The post liberalization period was of mergers and acquisitions and still it is continuing as a strategic driver for market dominance, geographical expansion, leverage in resource and capability acquisition, competence, adjusting to competition. M&As are strategic alliances. People Management plays a critical role in M&A. People issues like staffing decision, organizational design, etc., are most sensitive issues in case of M&A negotiations, but it has been found that these issues are often being overlooked.
The ability to succeed in a merger depends entirely on the people who are driving the business - whether they have creativity, capacity to innovate and ability to execute, and more importantly, whether they can do these things collaboratively. To ease the merger transition and make sure the pieces fit together as seamlessly as possible, the HR should take the initiatives in management, recruitment, structure, retention, and managing cultural change. In a merger, the employees should be put in a position to see easily that there was value in their daily work lives. It is more important for the employees to be able to say that they understand why this is happening. To achieve this understanding in the employees, the company’s HR executive minimize their conventional functions as administrators and payroll experts in favor of more proactive roles as coaches and profit consultants.
M&As are strategic alliances. In a merger, two companies join together and create new entity. In an acquisition, one company acquires sufficient shares to gain control of the other organization.
HR Issues in Mergers & Acquisitions:
People issues like staffing decision, organizational design, etc., are most sensitive issues in case of M&A negotiations, but it has been found that these issues are often being overlooked.
Before the new organization is formed, goals are established, efficiencies projected and opportunities appraised as staff, technology, products, services and know-how are combined.
# But what happens to the employees of the two companies? How will they adjust to the new corporate environment? Will some choose to leave?
# When a merger is announced, company employees become concerned about job security and rumors start flying creating an atmosphere of confusion, and uncertainty about change.
# Roles, behaviors and attitudes of managers affect employees’ adjustment to M&A.
# Multiple waves of anxiety and culture clashes are most common causes of merger failure.
# HR plays an important role in anticipating and reducing the impact of these cultural clashes.
# Lack of communication leads to suspicion, demoralization, loss of key personnel and business even before the contract has been signed.
# Gaining emotional and intellectual buy-in from the staff is not easy, and so the employees need to know why merger is happening so that they can work out options for themselves.
# Major stress on the accompany merger activity are: -
* Power status and prestige changes
* Loss of identity
* Uncertainty
# Unequal compensation may become issue of contention among new co-workers.
Managing HR Issues in M&A
There should be a clear and unambiguous communication between the new management and employees.
To manage organizational stress, establish performance criteria, identify who will stay and who will go, create a new organizational structure and assume the leadership of the emerging organization. begins, the two cultures should combine to create a unique culture.
In the long run, successful mergers and acquisitions occur when: -
Both sides are open to new possibilities.
With cooperation, flexibility and accurate information, the planning and assessment process has the best opportunity to progress smoothly.
Open channels of communication, which help minimize confusions and build confidence in employees.
Top management is receptive, holds a clear-cut vision, knows how to generate consensus and convince people about organizational goals.
Role of HR in M&A
Human Resources professional should take an active role in educating senior executives about HR issues that can interfere with the success of the merger and with meeting key business objectives.
HR professionals can play an active role in the change process by offering interventions that will help ensure a successful merger.
Facilitates Transition Teams:
Transition teams are used to study and recommend options for combining the two companies in a merger.
To discourage decision-making based on personal agendas or politics, human resource professional that facilitate transition teams should work with team leaders to run effective meetings. This gives all team members an opportunity to contribute their viewpoints.
Educate Managers & Employees:
To minimize stress and uncertainty in the organization during the merger process, develop and deliver educational seminars to help employees and managers manage stress, low morale and productivity issues in work groups.
These seminars should focus on specific issues affecting employees rather than on change management in general.
Develop Newly Formed Teams:
After implementation of merger as new teams are formed, they may experience problems arising due to interpersonal conflict, unclear roles and responsibilities, and confusing procedures.
A process to develop newly formed teams, review this process with managers and supervisors and offer to help launch new teams by providing consultation should be created.
Reinforce the New Culture:
When two companies with vastly different cultures merge, help the management to preserve the best aspects of the old company and carry them into the new company.
Find out what cultural characteristics and values senior executives want to preserve from their respective companies, what they don’t want to keep, and what new characteristics they want to introduce in the new organization.
Make a list and ask each level of management for feedback.
Provide management with a development tool.
Survey all levels of management about three months after the merger, to assess progress towards the new culture, and provide feedback to managers.
Involve in Planning, Transition & Integration Teams:
HR professionals need to contribute specific expertise to these teams, enabling the merger to be managed as a project while keeping core business going.
Develop effective ways of collaborating with the planning team from other company in pre-merger phase. Place framework in place for managing the different phases of the merger.
Find ways in which people from both the companies can get to know each other.
Identify how emerging organization’s vision can best be communicated.
Take “best of both” rather than “equal shares” or “acquirer dominates” approach to decide the roles and working practices to be adopted.
Decide fair principles on the handling of redundancies.
Identify HR Issues & Carry Out an Effective HR Due Diligence:
Comparing terms & conditions of employment and salary scales.
Understanding the skills of present HR team - are they adequate to coordinate proposed changes to the business?
Understanding the organizational structure.
Identifying what is required in terms of manpower plan to achieve the business strategy.
Identifying key personnel - to what extent is the necessary knowledge & skill vested in staff critical to running the business?
Identifying which job descriptions need to be changed.
Comparing ways of working and identifying differences which need to be addressed.
Is the organization unionized or does the employee representation group have negotiations rights, and if so, what do these rights include?
Carry Out Effective HR Integration:
Carrying out effective HR integration on the following: -
Remuneration
Benefits
Terms & Conditions
Culture & Management Style
Career & other Development Issues
Communication Employee Relations Help Line Managers to Communicate Effectively During Transition Phase:Managers play key role in communication about merger. Need practical help in understanding how to communicate with employees. Recognizing that merger is an emotional issue for the employees. Be communicated with and convinced of the benefits at an emotional and not just a rational level. Main challenge of line managers is “getting staff into confidence” - Raise the morale of the staff. Managing Individuals with Dignity: CEOs are keen to get through the difficult task of re-organization and job losses. Developing & Implementing Actions to Retain Key Employees: Key employees have to stay if both the organizations are to learn from each other’s strengths. Help Clarify Roles: People need help in clarifying their roles. Knowing where they fit in the organization. May require them to learn new skills or adjust their working practices. Briefings & Training in necessary.
Personalize the message given through corporate videos.
Ability to develop two-way communication.
HR can provide practical help with team briefings and feedback processes.
Such speed in dealing with employees may compromise on fairness and dignity.
Handling of key changes for individuals such as job changes, appointments, relocations and exits sets the tone for staff view the new organization.
Handling redundancies inappropriately usually results in a memorable backlash among ’survivors’.
Line managers should identify key employees and involve them in merger process.
If neglected in early stages, they can prove harmful for the smooth running of an organization.
Organization should develop retention strategies.
Financial incentives are not always necessary, letting people know that they are valued can be sufficient encouragement for them.
