The role of HR in Mergers and Acquisitions
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. The success of an M&A depends on the people driving the business, and surely, of all managers, HR 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.
HR Management needs to be proactive. 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 is to offer distinctive value to every part of the business process so that the unique capabilities of employees can be harnessed by the office. Similarly, this applies to each part of the M&A process. Be proactive. Be a coach. Be there.
Looking at the steps involved in an M&A process, HR has value to add in many areas:
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 than the bottom-line issues such as benefits and employee pay, looking at the impact of learning and development, advising on organization design and development, 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, recruitment.
Effective Communication: M&As 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, should make all the difference when it comes to communicating with and reassuring employees.
Dealing with Redundancies: No doubt, with an M&A, not all staff will be able to or want to stay in the new organization. Managers who showed "softer" skills work best in achieving trust and boosting morale in periods of transition and downsizing. These "softer" skills include: honest and proactive communication, good listening skills, sensitivity to employee needs, an ability to illustrate the need for change despite the pain it may cause to some, an eagerness to offer advice e.g. job swap, new career path, etc.
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.
HRM's contribution to mergers and acquisitions includes:
Corporate and HR strategy
General strategy
Business performance
Change management
Corporate governance
Corporate social responsibility
Ethics
Human capital
Knowledge management
Mergers and acquisitions
Organization development
When going through M&As, organizations usually focus primarily on the financial, economic, and commercial aspects of the deal, and often only as an afterthought on people. Contradictory really, as most senior executives recognize that people are their greatest asset, but they just seem to overlook this mantra in the heat of a deal.
The range of key issues that HR needs to address if the chances of success are to be optimized include:
Understanding, prior to embarking on acquisition, the strategic rationale underpinning the deal, together with the external constraints and opportunities
Ensuring that cultural due diligence is carried out prior to a deal so that effective integration programs can be implemented immediately post-deal
Moving quickly but fairly in the appointment of new management teams at all levels in the business and dealing humanely with the casualties
Identifying realistic synergy targets and exercising caution in estimating both the timeframe and the potential cost of redundancies
Ensuring that due diligence provides comprehensive data on all aspects of reward, and that the costs of harmonization or 'pragmatism' are factored into the deal
Establishing early a flexible project management process and ensuring that it has the necessary time, resources, and processes to manage the transition
Communicating consistently, truthfully and when necessary
HR being integral to the M&A process from the outset as a credible business partner offering practical, financially astute, and timely solutions.
Areas of HR policy identified as central to the successful handling of international M&As were:
- Pay and benefits
- Management selection and development
- Harmonization and integration
- Employee communication
- The pace of change.
Mergers and acquisitions (M&As) are fraught with difficulties, many of which relate to HR issues. And international M&As are even more problematical. When engaging in cross-border deals or acquiring an organization 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.
Regards,
LEO LINGHAM