Tom Sondergeld chuckles a bit when he’s asked why Walgreens Boots Alliance has had so much success in its M&As when so many others have failed.
“A lot of companies involved in M&As bring HR in at the end of the process and you end up with a mess,” said Sondergeld, Vice President of Global Benefits and Mobility for Walgreens Boots Alliance. “We start with an integrated team that involves HR right at the inception stage. As authorities in policies, culture and technology, we are always at the table, and it has always been accepted that HR was going to be a very big part of any M&A.”
Walgreens Boots Alliance is a true giant of the global retail industry, with 415,000 employees spread across 25 countries and more than US$131 billion in revenues. In 2018, the company replaced General Electric on the Dow Jones Industrial Index.
It is also a company built primarily through M&As with other retail chains that were themselves the creations of a series of M&As.
Walgreens became the biggest retail pharmacy company in the United States through a series of acquisitions, including the billion-dollar purchase of pharmacy and convenience store chain Duane Reade in 2010. In 2014, Walgreens completed an acquisition of Swiss-based Alliance Boots, making it one of the largest companies of its kind in the world. The company’s growth-by-acquisition continued in 2017 when it acquired Rite Aid, a Fortune 100 company that operates more than 2,500 stores across the United States. At the same time, Walgreens Boots Alliance has expanded into areas like pharmaceutical wholesale, providing medicine, medical supplies and other healthcare products to more than 110,000 pharmacies, health centers and hospitals.
Employees will always be wary about a big M&A deal, and the only antidote is information, communicated clearly and quickly throughout the organizations involved.Throughout all of this growth, Sondergeld said the family-owned company has maintained its core values even as the retail industry has gone through seismic changes. Those values include examining how big transactions and changes will impact people, as well as being willing to accept change.
“We are fortunate that we have always had leadership that wants to change,” he said. “Walgreens is a 110-year-old company, and its still family-owned. But through it all, the top of the company has always had an appetite for change.”
Companies built on M&As have to constantly keep an eye on culture and ensure they are effectively communicating decisions down to the front lines at the store level, Sondergeld said. That can be difficult when the companies coming together have different approaches to business and different strengths and weaknesses.
In the case of the Walgreens Alliance Boots merger, it became clear early on that the three entities involved had different legacies. “Walgreens was very strong in pharmacy, while Boots was very good at retail. The common ground for both companies was that both were family-owned and corner-store built. There was a bigger difference with the culture of Alliance, and it really took us some time to find that place where we’re all working together, all on the same page.”
Merging cultures is certainly a top-of-the-house responsibility, but HR can play a huge role in making sure communications make it all the way down to the front lines. Sondergeld noted, however, that the company also tries to give its stores a degree of independence to take on challenges and find solutions that make sense.
Sondergeld recalled a store manager from Texas expressing concerns about how much time his staff was taking to escort customers to a public washroom in the store that was behind a code-locked door. By policy, staff couldn’t give customers the code, so they had to walk each one to the door and open it up. The store ultimately asked permission to remove the door and just let customers come and go as they please.
“It was a simple thing, but the staff was so relieved when they removed the door,” he said. “It was also a relief to all of our people to know that change doesn’t always have to come from the top.”
Over his nearly eight years with the company, a period which has seen him play a major role in several major M&A transactions, Sondergeld said he has learned many important lessons about how a company can succeed in merging multiple cultures and workforces.
Get HR input right from the inception stage of any M&A planning. Sondergeld said that the only way to ensure a seamless integration of cultures and employee groups is to get top-level HR input from the very beginning of deliberations. Without HR at the table, organizational leaders will not be able to fully plan for the rough spots that inevitably come from this kind of transaction.
HR needs to become more strategic and less transactional. Far too many HR professionals are focused on the nuts and bolts of benefits and programs. These are important, to be sure, but without strategic thinking, HR cannot contribute to M&A planning, Sondergeld said. “You need to be able to think long term, think strategically to help everyone see the impact that an M&A has on human capital.”
Agility is a key element in making sure leadership fully communicates decisions to those on the front line. Employees will always be wary about a big M&A deal, and the only antidote is information, communicated clearly and quickly throughout the organizations involved, Sondergeld said. “This is a challenge for HR, which is typically not very agile. We have to learn to develop and deploy policies quickly.”
Embrace data and a willingness to try new things. HR is traditionally a staid profession that has had trouble innovating and has not used data to drive decisions, Sondergeld said. In an M&A environment, that simply has to change. “We don’t think of ourselves as data experts; we think of ourselves as people experts,” he said. “But to be able to lead a company where it needs to go, we’ve got to become comfortable with data to justify our decisions and prove our arguments.”
In the end, the challenge in any M&A is to identify the culture you want to create, move quickly and decisively to communicate that culture to the organization and be willing to make adjustments as you go along.
“Our success has largely come from the fact that we develop global policies and get them in place a lot faster than most organizations,” Sondergeld said. “These are the policies that define the culture. We’re always willing to adapt it and let it grow, but we’re always very clear about what we want to happen. That is essential.”