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SUBMITTED IN PARTIAL FULFILLMENT FOR THE REQUIREMENT OF MASTERS OF BUSINESS ADMINISTRATION (2008-2010)
SUBMITTED TO: CONTROLLER OF EXAMINATION MDU, ROHTAK. ITM, GURGAON
SUBMITTEDBY: POOJA RAWAT ROLLNO-08MBA134
INSTITUTE OF TECHNOLOGY & MANAGEMENT, GURGAON.
Mergers and acquisitions (M&As) are increasingly becoming a strategy of choice for companies attempting to achieve and sustain competitive advantage. However, not all M&As are a success. In this paper, we examine the three main reasons highlighted in the literature as major causes of M&A failure (clashing corporate cultures, absence of clear communication, and employee involvement), and we analyze the role played by the HR function in addressing them. Also, we discuss the importance of gaining the commitment and focus of the workforce during the acquisition process through employee involvement.
Gurgaon affiliated to Maharishi Dayanand University.) Vigya Garg . (Dr. in Partial fulfilment of the requirement for the award of degree in Masters of Business Administration at Institute of Technology and Management.DECLARATION I hereby declare that the Dissertation report on “Role of HR in Mergers and Acquisition” is original and bonafide work carried out by me under the guidance of Prof. I also declare that this project is a result of my sincere efforts. POOJA RAWAT (08MBA134) Page 5 . No part of this project has ever been published or been submitted earlier.
The study also bears the imprints of many persons. For making this project possible. ITM) for her kind Co-operation and guidance. I feel pleased to have an opportunity to express our deep and sincere feeling of gratitude towards those personalities who positively helped to complete our project.operation from various quarters. assistance.ACKNOWLEDGEMENT A research study cannot be completed without the guidance. we would also like to express my thanks and gratitude towards our respected director. MR GANESAN JAISHELAN(DEEN of the department. Pooja Rawat (08MBA134) Page 6 . Dr. I are also grateful to all my colleagues who continuously helped me in my project and for their kind co-operation and by spend their valuable time in providing me the information needed. without which this project could have never been completed on time. MBA. VIGYA GARG ( Faculty. inspiration and co. MBA. ITM) and my project guide Prof.
Integration Planning 4.EXECUTIVE SUMMARY The research project entitled “Role of HR in Mergers & Acquisition” is an attempt to analyze the relevance and practical application of HR in any M&A deal. And HR has a pivotal role to play in all the following phases which take place in any M&A deal. I was given a very limited time. which is caused by the differences in human resource practices. magazines. Lastly. Due Diligence 3. websites and articles were consulted for this research. Since. The M&A leads to stress on the employee. Pre-Deal Phase 2. Several newspapers. These phases are: 1. It also aims to throw light on the trends in M&A both in India and world wide. it was found that the M&A activity is found to have serious impact on the performance of the employees during the period of transition. Implement Merger 5. I had to confine my research to secondary sources of data collection. and differences in organizational structure and changes in the managerial styles. suitable recommendations are suggested based on the study. uncertainty in the environment. The data was collected through secondary sources and the type of research was EXPLORATORY. cultural differences. In the course of study. Evaluate Merger Page 7 .
on the other hand. The Human Side of M&A Activity Plenty of attention is paid to the legal. the management of the human side of change is the real key to maximizing the value of a deal. Besides assessing the risk and potential of the merged entity. which often has a new corporate identity. and are dealt through each phase. challenging. People issues occur at several phases or stages of M&A activity. or chaotic as a merger and acquisition. Therefore.INTRODUCTION To put it simply. But executives who have been through the merger process now recognize that in today’s economy. and operational elements of mergers and acquisitions. Basically M&A has 3 stages model. financial. No other event is more difficult. we need to look at how human resources professionals can assist in the success of an acquisition. Page 8 . it is essential for HR to play a pivotal role in ensuring the smooth integration of HR policies and managing employees of differing work cultures all through the merger and acquisition life cycle. To achieve this. the term “Merger” refers to the combination of two or more organizations to form a new company. The management of the human side of M&A activity. These people related problem are integrated in different stages of M&A. however. “Acquisition”. appears to be a somewhat neglected focus of the top management’s attention. it is just as important to derive synergy from the merger or acquisition so that the company can quickly transit into the new entity and operate at its maximum efficiency. This is crucial in meeting the various bigger organizational objectives including growth in market share. is the purchase of a company by another company. based upon the failure rates of M&As.
One of the issues that can be arisen in the pre-merger is to identify the reasons behind the Merger and Acquisitions. those in Stage 2 are the ones that make the activity come to life. As the new combination takes shape. The mergers often prove to be traumatic for the employees of acquired firms. the impact can range from anger to depression.HR in Three Stage Model of Mergers and Acquisitions The literature sources [e. Jansen 2000. HR issues like Page 9 . it faces issues of readjusting. Life cycle of the organization. which will include • • • • The organizational cultures. Whereas Stage 1 activities set the scene for M&A activity. There are many Human Resource issues along with other issues in the first phase.On the third stage.g. The second stage of integration in an M&A activity is extensive and complex. The first phase is the Pre-Merger which includes the planning of the merger and acquisition. The last phase is the solidification of the new entity. The pre acquisition period involves an assessment of the cultural and organizational differences. Haspeslagh/Jemison 1991] most frequently identify three phases of a merger or an acquisition. and The management styles. Role of leaders in the organization. solidifying and fine-tuning .
SO WHY THE MARRIAGE FAILS: The mergers and acquisitions are done to grow faster but it is not sure that the result emerges the same as it was thought. Assessing the new strategies and structure. Assessing the new culture are the main issues which an HR Manager is likely to face. It must also support and help other departments through their own individual transitions. Research also suggests that up to 65% of failed mergers and acquisitions are due to 'people issues' that result in poor productivity. M&A's carry quite a burden for HR.• • • • Solidifying leadership Staffing. Reconciling redundant HR functions 2. poor planning. while the integration of the HR functions. Working through two service and technology strategies – 3.to 4-year period. its systems and people programs are integral to a successful merger. unskilled execution Page 10 . As well as getting its own house in order – integrating HR programs. Some failures can be • • Expectations are unrealistic Hastily constructed strategy. This means that 83% of the companies do not ultimately see the returns that were projected for the merger or acquisition after a 3. 1. Relation of HR with Merger & Acquisition Success Rate It might be more accurate to use the term failure rate rather than success rate. As such. Industry analysts agree that the failure rate of mergers and acquisitions is somewhere between 40% and 80%.
rather than productive objectives Requires an impossible degree of synergy Culture clashes between the two entities go unchecked Transition management fails The underestimation of transition costs Defensive motivation • • • • • • • Perhaps of these. culture clashes. to have a successful M&A as prerequisite especially for a satisfied and motivated workforce. 2000) So HR department has to consider some critical factor or issues in M&A. although even these become intertwined with other reasons. or incompatibility and losses of key talent are cited the most frequently.• Failure/inability to unify behind a single macro message Talent is lost or mismanaged Power and politics are the driving forces. Selected HR Issues in the three Stages of M&A: Stage 1: Pre-Combination • • • • • • Identifying reasons for the IM & A Forming IM & A team/leader Searching for potential partners Selecting a partner Planning for managing the process of the IM and/or A Planning to learn from the process Page 11 . (2) Combination and integration of the partners. (Bianco. 2000. gaps. HR issues in three Stage Models of Mergers and Acquisitions The three stages: (1) Pre-combination. Fairlamb. and (3) Solidification and advancement.
Some examples of M&A are Volvo & Ford. Merger and Acquisitions success entirely depends on the people who drive the Business. Volkswagen & Rolls Royce & Lamborghini. and Processes. their ability to Execute. and Innovation.Stage 2-Combination and Integration • • • • • • Selecting the integration manager Designing/implementing teams Creating the new structure/strategies/ leadership Retaining key employees Communicating to and involving stakeholders Deciding on the HR policies and practice Stage 3: Solidification and Assessment • • • • • Solidifying leadership and staffing Assessing the new culture. Creativity. Pepsico-Pizza Hut.Hughes Electronics OBJECTIVE OF MERGER AND ACQUISITION Page 12 . BankCorp of America. Moreover. It is of utmost importance to involve HR Professionals in Mergers and Acquisitions discussions as it has an impact on key people issues has increased the involvement of HR professionals. By doing so they will achieve a much better outcome and increase the chance that the overall deal is a total success. new strategies and structures Assessing the new HRM policies and practices Revising as needed Learning from the process The strategic contribution of HR as consisting of the “Five P’s”: Philosophy. Programs. Policies. Practices.
as that people are the greatest asset. This entails devising a comprehensive communications strategy and implementing it with care and diligence. objective is to successfully managing many integration issues through effective communication. Now the HR issues are treated as a key component of any merger. but at times just seems to overlook this mantra in the heat of a deal. sales and market share. and often only as an afterthought on people. Contradictory reality is. Research Methodology OBJECTIVES OF THE STUDY: Page 13 . from the outset of negotiations. economic and commercial aspects of the deal. Secondly. So. HR managers need to work with senior management to identify and troubleshoot these potential problems. So the immediate objective of an acquisition is self-evidently growth and expansion of the acquirer's assets.When going through M&As organizations usually focus primarily on the financial. not on an ad hoc basis as they arise. The objective of M&A is to manage the people related issues again and again as it arises. thereby keeping a healthy working environment with motivated workforce leading to more productivity and high performing organization. A more fundamental objective may be the enhancement of shareholders' wealth through acquisitions aimed at accessing or creating sustainable competitive advantage for the acquirer.
3. To give recommendations and conclusions based on the study.1. 2. To analyze the strength and weakness of merger and acquisition. 4. 5. To enable to understand what are the trends in HR merger and acquisition now in India. To analyze the current Role of HR in merger and acquisition. To know the Evolution of the Merger and Acquisition. SIGNIFICANCE OF STUDY With the help of research study we come to know about:- Page 14 .
1. The Relevance and practical Application of HR in Merger and Acquisition RESEARCH AND SAMPLE DESIGN Page 15 . Understand the overview of Merger and Acquisition. Understanding Role of HR in Merger and Acquisition thoroughly 4. 3. The implication of role of HR in Merger and Acquisition 2.
