Role of Human Resources in M & A

It is reported that one of the main reasons for failure of a merger or acquisition is based on Human Resources neglect. People issues have been the most sensitive but often ignored issues in a merger and acquisition. When a decision is taken to merge or acquire, a company analyze the feasibility on the business, financial and legal fronts, but fails to recognize the importance attached to the human resources of the organizations involved. 

Companies which have failed to recognize the importance of human resources in their organizations and their role in the success of integration have failed to reach success. While it is true that some of these failures can be largely attributed to financial and market factors, many studies are pointing to the neglect of human resources issues as the main reason for M&A failures. PricewaterhouseCoopers global study concluded that lack of attention to people and related organizational aspects contribute significantly to disappointing post-merger results. Organizations must realize that people have the capability to make or break the successful union of the two organizations involved.
Cartwright and Cooper (2000) acknowledged that the leading roles of modern human resources functions are to be actively engaged in the organization and perform as a business partner and advisor on business-related issues. Employees do not participate enough in the integration process of a merger. If a merger is to reach its full success potential, they need to be informed and involved more actively throughout all the stages of the merger process.
Human resource professionals are key in pre-merger discussions and the strategic planning phase of mergers and acquisitions early as to allow them assess to the corporate cultures of the two organizations (Anderson, 1999). Being involved in the pre-merger stage allows HR to identify areas of divergence which could hinder the integration process. They can play a vital role in addressing any communication issues, employees concerns, compensation policies, skill sets, downsizing issues and company goals that need to be assessed.

I. Communication
During mergers and acquisitions, employees are often kept in the dark about the sale of the corporation. They often hear about the acquisition through the press or through the corporate grapevine. This can lead to a distorted or misrepresented picture of the acquisition's ramifications and to counterproductive activities by employees, who may be anxious about possible job losses. Therefore, Communication is of utmost importance in every stage of a merger or acquisition process, and is the key to its success.
It is very important for management to communicate clearly and regularly to all employees the implications of the merger, including the planned changes to working practices and organizational processes. Management should share as much information as it can with employees before, during, and after the acquisition. To be effective, the communication process has to be carried out in such a way as to avoid confusion and mixed messages. The communication process should also encourage two-way feedback between management and employees to make employees feel that they are contributing to the solution. By involving people at all levels of the organization, the merging companies are encouraging widespread acceptance of the merger process and reducing feelings of insecurity.

II. Retaining Key People
The retention of a talented workforce, which is often a major reason behind the decision to merge, should take priority during the merger process, and management needs to adopt measures to improve the retention rate of the best people in the merging companies. Truthful and thorough communication with employees can play a significant part in management's retention strategy. If the communication process is performed effectively, it can reduce employees' sense of insecurity and give them a better picture of what the future holds for them.
Pay and reward strategies can also play an important role in management's retention strategy but they need to be addressed early on in the merger process and should not only focus on senior executive pay, but also on the remuneration of employees at all levels of the organization.

III. Try to Establish a Common Culture
Successfully integrating the two cultures of the merging companies is an essential step towards achieving a successful partnership. Both organizations, the acquiring and the acquired, will have unique and beneficial cultural elements. Rather than imposing one organization's cultural elements on the other, the best of both companies can be integrated into a common culture for the new organization. This can create a win-win situation for both organizations, since it will result in a corporate culture with which both sides can identify.
Defining and promoting the new corporate culture will enable employees to work together toward achieving the business goals of the new organization. Conducting a cultural audit is a useful way of obtaining useful information about the two companies' differing cultures and helps to evaluate differences and similarities in work standards and practices. That information can raise awareness of potential difficulties and issues in the merging process, and allows the merging company to take steps to minimise culture clashes by building an effective communication structure.

IV. Training and Development
Training and development should be provided to senior and middle management and should focus on all aspects of the merger process. Training should focus on the implications of the merger for the company, its effects on employees at all levels of the organization and its impact on working practices and organizational structures. Training should also educate managers on what each stage of the merger process entails for them and for the company as a whole. Such interventions will facilitate more effective leadership on the part of managers, who will have a better understanding of the key issues that arise during the course of a merger.

V. Try to Eliminate the Them-Us Syndrome
Acquiring organizations should try to eradicate any arrogance on the part of their personnel to ensure that acquired employees do not feel inferior and 'conquered.' A post-acquisition atmosphere fostering mutual respect among management groups will facilitate a better understanding of the others' perspective and make a smoother transition.

VI. Provide Individual Counseling
Individual counseling on personal adjustment and stress coping strategies can assist the employees to 'solve the problems associated with merger stress; recommend, demonstrate and initiate coping with merger stress strategies; or improve the employee's mastery'. In addition, a counselor can unveil new career paths and job opportunities within the newly acquired organization, which can provide incentives for employees to remain with the organization.

Mergers & Acquisitions (M&A) has become the most important strategic element driving business growth and excellence. Mergers and acquisitions will continue to be an ever-present characteristic of the modern corporate landscape. Merger and acquisition (M&A) bring together different sets of people, processes and technologies with the common objective of creating a larger, unified organization. The organization aims to benefit from the synergies of merging organizations by consolidation, rationalization and integration of the people, processes and technologies of both organizations. Human Resources (HR) has the potential to play an important role during all stages of M&A. However, these issues are rarely considered until serious difficulties arise. The Human Resource dimension of M&A should be accorded the same emphasis and attention given financial, legal, operational and strategic concerns. HR no longer plays a dormant role and is emerging as a strategic business partner where key initiatives undertaken such as communication, training, counseling, career planning, support workshops, building trust, coaching and compensation planning, have significant business impact.


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