating.

“We wanted to share that message first,” she said. “Now, together, we are stronger, we are better and we complement each other.”

Moreover, they’re doing it using the stories about how both airlines began as family businesses with members that are still involved.

“They were our movie stars, our celebrities. We started with videos using Captain Rolim, the founder of TAM,” Hernandez added. They were shot in locations that were close to the airline’s heart, such as one of its original hangars in Brazil.

On the LAN side, the human resources team looked to longtime employees, including one that worked in the passenger division for more than 50 years, to tell their stories.

“We have 15 employees who’ve worked for us between 30 and 50 years and these people have great histories to share,” Hernandez said. “All of this was to connect emotionally.”

WorldCity51713 3 of 3Lorena Keough: Business opportunities available for companies that can help ease mergers

While Hernandez and others said bringing two companies together culturally is an ongoing challenge that’s key to finding success, it might also create a business opportunity for the entrepreneur that can tie the two together.

“Multinationals are going into Brazil and looking to buy solid companies,” said Diversified Search Managing Director Lorena Keough. “All of the numbers make sense but most of the kinks are cultural, somebody could develop a great consulting practice out of it.”

HR Connections is one of six event series hosted by WorldCity. HR Connections is sponsored by the University of Miami School of Business, Diversified Search and the European Institute of Social Capital.