For carrying out the secondary research. journals. magazines. journals. and previously conducted researches on the similar topics. Brochures.TYPE OF RESEARCH: • EXPLORATORY METHOD OF DATA COLLECTION: • Secondary data collection: large amount of secondary data is available in the forms of articles. • Data collection: Data collection has been done from secondary sources. • Secondary data: from newspaper. Internet. Page 16 . further help will be taken from websites. consumer forums & blogs.
These can be identified as follows 1. (a) The success rate of mergers and acquisitions is dismal. When to Involve HR 1.REVIEW OF LITERATURE THE MERGER AND ACQUISITION LIFE CYCLE There are five key phases to the life cycle of mergers and acquisitions. Several of them revolve around the people and cultural issues. THE ROLE OF HR IN MERGERS &ACQUISITIONS It includes the research work conducted by various sources and institutes independently in different time periods. Page 17 . Research by Gaplin and Hendron has shown that during mergers and acquisitions: • Only 30% of companies acquired their return on the cost of capital • Close to 50% of executives leave in the first year • 70% do not realize their projected synergies There are many reasons that can be attributed to these results.
(e) Raymond Stone comments: “The clash between corporate cultures is a major cause of merger failure. For example. Requirement to spin off or liquidate too much 8. (d) A survey conducted by Grant Thornton Business Owners Council across 750 businesses owners and senior executives in the USA found that some of the major contributing factors for the failure of mergers and acquisitions included: • A poor integration strategy • A loss of key personnel • The lack of a compelling strategic rationale • Inadequate communications 1. (c) The Economist (1999) reported: “Study after study of past merger waves has shown that two of every three deals have not worked. Excessive premium for acquisition 6. (b) The Bureau of Business Research at the American International College (1996) reported that the ten pitfalls which had negative impact on successful mergers and acquisitions were: 1. Unhealthy acquisition target 7.” 1. Inability to effectively implement change 3. A clash in management styles 5. Incompatible marketing systems 1. Incompatible cultures 2. Non-existent or overestimated synergies 4. Look behind any disastrous deal and the same word keeps popping up-culture.1. Culture permeates a company and differences can poison any collaboration. it is estimated more than half of all merged companies in the United States fail to create value for shareholders because management underestimates ‘the complexity of corporate Page 18 .
(g).” 1.marriage’.” 1. (f) CEO Magazine reported: “75% of Mergers and Acquisitions are disappointing or outright failures. By neglecting the human dimension. these complexities are intensified when organizations from different countries combine. HR managers. managers can destroy the value of the acquired or merged organization. therefore need to take a pro-active role in educating line managers about the people problems involved in mergers and acquisitions. 75% in the first 3 years. 50% experience a decline in productivity in the first four to eight months. Furthermore. I A survey conducted by the SHRM and Towers Perrin of over 440 HR executives worldwide showed that there was a considerable gap between the expected and achieved synergies of mergers and acquisitions: Page 19 . 47% of senior executives in acquired firms leave in the first year.
II The survey conducted by SHRM and Towers Perrin also looked at the most significant obstacles to successful mergers and acquisitions. It also surfaces the range of areas where HR professionals can play a key role. (g). These include: • Maximizing productivity • Developing the organizational culture Page 20 .From this survey it is clear that the key objectives that organization are striving for in mergers and acquisitions “growth in market share” and “becoming a leader in industry consolidation” The research shows that less than half the participants were able to achieve those objectives. For a successful merger and acquisition it is essential that HR play a pivotal role through all the five phases of the process. 1. The results can be summarized as follows A review of these key obstacles highlights the importance of the role of the HR professional in mergers and acquisitions.
1. experience has shown that HR has been involved too little or too late resulting as a contributing factor to the 70% failure rate in realizing projected synergies. (g). Page 21 .• Retention of key talent • Cultivating the style of the management team • Acting as a change agent • Communicating the business objectives Typically. III The results of the research conducted by SHRM and Towers Perrin demonstrate in particular the lack of involvement by HR professionals in the first two phases of the merger and acquisition life cycle. The obvious conclusion from the results represented in the above graph is that successful companies have benefited from a greater degree of HR involvement than unsuccessful companies.
2. Watson Wyatt in their survey across 190 companies compared the timing and level of HR involvement between companies in the Asia Pacific and those in the United States. health.1. ROLE OF HR PHASE-WISE Page 22 . The results showed that in the Asia Pacific. (h) With specific reference to the Asia Pacific context. So the differing results between Asia Pacific and the United States in the earlier stages may also be partially accounted for the greater need for due diligence requirements on accrued benefit liabilities (including retirement. there was little involvement of HR in the early stages of the Merger and Acquisition life cycle and may account for the need for extensive involvement in the later stages. long service leave) and termination provisions in the more developed United States environment. redundancy. annual leave.
However. Mrs. team strength. the organization determines the associated risks and the soundness of the deal. 2. This could involve reviewing an array of things such as leadership style. there is little involvement of HR professionals in the first phase of mergers and acquisitions.com.1 The Role Of HR In The Pre Deal Phase Typically in Asia. One of the Challenges that HR faces is obtaining this information in an environment where the organization may not want to alert other parties of their intent to acquire or merge.This data is takes from cite-hr.2 The Role Of HR In The Due Diligence Phase During this phase. As such. vision and values of the organization. • • • • This can include a wide range of activities such as: Recognising 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 organisation design and development and Recruitment and retention in the integration process • Page 23 . One of the first critical areas that HR can be involved is in assessing the potential compatibility of cultures. much of this information is usually obtained on an informal level or through the use of third parties. Pratigya Jain 2. it was assigned as a response to a query regarding role of HR in M&A. It is during the due diligence phase that potential problems and risks are often identified. by Prof. customer focus and Organizational capabilities. It is at this stage that the organization determines whether it will purchase the entity and its correct value. mission. there is a critical need for HR to be involved in this phase. Many of the HR activities identified in the pre deal phase are continued with greater detail in the due diligence phase to ascertain the correctness of the perceptions obtained in phase one. performance and reward management systems.
2. Who will I report to? Page 24 . decisive and focused action is needed.3 The Role Of HR During The Integration Planning It is during this phase when the HR professionals’ skills in Project Management and Change Management are a critical asset to the life cycle of the merger or acquisition.• Identifying any ownership issues regarding intellectual property In Summary. HR can play a pivotal role in maximizing employee engagement through effective and timely communications to staff. It is critical that the new organization maximize productivity and focus on client and shareholder satisfaction as soon as possible. This could include such issues as. 2. employees want to know “what is in it for me?” (WIFM). benefit entitlements and resource savings that may impact on the value of the deal. quick. For a successful implementation. Essentially through any change process. one of the most critical roles for HR during the due diligence process is to identify any contractual obligations.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 • • • • • The Details And Planning that are put into this phase is a critical factor in the success of the implementation of the acquisition. HR is usually involved in a wide range of planning issues such as: • Determining the culture/vision of the new company Contracts of employment Performance management issues Looking at leadership commitment and talent Confirming people's expectations .4 The Role Of HR During The Implementation Phase One of the key roles for HR professionals during the implementation phase is the Coordination of Communications to Staff.
Recognize that nothing is forever – some retention strategies are only appropriate for the short-term transition phase. it is advisable to develop a comprehensive Q&A sheet that identifies and responds to likely staff issues.During the integration planning phase. There are several other activities typically conducted by HR professionals during the implementation phase. Look for talent in unexpected places – some of your key resources may not be top management. Documenting communications is important for ensuring staff receives a consistent message during such times of change. A study conducted by Right Management Consultants that included interviewing a number of executives involved with the people side of mergers and acquisitions produced six important principles for making the transaction more successful: 1. 4. short term contracts with severance bonuses may be all that is needed for the integration phase. These include: • • • • • Alignment of HR policies and practices Advising senior management on people issues Reward schemes Education Recruitment Employee retention through the integration phase is often cited as a key role for HR professionals.What are my rights and benefits if terminated? What have my clients been told? What will be my future role and responsibilities? Who can I talk to for help and information? The questions raised are extensive! . Don’t be too desperate to retain any one person – for key management. Page 25 . One benefit of providing this information in a written format is that it helps ensure reliability and consistency of the message across the group in times of change and uncertainty. Decide how critical employee retention really is – this will vary considerably depending on the nature of the business. 3. 2.
Consider options such as career management and new skills development. it is important that this review process is conducted and appropriate remedial action is identified and taken to ensure the successful outcome of the integration. ROLE OF HUMAN RESOURCES IN MERGERS & ACQUISITIONS Page 26 . It is important for the management team to review the progress and success of the implementation phase.5 The Role Of HR In Evaluating The Merger An important phase in the merger and acquisition cycle is the post merger phase when a review of the achievements of the merger can be assessed against the original or revised objectives. Retention bonuses often backfire – sometimes good people leave because they are not part of such a scheme. often HR professionals will use a range of tools such as cultural surveys to benchmark and monitor the success of establishing the new organizational culture.5. Be open to creative approaches that earn trust – its not just all about cash bonuses. mission. 2. 6. In maximizing the engagement of the human capital in the new organization. vision and direction have not been obtained. In addition to comparing the achievements of the new organization against the original objectives. 3. Different performance management systems are still operating. The critical role for HR professionals during the implementation phase is to help ensure the organization maximizes employee engagement to assist in achieving the initial objectives of the merger or acquisition through a successful integration. Economies of scale have not been achieved through re-engineering and repositioning of the operations and A unified sense of purpose. • • • • Benefit programmes have not been harmonized.
guiding principles and factor for HR in case of M&A Mergers in India have moved to centre stage today.000. much in demand because of a talent crisis in the sector. Very probably they will get a handsome raise to boot." said Mumbai-based HR consultant Shashi Rao. Air Sahara has only around 200 pilots. "But the very fact that you are unwanted can be traumatic. Why were the pilots worried? They could walk out any day and get another job. the human side of the integration continues to evolve. The airline has about 5. Later defining the initiative. against Jet's 7. True. The Competition Commission of India has announced that it will introduce measures to critically scrutinize all mergers. The Jet brass has indicated that the Sahara folks will have to shape up or ship out. the Sahara Group has promised to absorb the unwanted in some of their other companies. The reason is that any merger or takeover creates uncertainty. The Union Aviation Minister has had to come out with a statement that the recent Jet-Sahara merger will not create a monopolistic monster in the sky. Page 27 .Sahara merger and the retrenchment and trauma faced by the Human Resource. Completion of the acquisition and integration--operationally and culturally--of the two companies have required human resources to play a major role. with the recent action in the air. cash flows or marketing synergies. written by Prof. are getting together to ensure that their seniority and pay scales are not affected in the new entity. they are about people making the synergies real. Harshada Mulay.000 employees across the country. Why such a woeful track record? HR consultants say people in charge of acquiring another company often forget that mergers are not just about balance sheets. The work is still going on: Although most of the integration plan has been implemented. Even the Sahara pilots.This article reveals itself with the much hyped case of Jet.
