[Blog 49] What is HR role in Merger and Acquisitions?
Mergers and acquisitions typically involve a great deal of number-crunching and risk assessment. However, the importance of communication and company culture should not be underestimated.
The most important asset belonging to the organisation is the people. Yet when it comes to mergers and acquisitions (M&As), the people perspective is often overlooked and HR is seldom involved in the deal team.
HR due diligence is usually an add-on, often seen at the later stages looking at elements with financial risk such as employment contracts, staff and severance costs, labour or collective agreements liabilities. This narrow view of HR can be compounded by the fact that the human resource professionals within the acquiring organisation may not be aware of the important role they can and should be playing as the transaction proceeds. Best practices for companies with successful deals always include HR earlier and more heavily in all phases of the M&A transaction.
HR can be one of the deal enablers and play a pivotal role in the M&A process in the following areas:
Involving HR late in the M&A process can create all sorts of problems and road blocks. With the company bought also comes alongside its people and culture. Those employees in the acquired company have an environment and routines with which they are comfortable and familiar with. Changes in the “new enterprise” create an uncertain environment and impediment, resulting in employees feeling marginalised and undervalued.
Further, in order to achieve growth and cost-saving targets, workforce synergizing issues like optimization of staffing levels; alignment of HR policies, programs and practices; harmonisation of total rewards; and resource allocation can further exacerbate and de-stabilise the workforce. HR will have to step up to support the business by acting as a change agent and an Advisor on the various transition/integration issues. Culturally integrating the two companies is key to capturing the hearts and minds of all the employees.
The importance of good communications
It is vitally important for HR to understand the deal structure and speak to all the stakeholders. HR needs to understand the people agenda, how people connect and what are the people concerns. These observations will provide to the acquiring company insights and understandings on the changes and challenges required and be prepared for it.
During the transition period after the deal is completed, staff are inevitably going to be vulnerable and nervous. Their senses will be heightened as they look for signals about changes to their role, or even if it exists at all. They will want to see if the new work environment and culture is going to be welcoming or alien to them.
HR can play a critical role to manage and diffuse the anxiety and tension by taking ownership of employee communications and keeping the communication channels open. It is important for HR to frame a compelling communications strategy and act as the linking pin between different groups to ensure a good flow of information. Communicate in a strategic manner and be open and forthright as much as possible.
Potential difficulties can be resolved
Cultural differences can lead to a flight of leadership and mid-level managers, a deterioration of customer service and an inhibition to execute the integration with clarity and focus.
A misalignment of corporate cultures can cause major problems and can threaten the whole M&A transaction. Yet with adequate planning, these potential difficulties can be resolved. HR needs to understand the lines of responsibility and scrutinise existing management attitude in areas such as training and development policy, staff benefits.
Some of these HR activities may seem secondary to the transaction, but employees need to see that their new owners are engaged, interested and willing to listen to their concerns. Even just walking around the offices and talking to people at their desks can make a positive difference in the assimilation process.
Reducing the risk of conflict
Both companies involved in the M&A process should realise the importance of clear and transparent communication. For only if there are open lines of dialogue can both organisations make clear and informed decisions, thereby reducing the risk of conflict and problems later.
Prevention of serious HR issues can be addressed systematically and in a relatively straightforward manner. By contrast, trying to introduce a cure after the event may be impossible. On a positive note, there are opportunities as well as risks. With HR intervention to learn about the wants, needs and aspirations of the employees, they can help to raise morale and build momentum for the newly merged company to move forward.
M&As provide enormous potential for growth that simply can’t be achieved as quickly through organic or incremental development. However, for it to be successful, companies will need to pay close attention to the people aspects of the M&A in order for the deal to fulfil its promise.
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