Mergers and acquisitions are the corporate combining of forces. Either two companies will come together and adopt a unified management style under one name (merger), or a larger company will buy a smaller one and absorb it into its operations (acquisition).
Whatever the case, the goal of mergers and acquisitions is to create a synergy--the idea that the combined output of the two entities is greater than the sum of the companies on their own.
Despite this ambition, SHRM reports that, from a revenue perspective, between 70-90% of mergers and acquisitions fail, largely due to people-related issues. As a result, the role of the HR department is paramount in ensuring that a merger and acquisition succeeds, with the following ideas helpful ways for HR to help mergers and acquisitions run smoothly.
1. Choosing the Right Employees
One of the most significant challenges of navigating mergers and acquisitions is figuring out which employees to retain, redeploy, and terminate. Blending two companies will undoubtedly create redundant roles, while also generating the need for new roles not currently used by either company.
A skilled HR department will have this in mind before the merger or acquisition closes. It will look at the talent pool in each company and assess each individual’s skills, potential, and capabilities for fitting into the new organizational structure. By doing this in-depth audit of employee talents, the HR department can create impactful roles that will help avoid large-scale defections and limit the cost of interviewing and hiring to meet the needs of the newly formed organization.
During the merger and acquisition, the HR department will also identify which professionals from each of the constituent entities are absolutely essential to the success of the new company. It will proactively recruit these individuals and make sure that they are not lost to uncertainty during the transition.
2. Developing Innovative Compensation Strategies
Many questions must be answered during a merger or acquisition. Chief among these are concerns about how employees will be compensated by the new organization. If employees received tenure-related raises at one of the constituent companies, are they starting over under the new organizational structure? Will employees have access to the same benefits that they did before the transition?
To complicate these matters, many mergers and acquisitions require a significant cash investment, which may make the cost of employee benefits a challenge for the new company. Therefore, if HR departments foresee the cost of health insurance being an issue for the new organization, it would do well to look into ways to offer innovative lifestyle benefits and flexible time off procedures.
3. Establishing New Management Policies
Another challenge confronting newly combined organizations is the basic nuts and bolts of how things will operate on a day-to-day basis. What is the process for requesting time off? To whom do employees report when faced with a difficult customer complaint? What are the norms for organizational communication?
The HR department should start crafting management policy prior to the transition and collaborate with the emerging leaders of the new company to get an organizational blueprint in place. By successfully implementing management policy as soon as possible, HR can help alleviate employee confusion and limit the amount of money spent on retraining.
4. Encouraging Anxious Employees
Lost in the albatross of recruiting, hiring, training, and compensating is the more “human” side of HR. Namely, HR is meant to be a department where employees can go to voice their concerns.
One of the most difficult aspects of selling a business in an acquisition is how employees and their families will be affected, so a quality HR department will be proactive in putting employee concerns to rest. Those employees being retained by the new organization need to be given ample confirmation as to their job security. For those being given new roles or titles, HR needs to provide positive reinforcement and remind them how their skills and experience will be of significant value to the new company. If an employee is not being retained, HR should make every effort to ensure goodwill and provide guidance and resources for their career continuance.
5. Prioritizing Culture
Many mergers and acquisitions fail due to incompatible cultures. Therefore, before a merger or acquisition is ever attempted, HR needs to look and see if the constituent cultures will readily align. Some ways to achieve this include:
- Evaluating the goals of each company
- Assessing the way in which success is measured
- Encouraging dialogue throughout the company to keep day-to-day activities consistent with the corporate vision
HR’s Role in Mergers and Acquisitions
Mergers and acquisitions are the corporate combining of forces. While they are readily talked about in the business world, most fail from a monetary perspective due to “people issues.” Therefore, by considering the five ideas listed above, the HR department can help ensure that mergers and acquisitions run smoothly.
This article is brought to you by HR Musings.
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