The upheaval associated with any merger or acquisition is a prime opportunity for HR to demonstrate its knowledge and skill in the management of human capital. Integration of payroll benefits and HR-IS 7. 3. Communications strategy development and implementation 6. Assessment of critical players and deployment of appropriate resources in the new company 3. Page 28 . HR is an intrinsic part of the integration team in an M&A because of its ability to evaluate the compatibility of corporate cultures and different options for combining enterprises. Development of preliminary organizational designs and identification of the top three levels of management 2. Retention of key people and separation of redundant staff 4.1 THE KEY HR INITIATIVES HAVE INCLUDED 1. An ability to do all of the above with speed. Development of a total rewards strategy for the combined companies 5.2 THE GUIDING PRINCIPLES * Take definitive action and make decisions quickly--the secret for holding onto good people. HR must also be the trusted source of information for employees about what the M&A means for them.3.
depending on what criteria you measure. 2. No matter how flawless a deal seems on paper. the results are often disappointing. to easing the transition. 3. use ownership of the company as represented by stock options and stock grants to get everyone pulling in the same direction. Most merged organizations lose 1 to 10 percent of their market value in the first year after the merger. Recent studies place the success rate of merged companies at 30 to 60 percent. Let them know that the combined entity will be a more valuable organization. * Treat those leaving with the same respect and attention as those staying. * Whenever possible. and confidence in leadership decisions. and to focusing employees on the creation of shareholder value as soon as possible. top talent. wait-and-see attitude that can lead quickly to irrelevance. Page 29 . Taking a wait-and-see attitude will lead to an irrelevant role for HR. Many companies report that their mergers are successful but admit the end results aren't as successful as they could have been. There's a lot to learn about 1. keeping the highest percent of talent. Individually and collectively. integrating processes and systems. managing the transition period. HR executives should be integral to all phases of due diligence. * Be honest about the people decisions that must be made. and treat them with respect. and 4. optimizing short-term performance. the role must be orchestrated so that its value becomes integral to the deal. Rather than take a risk-averse.* Be candid with employees. Instead. to ensure that the management talent required to define the future of the new company is there to steer the chosen course. Companies that don't address those issues may suffer a loss of profitability.
4 CULTURE COMPATIBILITY: By understanding the similarities and differences between the two companies early in the game. Practices regarding casual dress. To understand the cultures involved. HR has to look at the history of each company.3 DUE DILIGENCE: Beginning at the start of the process. it is possible to avoid a divorce before the marriage vows are taken. HR must orchestrate its role in due diligence. • 3. It is important to identify cultural areas of dissonance so that people can dispel misconceptions and begin creating a culture that's right for the new organization. and its products and services. It's essential to assess the valued human assets that never show up on a balance sheet. and.3. workers' compensation. That's often left until after the final papers are signed. Due diligence is more than a financial evaluation. it may even be wise to call off the wedding. One can't consider culture Page 30 . Should incompatibility be too great. attitudes about long hours. and how offices are apportioned are deeply ingrained and must be dealt with. Each key individual should be assessed against a set of clearly defined competencies that are aligned to the needs of the new group. the most seemingly inconsequential programs and policies have great symbolic impact. The key areas of HR due diligence: • • • • Culture Employee demographics and competency analysis Key talent analysis Benefit and compensation structure and how it compares with that of the parent company Any legal issues relating to outstanding employee litigation. How do we identify cultural differences and similarities and learn to leverage them? Often. where applicable. its reputation in the industry. in order to determine the true value of the deal and its likelihood of success. union contracts and issues. which is risky because culture mismatches can be the Achilles' heel of many deals.
3. "We're not going to change anything. and specific functional expertise relevant to the new business. the new company begins to build the loyalty that's crucial to survival." And "We want to get to know everyone. handle conflict. one-on-one meetings. Pick the best people.6 COMMUNICATION: Two-way communication always helps comprehension. The goal of communications should be not only to inform. There should be an integration project manager free from any routine responsibilities. During our acquisition. but also to engage employees' hearts and minds. In the seven-step process. and small. Rumor Buster. "How does this affect me?" Accessibility to managers. The integration manager needs a special set of competencies (including project management).and large-group meetings. He or she should be willing to make tough decisions quickly. we were careful to avoid statements that could be dismissed immediately as propaganda--such as. we developed an excellent tool. The overriding question is.compatibility without touching on the different views that the acquirer and the acquired have about the new company. broad experience in the parent business." "We respect your autonomy. Skill as a communicator is essential.5 INTEGRATION PLANNING: The integration effort must be led by a full-time dedicated team. People need a chance to probe. 3. which was produced and distributed weekly to counteract rumors. officers. and directors is critical to satisfying employees' hunger for information. there's plenty of Page 31 . discuss. Don't worry. and work well across functions and management levels. Integration leadership should be invested in the continued development of the new organization. ask questions. not just the available people. All avenues should be used: written. and arrive at a personal level of understanding that they can't get from a piece of paper. By presenting a clear vision of the future and gaining commitment to it. whose sole job is to manage the overall plan.
Other issues needing attention to maximize the growth synergy are reward and recognition programs. 3. with an M&A.1 Growth. and create development plans for people to prepare them to achieve the anticipated corporate growth.2 Economies of scale. and integration of benefit and compensation programs--ensuring they are competitive to attract and retain desirable employees. there must be an analysis of what the end-game organization will look like and which positions are truly. Managers who showed "softer" skills work best in achieving trust and boosting morale in periods of transition and downsizing. 3.7. These "softer" skills include: Honest and proactive communication Good listening skills Sensitivity to employee needs Page 32 . team development.opportunity for each of you. and nothing hurts the solidarity of the new company more than communication that is later contradicted.7." Statements like those are remembered.7. set up retention arrangements to keep critical talent.That's often a euphemism for firing people.The role of HR is to identify key human assets in the target company.7 THE SYNERGIES: There are two kinds of synergies that companies seek through a merger or acquisition: growth and economies of scale. Ultimately. 3. But to achieve synergies. not all staff will be able to or want to stay in the new organisation. 3. it involves capturing the tacit knowledge and informal networks that enable an organization to get things done.3 Dealing with Redundancies: No doubt.
well-ordered approach. Executives are often Page 33 . The next question: How long do you need them? Some talent may be needed only during the transition period.An ability to illustrate the need for change despite the pain it may cause to some An eagerness to offer advice example job swap. the story changes. You can make offers to certain people and if they accept and want to stay. The new structure of the merged companies may be different. Because people are anxious to know their futures as soon as possible at the start of the integration process. and certain jobs may not exist or be available because incumbents are staying. when two groups combine. The kind of agreement that's drawn up and how far it goes to keep key talent will differ from organization to organization. and a plan must be put together for that person.8 RETAINING KEY TALENT: There is no one way to retain people during a merger or acquisition. that's fine. As much as we might desire a logical. but there is wisdom in keeping the talent in the top 10 percent of the population. after which their responsibilities can be handed off.9 BUYER'S REMORSE: Once the thrill of the deal is over and the reality sinks in. "key people" doesn't always mean top executives. 3. and focus can be lost as critical and immediate problems rear their ugly heads. Talented people tend to welcome the challenges of a new role. that may also be fine. By the way. new career path etc. Each person must be considered. and they enjoy career growth and added responsibility. the mood may change from exhilaration to remorse as the workload grows and problems arise. Initial plans and assumptions have to be adjusted. Others may be needed for much longer. the process takes on a life of its own. we created a definitive plan with specific dates and a promise that each person would be spoken to within week 1 and everyone would know their alternatives for the future within 30 days. But when you're talking about key people. If they don't. People can be confused and fatigued Mergers and acquisitions don't follow a carefully laid-out linear progression. 3.
Ironically studies show that most of the mergers fail to bring out the desired outcomes due to people related issues. honest and consistent communication strategy can pave the way for a ideal M&A. Page 34 . HR issues are the most neglected ones. Mergers and acquisitions have become a common phenomenon in recent times. The good news is that people can tolerate a degree of uncertainty in their responsibilities if they believe the business direction is clear and the chances of long-term success are good.pulled away to deal with the next business issue. 4. KNOTTED FOREVER It’s an Journal taken from internet named Knotted forever…By Amit Pande & Sandeep K Krishnan provided an analysis of M&A with cases. And emphasis that a well planned process built on the foundations of an open. The human resource system issues that become important in M&A activity are human resource planning. By taking reference of a merger of the organisation size like HP-Compaq which has workforce across the globe. The uncertainty brought out by poorly managed HR issues in mergers and acquisitions have been the major reason for these failures. compensation selection and turnover. reducing their visibility and giving the impression they're no longer concerned about the merger. performance appraisal system. Firstly it tries to define an ideal meager as the newly created entity pools the best features of the two merging organizations. employee development and employee relations. practical problems faced by merging organization in past. It tries to bring out the importance of HR as mostly the merging entities give a great deal of importance to financial matters and the outcomes.
1 In the First Case involving Hindustan Lever Limited acquiring TOMCO. which they refused. a case of discrimination will arise against the employees of HLL. Differences in organizational structure and 5. 2. The workers of Wellcome were offered a one time compensation of Rs. 3.2 In the Second Case involves merger of Glaxo and Wellcome-Burroughs who decided to merge in 1996. Changes in the managerial styles. The M&A leads to stress on the employee. two classes of employees will come in existence. and 4. 4. Page 35 . Cultural differences.M&A activity presents a different set of challenge for the human resource managers in both acquiring and acquired organizations. Two cases in the Indian context are important which underline the importance of legal issues related to compensation in M&A activity. However the court supported TOMCO employees in the process. the employees in TOMCO enjoyed better terms and services compared to the HLL employees. who is caused by 1. For example the compensation issues may also involve legal angle. The M&A activity is found to have serious impact on the performance of the employees during the period of transition. The HLL employees argued that if TOMCO employees are allowed to work on their original terms and conditions. 4. 2 lakhs in 1998. Uncertainty in the environment. Since both the set of employees now belong to same firm. The Indian arms however couldn’t merge in the last seven years because of high pay differential between workers of Glaxo and Wellcome in India. Further the VRS scheme launched by the firm evoked very tepid response. The differences in human resource practices.
