Role of HR in Mergers and Acquisitions (M&A) - Emerging HR Trends - Part V

In continuation to my previous post on emerging HR trends, I intend to touch upon Role of HR in Mergers and Acquisitions now.
The past few years have seen a steep increase in cross-border merger & acquisition (M&A) activity - Vodafone’s $12.9-billion acquisition of 67% stake in Hutchison Essar; Tata Steel’s $12-billion buyout of Corus; and Hindalco’s $5.9-billion Novelis Inc (Canada) deal. However, despite the synergies and competitive advantage that M&A offer, they can also have a disruptive effect on organizations if not managed with utmost attention and care. And the key to successful integration and change management is carrying the people along—both in the acquired and acquiring company.

Whether your organization is about to undergo a merger, acquisition or is just rethinking strategies, HR managers need to firmly place themselves as leaders in the organization. Success of an M&A depends on the people driving the business and surely, all managers have a part to play in that. When it comes to maximizing the potential of a merger and acquisition, HR needs to be up there, working in conjunction with senior management.
HRM is central to what an organization does but unfortunately, HRM has not always been included when it comes to strategy development and M&As which results in the prime focus on financial, economic and commercial aspects of the deal, and often only as an afterthought, on people, though they are the greatest assets of an organization.
HR should be involved in every part of an M&A process, particularly in the early stages. HRM should play a more strategic role in the organization. The new role from them is to offer distinctive value to every part of the business process so that the unique capabilities of employees can be harnessed by the Organization. Similarly, this applies to each part of the M&A process. Be proactive. Be a coach. Be there.
Looking at the steps involved in a M&A process, let us see how HR can add value at each step.
 
Pre-deal
  • Spotting problems that may be overlooked by other members of the management team 
  • Assessing people, organization and cultural fit. 
  • Educating executives about possible risks 
Due diligence
  • Recognizing that there is more to due diligence that the bottom line issues, such as benefits and employee pay
  • Looking at the impact of learning and development
  • Advising on organization design and development and Recruitment and retention in the integration process  
Integration
  • Determining the culture/vision of the new company
  • Contracts of employment
  • Performance management issues
  • Looking at leadership commitment and talent
  • Confirming people's expectations - retention, cost and cultural fit
  • Looking at techniques that work well in both operations and selecting the most effective ones that will work across the board
Implementation
  • Alignment of HR policies and practices
  • Advising senior management on people issues
  • Reward schemes 
  • Education 
  • Effective Communication
M&A's fail due to ineffective internal communication. Communicating regularly to staff will boost confidence, improve morale and prevent rumors from running wild. An effective communication plan, implemented at a very early stage, certainly makes a difference when it comes to reassuring employees and managing uncertainties.

Dealing with Redundancies
There is a possibility that after M&A, not all staff will be able to or want to stay in the new organization. It is for HR to identify key resources and plan a strategy to retain them. The effort should also be on utilizing employees on bench by moving them cross functionally, if possible else a human approach should be applied while planning their exit. A softer approach works best in achieving trust and boosting morale in periods of transition and downsizing. To facilitate transition some of the prerequisites are honest and proactive communication, good listening skills, sensitivity to employee needs

Hence HRM contribution to mergers and acquisitions, include Corporate and HR strategy, General strategy, Business performance, Change management, Corporate governance, Corporate social responsibility, Ethics, Human capital, Knowledge management & Organization development.

Mergers and acquisitions (M&As) are fraught with difficulties, many of which relate to HR issues, international M&As being even more problematical. When engaging in cross-border deals or acquiring an organisation with operations in many countries, legislative frameworks, ways of doing business and cultural differences will all provide hurdles not found to the same extent in single-country deals and need to be handled with more sensitivity and knowledge of law of land.

