With investors and customers looking in, a merger offers the chance to prove you can incentivize and unify a staff.On May 12, Jeff Hodnett was ready to run through a familiar drill. It was the third time in his four-month tenure as head of corporate communications for web-hosting company Navisite that he was about to take responsibility for coordinating the first contact his company would have with a new set of employees. Just the day before, the same set of workers was part of another company. Hodnett says that he has learned that springing into action early on, with an plan designed to give employees as much information as possible, is the best method to help integrate an acquisition. "We've had a plan for the last two or three (takeovers) that has been really successful," notes Hodnett. "It starts as a 30-day plan and then rolls out longer term. On day one, senior management is there for an on-site meeting at the company being acquired as a sort of 'all-hands' meeting. It is basically designed to introduce Navisite and explain how we see their company fitting into our longer-term plan." Change management has become a way of life for Navisite. Hodnett estimates that he has spent about 45% of his time working on internal communications for a company that is very much in transition. Once an internet highflier during the Nasdaq's salad days, Navisite's fortunes quickly changed. And with questions lingering about its ability to remain solvent, a company called ClearBlue Technologies bought a controlling interest in the firm late last year. Shortly after, ClearBlue consolidated its operations under the Navisite name, and is now using the company as its vehicle to continue a buying spree that has seen three acquisitions in 2003 thus far. Under its new management, Navisite appears to be making progress towards profitability. And it's shares - while nowhere near their highs of the internet's glory days - have jumped about 45% in the last 12 months. Easing employee angst Yet like much of the economy in recent years, the modest growth by Navisite owes much to cost-cutting, which can often mean job losses. Employee communications therefore becomes a vital function. Navisite's most recent acquisition, Interliant, was purchased out of bankruptcy. In these situations, Hodnett says, employees have often already been through significant professional tumult and need as much information as can be made available at the outset of the purchase. Communications at this early stage can be critical to laying the foundations of trust and of functional, long-term relationships. "One of the key elements of 'day-one' of our plan is letting everyone know that all decisions about employment and positions will be made by a set date - traditionally that's been about two to three weeks - and we stick to it," says Hodnett. "We have found that even though people are still not pleased about the possibility of being laid off, it eliminates the sense of lingering, which can really paralyze people. It can really have an impact on people coming to work every day not knowing whether that's going to be the day they find out whether they still have a job." Still, Hodnett says, people should not think that his concern for the impact on employees is wholly unselfish from a corporate perspective. He says that as Navisite transitions into a new era for its industry, it must prove that it's aggressive consolidation strategy can work seamlessly in real life. "I believe that the biggest thing is keeping everyone focused and moving towards the same goal," he says. "Because in the end, that's what everyone outside the company - in the industry and investors - is really looking at. They see these acquisitions and say, 'It makes great business sense, but can you integrate them?' Keeping employees focused and satisfied is a large part of that." This is one reason why PR and corporate communications is emerging as the natural home for employee relations, elbowing aside former rivals like human resources, according to many in the industry. Like other communications disciplines, such as IR, consistency of message is critical. Employees get information about their company from various other third parties - particularly the media - that are mostly dealt with through companies' PR functions, so it's important that employees receive the news from their employers first. "Management is now realizing that getting below the vision and values stuff is important, and getting into 'How we are doing as a company' is critical because employees are reading about it in the newspaper everyday," says Monica Oliver, principal at Monica Oliver Consulting. And she should know, having worked on employee communications at AOL Time Warner shortly after its mega-merger. "You can [either] leave it up to employees to interpret [the news] for themselves, or you can help them understand it," Oliver adds. "This was one of the biggest challenges that we had in early days of AOL Time Warner. Things would come out (in the media) and employees knew nothing about it until they had read the paper that morning." Maril MacDonald, industry veteran and founding partner at internal communications consultancy Matha MacDonald, says that changes in how senior management sees its own job have also resulted in shifts that make corporate communications the natural home for internal relations. "About 10 years ago, the prevailing management theory was about control and processes," says MacDonald. "In this scenario, the controllable company processes, like HR, law, auditing, and accounting, were front and center. Now, the management literature and books have shifted their focus onto leadership and leading people. Well, leading is a communications discipline, because I have never seen somebody lead someone else without communicating with them." Integrating internal relations MacDonald's view is backed up by industry recruiters who say that companies are coming to them looking to hire full-time employee communications experts, which almost always now report into the corporate communications function. "Companies are coming to us looking for people that can put together an internal communications strategy that dovetails with media relations, IR, and public affairs, so that the company's messages are delivered consistently across audiences," says Maryanne Rainone, a recruiter at Heyman Associates. "Those companies that used to put internal communications into its own silo are the ones that are realizing that the employees may have been getting mixed messages and are now looking to bring one message to all audiences." Hodnett says that's how he sees his job when he's wearing his internal communications hat at Navisite. He doesn't, however, play down the difficulty of the task. "Our plan is basically built around letting everyone know that there is a goal and that there is plan for the direction of this company," he says. "What we do is just try to relay that to all of our employees. That's it. I'm not trying to pass this off as rocket science." ----- Putting a value on internal communications While internal communications, much like the rest of the communications industry, is bedeviled by the problem of proving ROI, recent data on employee satisfaction and its correlation to shareholder value adds further credence to Navisite's Jeff Hodnett's assumptions about keeping employees focused and satisfied. According to a 2002 survey by staffing firm Watson Wyatt of 12,750 US workers at all levels and in all major industry sectors, companies with high levels of employee trust outperform other companies in returning value to shareholders by 186%. (Shareholder value was defined as appreciation of stock price over three years plus dividends.) Worryingly, the same survey found that only 31% of employees feel their companies communicate effectively, and just 43% say their companies effectively manage business changes such as restructuring, downsizing, merging, expansion, and growth. And when asked to rate their companies' ability to help employees establish "line of sight," or make connections between their jobs and business goals, only 52% gave their companies favorable marks, compared to 65% two years ago. Yet while correlating data may be compelling, proving any concrete "cause and effect" of proactive internal communications can be daunting. Some industry veterans say that shifts in the overall structure of the economy - from one based on making things to one based on providing services and ideas - has made senior management in much of corporate America quicker to accept the importance of employee communications. "Internal communications has been strongly headed in the direction of driving bottom-line performance in recent years, and I think perhaps the economy has accelerated that move," says Maril MacDonald, founding partner at internal communications consultancy Matha MacDonald. "The reality is that somewhere along the line, management teams have begun to actually believe that their people are their greatest asset. I have been in this business 20 years, and 20 years ago I was saying it - but nobody really believed it. Now, I think it has come to be believed because as the economy has shifted, and it has become less about hard assets and more about ideas and knowledge, people have really started to matter."