4 Acquisition strategy of GE Capital The GE Capital uses a successful model called “Pathfinder” for acquiring firms. 4. Page 36 .3 HR takes control • Train managers on the nature of change • Technical retraining • Family assistance programs • Stress reduction program • Meeting between the counter parts • Orientation programs • Explaining new roles • Helping people who lost jobs • Post merger team building • Anonymous feedback helpline for employees 4.Hence the differences in compensation structure and performance appraisal systems also need to be rectified so as to bring equity in the human resource systems and to treat employees at the equal level. The model disintegrates the process of M&A into four categories which are further divided into subcategories. The four stages incorporate some of the best practices for optimum results.
The second phase is the foundation building. work culture. assignment of roles etc are done at this stage. Also a 100 day communication strategy is evolved and the senior management involvement and support is made clear.6 Acquisition strategy of Cisco The acquisition strategy of Cisco is an excellent example of how thorough planning can help in successful acquisitions. A team of executives from the GE Capital and the acquiring company is formed. This involves the cultural assessments. The third is the integration phase. geographical proximity etc. devising communication strategies and evaluation of strengths and weaknesses of the business leaders. understanding how the two organizations will fit together – how the employees from the organization can match with Cisco culture and then the integration process. In the evaluation process. The last phase involves assimilation process where integration efforts are reassessed. At this phase the integration plan is prepared. This stage also involves continuous feedbacks and making necessary corrections in the implementation.The pre-acquisition phase of the model involves due diligence. This is also the period when the organization actual starts reaping the benefits of the acquisition. After experiencing some failures in acquiring companies. Cisco looked whether there is compatibility in terms of long term goals of the organization. Here the actual implementation and correction measures are taken. An integration manager is also chosen at this stage. This stage involves long term adjustment and looking for avenues for improving the integration. 4. negotiations and closing of deals. The model is dynamic in the sense that company constantly improves it through internal discussions between the teams that share their experiences. This involved. Cisco devised a three step process of acquisition. For Page 37 . effective tools and refine best practices. The needed resources are pooled and accountability is ensured. The processes like assessing the work flow. analyzing the benefits of acquiring.
If this is lacking in the working style of the target company. Once the acquisition team is convinced. Cisco is not convinced about the acquisition. employees of the acquired firm are given 30 days orientation training to fit into the new organizational environment. Aggressive competition. A top level integration team visits the target company and gives clear cut information regarding Cisco and the future roles of the employees of the acquired firm. THE KEY ROLES OF THE HUMAN RESOURCE PROFESSIONAL IN THE NEW ECONOMY 5. rapid change. After the acquisition. the impact of technology.1 The New Economy We work in an economy that is poised for merger and acquisition activity. The planned process of communication and integration has resulted in high rate of success in acquisitions for Cisco 5.example Cisco believes in an organizational culture which is risk taking and adventurous. Page 38 . The acquisition team of Cisco evaluates the working style of the management of the target company. legislative change. consumerism and increasing workforce mobility drive the new economy. globalization. the caliber of the employees. No forced acquisitions are done and the critical element is in convincing the various stakeholders of the target company about the future benefits. an integration strategy is rolled out. The company insists on no layoffs and job security is guaranteed to all the employees of the acquired company. the technology systems and the relationship style with the employees.
anticipate and deliver. a generally positive attitude. imagination.To operate effectively in such a dynamic environment.3 The Roles Of HR Professionals 5. 5. • One’s motivation to share information and knowledge – team spirit and goal orientation. These roles can be summarized as: •Responsibility for improving productivity through assisting in performance management • Responsibility for being a functional expert in the administrative function • Responsibility for being a facilitator of cultural change and Page 39 . energy. to meet client expectations. it is essential for organizations to harness their greatest asset – their people. Jac Fitz-enz in his book The ROI of Human Capital describes “human capital” as a combination of factors such as: • The traits one brings to the job – intelligence.3. creativity. reliability and commitment. Organizations need people who can adapt. • One’s ability to learn – aptitude. respond. 5. Fitz-enz goes on to describe people as the “profit lever” of the new economy and that the organization’s passive resources “require human application to generate value”. and what is often called “street smarts” and savvy (or how to get things done).1 Dave Ulrich (1997) identified four key roles for the future HR manager. Effective organizations seek to maximize the efficiency of their human resources by ensuring that they are well managed and developed.2 Maximizing Human Capital The term “human capital” has gained increasing popularity as a way to describe the people working in organizations.
and • identify and improve capabilities for future success. the customers and the employees.• Responsibility for being a business partner through the development of a HRM strategy. administrative and strategic duties as well as a focus on both people and processes.2 Dave Ulrich (1997) describes HR champions as those who: • turn strategic statements into organizational actions. They can be represented as such: 5. Whilst many HR professionals have identified the need to shift their focus from satisfying administrative requirements to becoming a strategic partner of the Page 40 .3. • align HR plans to organizational actions. • meet targets and needs – both of the organization. The roles are multi-dimensional and involve a combination of both short and long term horizons.
Until then we will have to bank upon human capital to carry out various operations . plan.organization. The findings of Hay Group suggest that just 9% of deals are fully successful in achieving their objectives. As business partners and facilitators. (http://www. It has been found that of the 40 European companies involved in such deals in the last 2 years. no matter how precise the M&A agents are in their calculations. Schmidt had to say about the role of HR in mergers and acquisitions. we are still not in era of the Matrix or Skynet 1. This is a critical role to play through all the phases of a merger or acquisition. they are expected to lead.com/public-events/conference/69/the-role-of-hrin-mergers-and-acquisitions/introduction/ : Date Accessed:29-Oct-09) Page 41 . the deal can never prove to be a success. the question remains as to how successful they have been in achieving this shift. 6. 83% failed to meet their key transition goals and the majority cited ‘human capital challenges’ as the most formidable challenge. There has been a growing recognition that HR professionals of forward-looking organizations will be required to act as business leaders. when one look at the causal analysis of the failure trends of the M&A deals in Europe over the past two years. The earlier HR is involved in the process. surely need some introspection. HR – An orchestrator in Mergers and Acquisitions “The correct spelling of M&A begins with HR” – that’s what Jeffrey A. direct. higher are the chances of the M&A being a success. All those who say that HR’s role in mergers and acquisitions begins when the deal is inked. promote and manage. HR professionals are expected to share.0 (The Terminator fame) where the companies can be run by intelligent systems. If the HR aspect is not handled properly. This makes the HR an indispensable part of company’s activities and M&A cannot be an exception here. thrive on chaos and respond to realtime issues. as business leaders.jsbonline. How important is HR while considering and carrying out M&A opportunities? Unfortunately.
what else!! So. here’s how HR can don different hats in different stages of M&A and contribute to the making of a successful M&A deal Page 42 . it is amply clear as to what is amiss in all the M&A deals that fail – the role of HR.Hence.
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it can conduct a survey of all levels of management about 3 months after the deal is through in order to assess the progress towards the new culture. Hence. low morale and productivity. Role of HR in M&A – Stage Wise Involvement Page 44 . countering problems arising due to interpersonal conflicts.Find out through surveys what cultural values are valued and which of them should be preserved . A formal process to develop newly formed teams.Provide the management with development tools and ideas to implement the result of the surveys and feedbacks .Enlist all of them and request feedback from each management level . 6. It needs to assist the management in preserving the best aspects of the organization.Finally. HR’s key role in any M&A is the reinforcement of the new culture. Development of newly formed teams.The HR has to quickly take control in these cases and educate managers and employees. review of the process and help in launching new teams through consultation should be the forte of HR during M&As. To manage issues like stress. it should facilitate transition teams that are averse to decision making based on personal agenda and politics. unclear demarcation of team boundaries as well as roles and responsibilities ought to be another thrust area of HR. the focus should promptly change from change management to management of employee issues. What the HR can do is: .
by Page 45 . March 2001. The Impact of Culture on Mergers & Acquisitions This article originally appeared in CMA Management.7.
the strike by French railroad and subway workers in December 1995 resulted in the demise of the Juppé government. being part of the 17% that succeeds. and Lionel Laroche. Difficulties encountered in M&As are amplified in cross-cultural situations. In the case of international mergers and acquisitions. P.Gene Gitelson. for example. people tend to look for support within their group. In France and Italy. the complexity of these processes is often compounded by the difference in national cultures. If unions cannot provide answers because they have been excluded from the negotiation process. requires more than insight. It’s a research based on survey conducted to test the effect of cultural difference in M&A . PITFALL 1: PREOCCUPATION In countries where people identify largely with groups. These strikes may do much more damage to the organization than comparable Canadian strikes. Ph. Seven Pitfalls on the Path to Merger Success Merger success is possible. People living and working in different countries react to the same situations or events in very different manners. Page 46 .. people caught in the midst of a merger or acquisition often turn to unions. concentration and creating a critical mass for operational change (adaptation). The seven pitfalls represent the critical and vulnerable areas of the M&A transaction. Therefore. "83% of all mergers and acquisitions (M&As) failed to produce any benefit for the shareholders and over half actually destroyed value". Interviews of over 100 senior executives involved in these 700 deals over a two-year period revealed that the overwhelming cause for failure "is the people and the cultural differences". when the companies involved are from two or more different countries.. John W. Bing. Merger success is based on acceleration. they are likely to go on strike. a company involved in an international merger or acquisition needs to consider these differences right from the design stage if it is to succeed.D. According to a KPMG study. rather than the 83% that does not deliver.D.E. Ed. however..