6 comments:

  1. You are quite right about the vital and challenging role HR should be playing in this atmosphere of too-frequent and sudden mergers and acquisitions. Unfortunately, it often fails to fulfill its required role of properly advising higher and line managers in how to properly manage their employees in times of tramatic change in the organization. For instance, in my concept of the four tracks of employees, one of the tracks, which normally can be the most dependable and productive of all of the tracks, can be torn to pieces by impending or on-going change and require especially careful treatment by their supervisors. It is up the the HR function to fill the usual voids in people-handling skills and insights on the part of many line supervisors and managers. Unfortunately, HR's all-too-often unfavorable reputation within the organization prevents it from having a credible image as an internal consultant and makes it difficult for the HR function to rise above the status of a fireman constantly occupied with putting out recruitment and staffing emergencies.

    William Hughes

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  2. You have shared a nice article which is very much relevant to current business trend of Mergers and Acquisitions (M&A).

    Below is my understanding and short note on the HR issues that apply to M&A type situations and Handling of the Same

    Overall Due Diligence of an Organisation is a necessary step in the process of determining whether the target being considered for the M&A is worth merging with or acquiring. The Due Diligence of the HR function would amongst others, at a broad brush level, involve evaluation of the following:

    - the human resources practice of the organization involved
    - the cost of amalgamating the HR practices
    - the level of complexity in amalgamating the HR practices
    - the issues and opportunities perceived in the process of amalgamation
    - the implementation issues

    Following on from this, the personnel function will play a critical role in the following -areas:
    . Understanding the stressors that will come into play in the specific situation in terms of employee groups & profiles during the amalgamation process
    . the issues arising from the organization structure
    . the communications, responses and fair play mechanisms required to be put in place to handle the physiological and psychological reactions that will arise as a result of the stressors

    A proper understanding of the issues involved in the specific context and industry focus (i.e. IT) will be critical to address the following and for achieving a successful outcome.
    1) Primary corporate focus and momentum is maintained (Corporate objectives and goals should not get derailed or lost sight of in the process of handling the merger or amalgamation)
    2) Productivity is maintained and enhanced (Not only should it not decrease but the sum must be greater than it's parts)
    3) Morale to be maintained (Can be achieved by crossover mechanisms and good communications)
    4) Loyalty to be maintained (See under Morale)
    5) Turnover to be minimal (There will always be a certain percentage of employee of mis-match and turnover in the process. Steps need to be taken to ensure that the right talent is retained and encouraged to stay.)
    6) Absenteeism to be minimal (This will to a large extent depend on speed with which the factors relating to Morale and Loyalty are implemented)
    7) Termination lawsuits to be minimal (Care needs to be taken that the letter and spirit of the law are maintained in the process of handling terminations)

    Collecting the required information related to HR and comparison between both organizations will be vital for decision making. Whilst standard methodologies are available, these will have to be specifically tailored to the situation at hand to achieve results.
    ===========
    - Rajeev Ranjan

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  3. Thank you for initiating this very important topic. For the past 15-20 years, it has been known that As fail to meet their financial targets in the first two years because decisions regarding the acquisition have usual,y been taken by financial leaders, without due consideration of the cultural fit and people issues that will eventually affect the financial outcomes.

    Cultural due diligence by professionals who can assess and foresee the possible people issues is critical. There are many easy if minimizing the loss of talent, the fears, the low morale and lack of trust that can occur after an acquisition. Creating an atmosphere of candid sharing of facts (preventing the rumor mill), having an ombudsperson, having a Q&A web-site, assessing people aspirations, fears and competencies and making clear decisions about the new direction and culture and about which personnel will stay is very important, among many other things, We have seen the best results when we have been called in (by a leading Indian company) to really assess the issues and prepare people on both sides of the ocean, even before bringing the people together.

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  4. excellent educative,perceptive site...


    Please Join:
    http://groups.yahoo.com/group/EmpoweringPeoplePower
    http://www.linkedin.com/groups/Whizible-Advance-Service-Management-Beyond-4082706

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  5. Fantastic....

    http://thinkbeyondpossibilities.blogspot.in/

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  6. because of ignorance of these issues only, pilots' strike at Air India took place. this proves that even in M&A, HR issues can not be ignored.

    ReplyDelete

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