In the case of international M&A's. the individuals and /or the groups from getting on with the work and their lives. Pitfall 2: List-making In the face of overpowering uncertainty and rising fears of insecurity. the economic value of a foreign organization may not be where its Canadian partners expect it. its Mexican employees are often looking for information and structure that is not forthcoming. Page 47 . In the case of international M&As. During the first 90 days. Personal and departmental needs drive the allocation of resources. the reality sinks in. it will happen. there is a widening disconnect between the financial and market-based goals of the merger and real-time allocation of effort. focus and get everyone to focus on the 20% of the goals that yield 80% of the economic value. since this may be viewed in Mexico as questioning management's authority. The strategy: Concentration. When a Canadian corporation acquires a Mexican company. since Mexican employees are unlikely to go and ask for the information they need. The strategy: Acceleration. as the days build. For example. a Canadian company acquiring a company operating in a country where the government controls much of the economy may find that the value of its new acquisition lies more in the personal ties between its managers and high level government officials than in its quality of service. Delayed decisions to "ease the pain" only magnify and sustain the pain and prevent the company. Quickly. As soon as the merger is announced and the first calls to action proclaimed. Dealing with uncertainty explicitly is critical to the success of M&As. ensure that both individual and collective concerns are addressed. Speed the integration to reduce the uncertainty and anxiety. because their new Canadian managers deem it unnecessary. The Mexican organization often grinds to a halt. Mexicans tend to require more structure and definition of their role and responsibilities than do Canadians. For example.What is less apparent is the pervasive loss of productivity of those who remain. Tolerance for uncertainty varies widely around the world and this variation can play havoc in international M&As. The "list" is overwhelming.
Consider the case of a Norwegian . since language and cultural differences create significant communication issues. Pitfall 4: Infrequent and irrelevant communication Fear and a lack of all the answers deters top management from providing the information that customers. including people from both sides of the M&A. they often break down into sub-teams (one sub-team for each side of the M&A). concentrate and adapt. In many international M&As. Form small. For example. with a clear mission and empowered integration team managers with direct access to senior management and to their support. without it.. Clear leadership and strong support is essential to these teams.American joint Page 48 . committees and integration teams are created to handle all the lists and to plan new lists. When there is communication. In the case of international M&As. This may paralyze cross-cultural M&As. change is brought about from the top and employees at all levels expect new directions from their managers. this issue is compounded by the fact that organizational change is brought into companies in different ways in different countries. it often lacks information and substance that explains and supports stakeholders' interests. since top Canadian managers expect input from these teams and committees. Integration structures and transition teams designed to be all-inclusive and to represent a sign of "new partnership" will weigh heavily on an organization seeking to keep its eye on its customers and the market. in countries where the sense of hierarchy is much stronger than in Canada (like France and Mexico). the working languages of the two organizations involved are not the same. Transitions do not need to be demonstrations of democracy in action. while French members of these committees and teams expect direction from their managers. quick-acting teams. shareholders and employees need to redirect their action to the valueadded of the deal. The strategy: Accelerate.Pitfall 3: Organizational Proliferation In Canadian organizations. Communication can break down even when the employees of the foreign M&A target speak English. Rumor fills mystery and vacuums. many task forces. agile. This is particularly common in the international case.
Frequent communication. Because Norwegians tend to be more relationship-oriented while Americans tend to focus on tasks. In the international case. temporary organizational charts and decision-making processes depends on the countries involved in the merger or acquisition. The Americans responded that they could not waste valuable time on further meetings and that the matter should be settled by the legal team. The Norwegians complained that they had not built up enough trust to negotiate final details and needed more time. The tolerance for "fuzzy". For example In hierarchical countries. If employees do not understand them. Pitfall 5: Triangulation Without clear lines of authority and clear understanding of where they fit in. e-mail. The strategy: Accelerate. A recent PricewaterhouseCoopers survey of 124 mergers indicates that those firms that implemented effective communications strategies showed better results in customer focus. and video. employee commitment and productivity than those firms that had a delayed communication strategy.venture. Tension decreased when the teams realized that their goals were the same but their ways of achieving them were quite different. He / she interprets the situation as having to meet two complete sets of expectations and perform two separate Page 49 . A Filipino employee reporting to two managers. like the Philippines. more clearly than in Canada. the best way to make a presentation and to reach an audience differs from country to country 1. Indeed. communication often requires translation as well as adaptation. as in the Norwegian .print. the parties almost came to blows over when and how to bring the discussions to a conclusion. The communication strategy needs to take communication style preferences into account. paralysis often results.American example mentioned above. as in a matrix organization. both organizational chart and chain of command need to be clearly defined. concentrate and adapt. meetings. a deal was eventually struck. employees and managers are caught in a web of conflicting objectives and old loyalties. voice mail. repeated at least 7 times through multiple avenues . will likely be quickly overwhelmed.
space and organizations. asking managers to discuss their conflicting requests would be viewed as insubordination. those not "connected" in the same space and time feel disconnected from the decisions and the center of the action. countries and organizational units. Pitfall 6: The relatives The relative forces of time and space. it means up to 30 years in Japan. keeping in mind the different Page 50 . publicly held companies need to show clear results at the end of the first quarter after the announcement. people need to know how they fit with the value drivers rather than short-lived organizational charts. Management needs to provide the information that people need to be comfortable with the new organization. Adapt to the realities of change and transition . Individuals going through a merger have to work at an accelerated pace at the very same time that the inner adaptation of change . compressed and merciless. Provide temporary structures to enable people and departments to navigate between the old ways and the new.jobs. The strategy: Concentrate and adapt. Space is also relative. The concept of time is also related to culture. For Filipinos. Japanese strategy discussions are likely to take into consideration events that Canadians consider irrelevant. In Canada. The strategy: Adapt. this information depends on people's cultural backgrounds.weighs them down and operates on personal. since they are expected to take place beyond the Canadian planning horizon. In Canada. Time in a merger is accelerated. rather than linear time. Help guide and support employees through the endings that they need to come to terms with before you expect them to embrace the new world. Actively manage the merger across time.personal and psychological transition . Irregular and incomplete communications at headquarters becomes a daunting challenge for those who live in different time zones. regions. While long-term in North America tends to mean three years. such may not be the case in other countries. In an increasingly virtual world. Consequently.they are different experiences and each individual will have their own way of going through them.
than less. but the concrete reality of productivity.. at this time. charisma and a positive personal image are important attributes of leadership in the U.accelerate. These people are the role models who demonstrate. Changing culture means changing behavior. with the visible active support of senior management. . Pitfall 7: The guiding light At a time when leadership and active management is most called for. adapt. Conclusion These pitfalls of mergers and acquisitions challenge today's leaders to a new standard of managing change. Create the appropriate communications tools and the accountabilities and standards that will enable the organization to better operate across time and space. the need for leadership remains. In the case of international M&As. For example. The strategy is clear . Only a new culture can create the context for true change to happen and hold. Page 51 . economic value and sustained growth. The strategy: Adapt. what the new culture is. One of the primary roles of a leader is to articulate a vision and inspire others to join in that vision. The human and cultural issues that separate the 17% from the 83% are not about some abstract values or the "soft stuff". but the nature of leadership changes. A clear new. More leadership is needed. the stress and uncertainties associated with the merger causes an inward focus and a retreat to safe and high ground. concentrate. One of the quickest way to effect change and create the new company is to place in all key positions those individuals who are true representatives of the new culture and who can lead effectively people on both side of the company's cultural divide. consider cultural differences. and in the case of international M&As.concepts of time and space that may be at play. Being a good leader requires different skills and attributes in different countries. more so than in Canada.S.
So while devising a strategy to overcome the pitfalls one can analyze the impact on employees for the action’s takes by HR department in case of Merger and Acquisition Actions from HR Psychological and Cultural Impact on employees
Communication : Management cascades/road Raises questions amongst employees shows/discussion forums (What is happening?)
Business strategy: Loose coupling or tight integration Organizational structure: Integrating/rationalizing operations Managerial de-layering Appointments and exits: Redundancy/relocations/new roles/ new appointments Terms and conditions: Pensions/salaries/benefits Managing performance: Immediate targets and deliverables longer term objectives Training and development
Employees question the rational (Why is it happening?) Employees question their short-term futures (Where will I be in six months?) Employees question their long-term prospects (Will I have a job?) Doubts raised about financial benefits (Will I lose out?) Questions about management expectations of personnel (What is expected of me?) Further questioning the future (Do I have a future?)
8. KEY FACTORS OF HRM IN M&A
Guideline: When making staffing decisions, gather reliable information about how employees respond to cultural differences. Competencies related to managing diversity should be given at least as much weight as technical competencies. Throughout the lives of IJVs and IM&As, numerous staffing decisions must be made, including decisions regarding whom to hire, whom to promote, and perhaps whom to let go. In addition to ensuring that an alliance is staffed with people who have the technical proficiencies required, staffing practices can improve the organization’s effectiveness by identifying individuals who are more likely to be effective working amid cultural diversity. Staffing practices also should be sensitive to the composition of teams (i.e., the content and structure of cultural diversity). 8.1 Staffing for cross-cultural competency On the basis of their experiences and a review of the literature, Schneider and Barsoux (1997) proposed a set of behavioral competencies needed for effective intercultural performance. These included linguistic ability, interpersonal (relationship) skills, cultural curiosity, ability to tolerate uncertainty and ambiguity, flexibility, patience, cultural empathy, ego strength (a strong sense of self), and a sense of humor. When evaluating employees for staffing decisions, competency models such as this one provide useful guidance that can increase an organization’s ability to staff its alliances with employees who easily adjust to and enjoy cultural diversity. However, it should be noted that competency models for cross-cultural adjustment often are developed on the basis of expatriates’ experience (e.g., Mendenhall and Oddou, 1985; Tung, 1981). While expatriate assignments may share some similarities with IJV or IM&A assignments, there also are many differences. Much more research is needed to identify the personal characteristics most likely to contribute to success in these settings. When an organization’s strategy requires that it participate in a large number of IJVs and IM&As, it has the opportunity to conduct such research. Doing so can help it further refine its understanding of how various personal characteristics relate to the performance of employees in culturally diverse organizations.
8.2 Staffing for composition As we have noted, cross-cultural alliance partners often establish teams to ensure the airing of multiple perspectives prior to decision making (Apfelthaler et al., 2002). Especially during the early stages of the alliance’s evolution, these teams often are staffed with equal numbers of representatives from each partner involved in the alliance. For example, following a merger, this tactic might be used ensure that the two companies have equal representation in the new top management team (Schweiger et al., 1992). This tactic also is likely to be used when forming the board that oversees an IJV, when staffing IM&A integration and transition teams, and so on. While representational staffing has many benefits, it may inadvertently lead to unnecessary conflict, divisiveness, and turnover if it creates teams characterized by strong fault lines. Fault lines can be avoided if staffing decisions take into consideration the structure and content of diversity created by a combination of people selected to staff a team. In other words, selecting the “best” people for a team assignment involves more than evaluating the performance potential of individuals: it requires evaluating the performance potential of the team as a whole. In addition to avoiding the creation of teams or departments with clear fault lines, staffing decisions also need to consider the status dynamics that are likely to arise within a team or organizational unit. When members of a group perceive a clear status hierarchy, lower participation and involvement can be expected from those on the lower rungs of the hierarchy, regardless of their actual expertise and knowledge. 8.3 Training and development Training and development activities can address a number of challenges created by the cultural diversity present in IJVs and IM&As. Training to improve cultural awareness and competencies may seem the most relevant form of training for improving intercultural relations, but appropriate business training should also be helpful. 8.3.1 Cultural awareness and competency training
Perhaps most obviously, cultural awareness and competency training can quickly teach employees about cultural similarities and differences, and perhaps diminish their reliance on inaccurate stereotypes. (Triandis et al., 1994). As was implied by our earlier discussion of the many types of cultural diversity present in some IJVs and IM&As, awareness training should not be limited to learning about national cultures; employees may also benefit from information about differences (and similarities) due to regional locations, industries, organizations, and membership in various demographic groups. Besides Educational briefings may be helpful initially, but as the alliance evolves, more intensive team-building workshops and joint problem-solving sessions will likely be needed as employees experience the many implications that cultural diversity has for their daily interactions. 8.3.2 Business training The potential benefits of cultural awareness training seem obvious, but business training also can improve the alliance’s ability to manage its cultural diversity. Business training can help to establish two of the conditions that enable diverse groups to reap the benefits of their diversity: an understanding of shared goals, and mutual respect. Unless participants in an alliance believe they share the same interests, they may assume that a competitive relationship exists between the alliance partners. Through business training, employees in an alliance can develop an appreciation for how the capabilities and resources of each partner can contribute to success. For example, if IJV partners enter a relationship that is not based on a fifty-fifty equity relationship, employees in the venture may assume that the higher-equity partner will ultimately have more influence and control, placing the lower-equity partner in a position of lower status. Thus, teaching employees about the complementary value of capital and intangible resources provides employees with a solid foundation for developing mutual respect.
8.. giving and attending to feedback is necessary for maintaining effective relationships. For IM&As. and rewarding them for developing the competencies required to be effective in a culturally diverse organization. all employees involved will understand how their performance is assessed and how performance assessments relate to the goals for the alliance. Cultural differences mean that feedback communications are particularly prone to misunderstandings and misinterpretations. performance management systems can improve cross-cultural relations by ensuring that employees’ efforts are directed toward shared goals. 1995).S. as does providing rewards to employees who provide evidence of improvement (Rynes and Rosen. According to a study involving several hundred U. 2002). Training programs can inform employees about the shared goals of alliance partners. Ideally. organizations. the success of domestic diversity interventions was enhanced when supporting sanctions were in place. providing them with feedback that provides insights about how people from other cultures interpret their behaviors. 2001). yet in any culture. Page 56 . but performance management systems must convince employees that the rhetoric is also the reality. The norms that govern giving and receiving feedback in various cultures differ greatly. Rewards and recognition for performance that contributes to achieving the alliance’s goals serve to reinforce the message. For JVs. performance management is an important and very complex aspect of human resource management.. Well-designed performance management practices can ensure that employees receive the feedback they need in a culturally appropriate way. a major challenge is creating a performance management system that aligns the interests of managers in the venture with those of the parents (Evans et al. at each evolutionary stage. Requiring everyone to attend cultural awareness and competency training communicates their importance.4 Performance management For any organization. In addition to contributing to employees’ performance in the technical aspects of their jobs. creating a unified performance management system is perhaps the greatest challenge faced by organizations that seek to blend two disparate cultures (Fealy et al.
the Steering Committee decided that the harmonization of HR issues would be driven internally and as such there was no involvement from external HR consultants.1.1. headed by Kuang King Khoong. From the analysis of the employees’ pay and benefits. gaps Page 57 . administration and systems • Identification of duplicated job roles • Development of an employee redeployment process • Planning of an inevitable retrenchment exercise The HR Team was also engaged in the extensive negotiations with two separate unions: • Singapore Bank Employees’ Union (SBEU) • Singapore Bank Officers’ Association (SBOA) 8.5. b Challenges Faced By HR One of the main challenges faced by the HR Team was the rationalization of salaries and benefits of the two banks. An external business consulting firm was appointed to assist with the change management of the business.1 Acquisition strategy of Keppel TatLee Bank Ltd In January 1998.a The Role Of HR It was imperative that the merger should result in a consolidation of resources and cost.5 Examples 8. the intention to merge Keppel Bank and Tat Lee Bank was announced.4 from Keppel Bank and 3 from Tat Lee Bank. was responsible for issues such as: • Alignment of salary structures • Harmonization of employee benefits • Consolidation of HR policies.5. the HR Director.8. The Merger Steering Committee was headed by the CEO of Keppel Bank and comprised seven selected members .5. The HR Team. especially headcount cost as there were obvious duplication of jobs and functions. 8. However. Keppel Bank and Tat Lee Bank obtained approval from the Monetary Authority of Singapore for a merger that involved a share swap.
which would be paid if they stayed for the agreed period to successfully complete their tasks. The HR Team considered adopting a “retention bonus” plan. Apart from focusing on the business and economical aspects of a merger. A lot of effort and time were spent in communication and negotiation.1. How it is managed. Another major challenge was to retain the people it wanted. This plan was not adopted eventually. 8. will have lasting impact in the newly merged organization. regular and with greater openness. He stressed that communication is one of the most important factors of a successful merger. they should hear it from the Bank first. human capital is one of the most important assets of an organization. particularly during a merger or acquisition. there were very few unfavorable reports from the press. The HR Team had to overcome much resistance from the affected employees.were identified and solutions proposed. Three Communication Sessions were also conducted by the senior management to brief the department heads and other employee representatives on the progress of the merger. especially when the public and the press were watching it closely. priority should be given to both the tangible and intangible human resource issues. Page 58 . It was difficult to hold them. Some IT personnel for example were critical to the transition but only for a limited period of time. c Key Lessons Learned Kuang was quite relieved that apart from the news of its retrenchment. employee newsletters were distributed periodically. Kuang feels that the communication could be even more extensive.5. In retrospect. In his view. Kuang’s advice for a successful merger is for the management team to keep an open communication channel with the employees. Throughout the merger exercise. The HR Team ensured that if there were news affecting employees. The concept was to retain them for the transition period with an incentive. The affected employees were subsequently either redeployed or retrenched. although the economic crisis at that time helped to control the situation.
Extensive research was conducted to determine the suitability of hotel operators who could be a strategic fit to Raffles business goals and financial objectives. This team.2 Acquisition strategy of Raffles International Ltd As the owner and operator of fine hotels and resorts. Legal and Sales Page 59 . it decided to acquire Swissotel Holdings AG at a cost of S$420. The first Task Force was specially assigned to look into the legal issues of each functional areas and their implication on the overall acquisition. ii. Human Resource. Raffles Holdings immediately set up two task forces to conduct due diligence on the target hotel operator.1 million. How It All Began i. Raffles International consistently delivers its promise of not only meeting but also regularly exceeding expectations. The acquisition of Swissotel achieves several Raffles Holdings strategic thrusts: Increased Global Reach Enhanced Brand Equity Operating Benefits Of Scale Achievement Of Strategic Business Goals Enhanced Human Capital a. Raffles Holdings set out to identify potential hotel operators for acquisition to complement its existing business.5. Pre-deal Stage Armed with a clear business expansion plan. To this end. Raffles International Limited began to develop an international expansion strategy focused on obtaining a presence in capital and gateway cities in regions outside Asia. made up of key personnel from Business Development. Finance. In support of this vision.8. Due Diligence Once the target hotel operator was identified. Through this acquisition. Raffles International gained ownership of the Swissotel brand and its trademarks and management contracts for 22 hotels including those of 6 majority or wholly owned hotel properties and minority interests in 3 hotels.
systems and processes with that of Raffles International. The integration of Swissotel allowed the Group to realize synergies and create opportunities for shared services. the following areas were carefully analyzed and studied: • Employees’ Employment Contracts and Terms e. people. experience and competencies • Employees’ remuneration details. The integration process further acted as a catalyst for the establishment and implementation of various systems and processes such as the Page 60 . duration of contracts. costs of benefits and related costs • Pension and retirement plans and company’s contractual obligations • Employer’s liability – both written and implied •Agreements with Unions and Work Councils iii. etc •Employees’ demographics. contracts. As this was a very daunting and challenging task. documents. severance pay. qualifications. management moved swiftly to integrate the Swissotel’s business. Communication To drive the integration process. policies.g. The other Task Force was divided into Project Teams to gather as much information as possible on Swissotel in the respective functional and operational areas to aid the acquisition process. and agreements. The Integration Once the deal was concluded. skills. notice of termination. only the best people were deployed to this team. correspondence and notes to conduct detailed paper searches for any material evidence that would have an impact or implication on the acquisition whether financially or operationally or legally. philosophies. a communication team was formed to ensure that messages to the employees were delivered the way they were meant to be. distribution and marketing network and implemented uniform hotel operating standards and procedures. the Group consolidated its global sales. practices. Systems and Processes From a business standpoint. In the case of the HR function. v.and marketing locked themselves with a myriad of files. iv.
there was duplication of jobs in some areas such as Human Resource where a team exists in both organizations. Being a Singaporean was not a criterion for retention and the final selection criterion was based purely on merit. communication and consistency on deliverables”. Key Success Factors The 3 key success factors of a merger or acquisition are “Strong leadership. skills and know-how. These systems are the vital infrastructure to support the Group’s medium to long-term growth business objectives. PANKHURI Page 61 . Job holders who held duplicate jobs were reassigned and a period of 6 months was allowed for the incumbents to demonstrate their competence level. People The acquisition was that of an ongoing operating hotel and as such the employees in each operation were much needed to keep the operations functional and going. vi. 9. Raffles International was keen to promote a system of meritocracy and drove this philosophy by not making jobs redundant immediately. However. Human Capital Management System (“HCMS”) and Financial Management Information System (“FMIS”). b.Customer Relationship Management (“CRM”) system.
Also. policies. A: Align As mentioned above. (these can be new or picked up that are vital. • Position: Job analysis of the role. So the irrespective of what is best for issue here is that the new entity should have a the company.). Hierarchy) Organization each position. Structure who gets demoted. paid time off/leave policies (leaves are changed so that there is least determined by the grade or designation so friction/resistance. designations and titles. from the smaller company or from the larger one. The high mapping the new org structure to the leave impact procedures remain and policy becomes important). The following table explains in detail all the aspects of this approach : PANKHURI P: Policy and Procedure Mapping ISSUE APPROACHES TO ADOPT HR policy integration becomes crucial for • I Buy I Dictate: the post merger integration success if the two policy/procedure of the bigger merging companies carry different legacy company prevails and the procedures. remuneration policies etc. Srinivas Rao” and it is called PANKHURI. Take action according based on other variables. responsibility etc will each role carry? Will it be similar to the merging companies or will differ? • Hierarchy: who will fit which Page 62 . Examples of policy and smaller one has to adjust/change procedure conflicts are PMS system • High Impact: the most differences (rating scales. has to be most beneficial to both and • Best of the Two: the best should cause the least friction from the practice prevails. policy procedure system derived from the 2 entities. whether it is change management perspective. 360 degrees vs. Things to be determined are grades. single rater system policy/procedure system is etc. there are 2 people for RPH Model (Role. How much decision making authority. and from one of the merging entities.A unique approach has been adopted to resolve the HR issues in the book “Whispers of the Devil in the Angel – K. Position. TBD) desirable or can be scrapped. essential. reporting • Role: divide roles between those structures etc. the merged entity can pick up a new policy/practice out in the market if that’s best for the new firm. promotion flexible/malleable processes. so the issue here is who stays. expatriate the low impact one’s leave. who gets laid off and on what basis.
group and organization relocation etc. and reinforced by the structure and Cultures Organizational cultures pose a difficult policies. N: The management styles and geographical A new organization culture best suited Neutralizing imprints of the merging entities will differ. for the new entity is to be introduced Cross hence making integration difficult. managerial and role specific Skills Sets different competency models and different training to be conducted skill sets of employees. uncertainty around is the only way to deal with anxiety at pay differentials. qualification. it is • Awards: Reward those who Management imperative that all the knowledge of the share information legacy systems of shared. rewards and actions M&A too. procedures around reward and Also. Specifically. management have to be such that they reward and reinforce open and flexible behavior among employees.: if the new culture is to be integration issue. job loss. Issues that arise here employees to share information include cases where employees are reluctant to share information thinking that they will not be required in the company anymore of the information is shared. etc. The competency framework needs to be matched and the skills sets of some employee will need to be Page 63 . E.g. H: Handling The uncertainty caused by any change Communication and reinforcement Anxiety management initiative creates an issue in an through messages. This is the most crucial and most difficult as each employee has been mapped using difference performance management of their legacy companies. There is nothing like confidential data to be hidden from the • Policy: Create a policy that new entity. the policies and bureaucratic while others are more flexible. U: Upgrading The two merging companies will have Technical. country cultures are different impacting recognition and performance organization cultures. demotion. level. K: Knowledge For any successful integration. Some organizations are more open and flexible. performance record.PANKHURI ISSUE APPROACHES TO ADOPT role and position based on their background. the individual. typical response being “this is all I know”. This needs to be introduced as a makes it mandatory for mindset in employees. potential to be promoted.
PANKHURI ISSUE APPROACHES TO ADOPT upgraded to match the rest. Compensation insurance plans. • Performance of the respective employee • ROI derived from relocation • Analysis of the replacement cost Potential of employee to be promoted Compensation needs to be mapped by first mapping positions and roles and then conducting an industry benchmark. All these might be different for the merging companies and hence need to be mapped. handling change management etc. R: Relocation In a merger involving two large The determining factors for deciding Plan organizations. differential pay etc. there would internal and relocation should be: external relocation of personnel during the integration phase. What is worth noticing is the fact that there exists enough literature on the possible role of HR in an M&A yet there seems to be very little that companies are doing to put theory into practice. Despite all the talk about the synergistic benefits that an M&A provides. Issues arising here could be determining the decision criteria for relocation. Compensation is one of the most sensitive issues and only those practices that are best for the new company should be adopted. • I: Ideal Compensation includes benefits scheme. leave encashment policy. What are the possible causes and hindrances in this regard and how can they be overcome needs to be found out to ensure that the human element is not compromised over financial and other business related issues as usual DATA ANALYSIS M&A does deliver Page 64 . government regulations. bonus. there are examples galore of failed M&As.
” Page 65 . chorus the HR professionals “Whatever you do. avoid using the merger as a career step. at least in the short and medium term. People issues are critical The prominence given to companies’ human capital before and during M&A deals is critical to the success of the transaction. In 45% of the deals the share price of the merged company outperformed the rest of its sector in the following year. while a greater level of M&A success than is commonly perceived.” And you’ll need to know your management capabilities before the hard work begins. Both the operational and financial success-rate of M&A deals revealed by the survey contradicts previous studies into M&A performance and should embolden companies considering M&A activity. HR expertise is key factor for success The more capable the HR department. Therefore. Yet the most common responsibility given to HR during the M&A process is to provide ad hoc advice to senior managers. it also suggests there is still significant room for improvement by ensuring HR involvement. “This is not the time to discover that your people management is not too good and it certainly isn’t a time to try and sort it out. rather than carrying out a structured and formal role. Mergers are not for amateurs. Transactions that place HR considerations and capabilities centrally have a higher success rate than deals that neglect HR.European merger and acquisition (M&A) transactions are surprisingly successful: over 70% of respondent’s report their M&A deals achieved targeted objectives (published by Towers Perrin). There are differing strategies of involving human resources functions by senior managers responsible for managing M&A. “A merger will quickly reveal management weaknesses like no other event. the greater the chances of M&A success. “You need seasoned professionals in place to do the job.” says one. New desk research into 50 large mergers and acquisitions in Europe backs-up the respondents’ claims.” says an HR director.
Performing due diligence in HR-related areas 8. Developing a reward strategy for the new organisation If people really matter. it’s like cramming five years’ normal management experience into 12 months. Securing the top team 6.But it can be turned into a great management development experience for those who want it. the US and Asia who had all recently experienced a merger (either as acquirer or target). Finalising and developing a staff model 9.” If you choose the latter course. distilled the following critical HR-related factors: 1. most do not get involved until after the planning and strategy-setting Page 66 . “At the time of a merger you are in a virtual construction zone. why don’t HR departments? People issues are recognised as being of paramount importance in successful M&A. Yet analysis finds that HR departments play only a modest formal role in most deals. Prioritising activity in the first 100 days and beyond 7. Achieving cultural alignment 3. From this study. “says a financial services executive. or you can pull on a hard-hat and get on with it. “You have a choice. You can get out and find a quieter place to work. Ensuring effective communications 2. Developing a change management plan 5. Of those that do.” GETTING THE HR CONTRIBUTION IN M&A RIGHT As part of the research process studying of senior human resource professionals in Europe. The majority do not have a dedicated HR resource to participate in M&A activity. “you’ll learn so much in that merger period. Keeping the business running and understanding ongoing roles and responsibilities of a business in transition 4. things fall out of the sky and hit you.
Boeing. The best performing merged companies were likely to have top management that consisted of both companies’ management teams and that had increased headcount. British Airways. GlaxoSmithKline. Over half of companies that gained employees after a merger or acquisition saw share prices grow at a rate above the sectoral average. Synergies non-existent or over-estimated 3. Honeywell. ExxonMobil. Clash of management styles/egos 5. DaimlerChrysler. In contrast of companies that lost employees saw their share price fall below the sectoral average growth rate. The Ford Motor Company. Page 67 . Inability to manage target organisation The top five causes of M&A failure identified by the study are all deeply rooted in the “softer” management issues of integrating different cultures. Most of companies going through M&A made immediate job cuts. This study provides some insight into the positive impact that a deeper HR involvement in the M&A process can have. Incompatible cultures 2. E. How capable is your organisation’s HR department in relation to M&A and other activity?” 1. BP Amoco. So to identify the people issues that have a critical impact on M&A activity and the roles entrusted to human resources professionals during the M&A process. the greater the chances of M&A success. In other words. it appears that the more capable the HR department. The worst performing companies were likely to be led by the acquirer’s management alone and to have lost employees. Unilever and United Technologies.ON. Inability to implement change in new organisation 4.phases of a merger or acquisition – the precise point at which a full and frank assessment of the culture and key people at the target organisation should be taking place. leadership teams and workforces. Syngenta. Deutsche Bank.
We have outlined the need for the CEO and the senior management team to make themselves visible to employees of the new company and to coordinate the integration of all corporate functions. such as internal communications. Inside the HR department A new breed of HR professional is required. one that can think strategically and communicate directly with senior management about the people issues of M&A activity. how can this gap be narrowed? The answer lies partly within the boardroom. Disparate benefits and compensation policies also need to be integrated to align the company’s employees with the senior management team’s Page 68 . Inside the boardroom Ultimately. there are signs that just such people are emerging—organizational development experts and corporate integrationists with the skills and insight to bring together the diverse parts of a business empire and make people work together in pursuit of the business’s objectives. Otherwise firms risk losing control of key human capital issues – even as they boast that people are their greatest asset. and. It has also revealed the low level of involvement that many HR departments have in those deals. partly within HR itself. Since HR departments have (or should have) knowledge and expertise to contribute on these issues. and partly outside the organization. Regular walkabouts by top managers. for assigning a budget to bring in outside specialists. are essential to retain motivation and persuade each side that their own leaders are not being sidelined. This study points that people issues are critical to the success of M&A deals. accompanied by their immediate reports. senior management is responsible for the success of M&A deals. Indeed. if need be.Role of senior management CEO and senior management MUST invest their own time. They must also take responsibility for ensuring that the HR department is systematically involved in the M&A process.
the answer is to bring in resources and expertise from a trusted outside partner. Ad hoc advice to senior management on HR issues 3. and if they budget for outside help where it is needed. The role of HR departments in the due diligence process is also vital to ensure the M&A transaction is accurately priced. Designing the new reward programmes post-deal 5. Performing due diligence on the benefits/compensation plans of prospective firms 2. Helping to define the new business strategy 9. Identifying and retaining key talent in merged entity 4. that way lies success The roles that helps HR manager in a merging firm 1. if they enable HR to play a fully engaged and constructive role in the M&A process. Performing due diligence on the culture of prospective firms 8. Performing due diligence on the HRIS/ administration systems of prospective firms 7. M&A deals are important to companies’ strategies.business objectives. If senior managers pay enough attention to human capital. they just don’t have the manpower or the experience to do the work with the speed required. Outside the organization Often HR departments cannot get involved in M&A deals to the extent that they should. For these departments. Why? Because. Managing communications to the whole company on M&A activities 6. Delivering cost savings through downsizing of duplicated functions CONCLUSION Page 69 . People issues are critically important to M&A deals. particularly in the case of big global and cross-border mergers.
A merger of the size like HP-Compaq has implications for the workforce of these companies across the globe. downsizing. it is important to restructure the organization and quickly induct the employees to its new goals and culture. layoffs. the impact can range from anger to depression. role of leaders in the organization. life cycle of the organization. Literature provides ample evidence of difference in between the human resource activities in the two stages: the pre-acquisition and post acquisition period. The human resource system issues that become important in M&A activity are human resource planning. decrease in the morale. information system issues etc. 3. Despite every intention to derive synergy from the mergers and acquisitions. The other issues in the M&A activity are the changes in the HR policies. and the management styles. it is a business imperative to merge and acquire companies. Although the merging entities give a great deal of importance to financial matters and the outcomes. survivor syndromes. Ironically studies show that most of the mergers fail to bring out the desired outcomes due to people related issues. 1. The human resource issues in the mergers and acquisitions (M&A) can be classified in two phases the pre-merger phase and the post merger phase. stress on the workers. only one third of all such deals are successful.Indeed. which will include the organizational cultures. HR issues are the most neglected ones. compensation selection and turnover. productivity leading to merger failure. motivation. The pre acquisition period involves an assessment of the cultural and organizational differences. performance appraisal system. 2. 4. The mergers often prove to be traumatic for the employees of acquired firms. The usual impact is high turnover. Due diligence is important in the first phase while integration issues take the front seat in the later. Page 70 . To fully gain the benefits of mergers and acquisitions.
hence the excess manpower at times needs to be downsized hence the first set of thoughts that occur in the minds of employees are related to security of their jobs. The M&A activity also causes changes in their well defined career paths and future opportunities in the organization. The employees not only need to abandon their own culture. working in new departments and fear of working with new teams. M&A activity presents a different set of challenge for the human resource managers in both acquiring and acquired organizations. Page 71 . 8. The M&A activity leads to duplication of certain departments. 5. Leads to “us” versus “them” attitude which may be detrimental to the organizational growth. career path. which may clash owing to the M&A activity. hence the employees find themselves in a completely different situation with changes in job profiles and work teams. 7. values and belief but also have to accept an entirely different culture. one of the cultures that are dominant culture may get preference in the organization causing frustration and feelings of loss for the other set of employees. 6. In case of cultural clash. Research has found that at least two hours of productive work per employee per man day is lost during the M&A activity in the organizations. The uncertainty during the M&A activity divert the focus of employees from productive work to issues like job security. changes in designation.employee development and employee relations. Some employees also have to be relocated or assigned new jobs. This may have an impact on the performance of the employees. The organizational culture plays an important role as each organization has a different set of beliefs and value systems. The exposure to a new culture during the M&A leads to a psychological state called culture shock.
10. Without bringing people skills to the agenda of the merger and acquisition process we close off a whole area of expertise that is a must-have for today’s business operations. fluid and constantly changing. are the potential rewards. too. This will require study of management-union equation. On the other hand if the compensation level of employees in acquiring firm is lower the employees may press to have equal compensation across all the divisions of the firm. Since the organizational structures are different designations for the employees are used. not enough time and effort is expended getting these often brittle. The power equation between management and trade unions is bound to change with the acquisition. While people may be the heart and soul of a business. The employee relations issues gain more importance in the acquisitions of manufacturing units in India. Hence comprehensive analysis of trade unions operating in the plant should be done. compensation related clauses. RECOMMENDATIONS Page 72 . The acquiring management also needs to keep track of number of unions. The effort required may be substantial.9. during the integration of acquired organization the acquiring organizations need to develop a mechanism to remove the differences in the grading systems bring them at equal level. number of trade union and dynamics between the unions. employee contracts. 11. political linkages of the unions. Another practical problem is differences in the grading or organizational structures in the systems. The compensation issues may also involve legal angle. Companies are living things. This report serves as a warning signal. as many a times the compensation is related to the grade of employee in the organization. fragile people issues into the right context. The pay differential can act as a de-motivator for the employees of acquiring firm and may have long term consequences. but so.
Finance departments often drive M&A processes. Involve HR professionals early – involve them when scoping a proposed deal 2.The companies should ensure to consider the following practical tips: PRE-MERGER & ACQUISTION STAGE PLANNING 1. so that effective integration programmes can be implemented immediately post-deal CREATING AWARENESS 1. 2. INTIAL COMMUNICATION 1. Find out through surveys what cultural values are valued and which of them should be preserved Conduct common understanding programs with the executive level employees of the company which you are takeover. Identifying realistic synergy targets. say so! INTEGRATION STAGE PROACTIVE RESPONSE 1. and exercising caution in estimating both the timeframe and the potential cost of redundancies 4. Be clear and transparent about the nature of the deal – if it’s not a merger of equals. Ensuring that cultural due diligence is carried out prior to a deal. they must speak in financial terms 3. Acknowledge the problems as and when they arise Page 73 . If HR departments want a seat at the M&A table.
Moving quickly but fairly in the appointment of new management teams at all levels in the business. Provide the management with development tools and ideas to implement the result of the surveys and feedback COMMUNICATION 1. go deep the first time and do it quickly. and dealing humanely with the casualties. 3. 2.Focus on the top team and key talent. offer outplacement services and just severance packages 3. Get that talent inventory completed quickly and make sure you secure the people who are mission-critical. a. Have a definitive plan with specific dates for individual communication STABLIZING AND ADAPTING THE CHANGE 1. Workforce management. demoralizing stream of announcements of redundancies 3. In the case of acquisitions.Employees in the branches and plants are the most starved of information. POST MERGER & ACQUISTION STAGE Page 74 . 2. Be bold in integrating rewards and benefits.2. Encourage open houses or forums where employees can come together and discuss the deal and allay their fears and insecurities surrounding it Negotiate and make the union leaders understand about the entire issue and their future positions after M&A People must know where they stand. 4. the HR needs to ensure an equitable and fair treatment of employees. If there have to be job cuts. Avoid a constant. So you need to explain why the deal is good for them and their future job security. In case of lay-offs. Understand the organization structure/salary structure and try to reduce the parity between the two companies. b.
3. Establish an anonymous helpline for employees Should facilitate transition teams that are averse to decision making based on personal agenda and politics The HR has to quickly take control in these cases and educate managers and employees. 2. POST COMMUNICATION 1. Advocate family assistance programs to make the employee that he/she is cared for 4. Any transformation in the compensation policies should also be informed to reduce ambiguity. It is important to keep the employees updated about the performance appraisal guidelines of the new company. Conduct a survey of all levels of management about 3 months after the deal is through in order to assess the progress towards the new culture Understand all the legal cases pending with the acquiring company and take full accreditation of the cases to take next steps. COMMON POINTS OF RECOMMENDATION THROUGHOUT M&A STAGES Page 75 . 2.EVALUATION 1. 5.
Credibility And Respect Needs to be earned by the buying organization (through observing such things as thoroughness. New pension policies. such as the prospect for merging corporate cultures.1. Page 76 . 3. technical knowledge and behavior of key executives). The best way to show that the merger works is quickly to announce some new business deals. This will also give confidence to the existing employees about their future 4. 2. Communicate at all levels in the company – there’s no such thing as too much communication 6. 5. for any new project in the pipeline. Pay as much attention to the people issues as the numbers. you won’t get the benefit of the deal without the people. Ensure the due diligence process identifies the people liabilities and covers the socalled “soft stuff”. appropriate training should be given to the employees and correct explanation should be provided for the same. if any and retirement benefits should be informed to the employees to reduce employee turnover during an M&A activity. If a new skill set is required. Rapidly formed task forces from both companies can prove that the merger was also a practical moneymaker & One way to avoid instant culture clash is to promote the benefits of having acquired a new and complementary talent pool. LIMITATIONS 1. The origin or source of the data is mostly hidden.
Data can be outdated 5.2. Data can be inaccurate and vague as it’s based on information uncertified & personal option. The sites giving data may be unreputed & unrecognized 7. S. BIBLIOGRAPHY HUMAN RESOURCE MANAGEMENT – V. RAO Page 77 . The topic of M&A included vast global organizations. Limited time to complete this study. The secondary data can be distorted or molded by the provider 4. 3. 6. analysis and conducting study on each parameter is not possible.
Volume 4:3 . Hoboken. HR Monthly.Page xv Anthony F. Paul W. David “Merging Interests”. October 2009 . "Thirty Years of Mergers and Acquisitions Research: Recent Advances and Future Opportunities".Mergers and acquisitions: text and cases Kevin K. AMACOM. Economic Bulletin. Rod Carveth . Ira and Shelton. and Mergers & Acquisitions.Cairnes. James Owers. (2006). Stahl.1993 . Leveraged Buyouts. The Complete Guide to Mergers and Acquisitions(2005) . British Journal of Management 17(S1): .Gaplin and Henron. A.HUMAN RESOURCE MANAGEMENT – GARY DESSLER STRATEGIC HUMAN RESOURCE MANAGEMENT – SRINIVAS R KANDULA - Corporate growth through mergers and acquisitions S. DeSimone. October 2007 . January 2008 .Cartwright. Australia.THE IMPACT OF MERGERS AND ACQUISITIONS ON US SOCIETY Alison Alexander.. 2000 . Schoenberg.. James L. Harris – 2002 . Mike “The People Problem in Mergers”. Werner.Powell. Joshua Pearl (2009).2005 . Human Resources.Neiger. Jac The ROI of Human Capital. . Shiva Ramu . .2003 . Page 78 . Susan.Mergers and acquisitions: managing culture and human resources Günter K. Mark “Managing the Asian M&A wave”.Kay.Harwood. Bowditch . Beamish – 2007 .Human resource development Randy L. Boeh. Mendenhall . David M. Richard (2006). Joshua.Rosenbaum.1998 . British Journal of Management . I. Jon M. Investment Banking: Valuation.Fitz-enz. Margot “Surviving Super Mergers”. Mark E. Buono. Jac Fitz-Enz. Human Resources. Asia Pacific.The human side of mergers and acquisitions: managing collisions . "Confidentiality constraints within mergers and acquisitions: gaining insights through a 'bubble' metaphor". . NJ: John Wiley & Sons.
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