Article: The dynamic role of HR in Merger & Acquisitions

Culture

The dynamic role of HR in Merger & Acquisitions

The Human Resource department acts as a trusted adviser to the employees of an organization along with the management who intend to enter to an M&A deal.
The dynamic role of HR in Merger & Acquisitions

 

The wave of mergers and acquisitions in India has been enabling businesses to achieve significant competitive advantage in the market, thus making M&A the fastest tactical preference for global players as well as start-ups. The highly competitive global environment has made Mergers and Acquisitions (M&A), a common phenomenon for big and small businesses throughout India. M&A deals are an effective growth strategy for companies that help in—

  • Multiplying capabilities, 
  • Sharing proficiency,  and
  • Enhancing market share

The Human Resource (HR) department plays a pivotal role in the process of merger and acquisition between two companies. While mergers and acquisitions are considered an essential part of a company’s growth strategy and carried out for beneficial reasons, a messed up and weak understanding of HR issues often stands as an obstruction that results in failed mergers. Thus, HR plays a key role in managing all crises as well as disputes that may crop up in an organization, as and when the process of merger and acquisition sets off.

The Human Resource department acts as a trusted adviser to the employees of an organization along with the management who intend to enter to an M&A deal. In fact, the Human Resource team of an organization plays a dynamic role of leadership during any merger and acquisition. Here’s a glimpse of the critical role played by Human Resource during any merger and acquisition: 

Analyzing Organizational Cultures

HR helps figure out if the organizational culture of two companies partnering together are compatible enough to be meshed as one. When two corporate cultures integrate, it is the responsibility of human resources to enable a smooth transition by assisting the employees to comprehend and embrace a new organizational culture. However, this may turn into a daunting task as many M&As fail awfully owing to cultural disparity, clash in leadership, need of management commitment, absence of common objectives, or weak change management, which may turn into a matter of grave concern. Human resource is responsible for analyzing the cultural amalgamation of two companies by taking the demographics of the partnering organizations into consideration, which covers multiple factors such as: 

  • Management trend of the two organizations
  • How the employees of two organizations think?
  • Growth rate of the merging companies
  • Cultural differences between the two organizations
  • How the two organizations view each other?
  • Selectivity in hiring
  • Benefits enjoyed by the employees, such as insurance and perks
  • Rates of employee turnover
  • Level of estrangement experienced by employees.
  • Readiness or attitude of employees to embrace new corporate culture

Analysis of the demographics by the Human Resource team goes a long way in helping firms that are planning an M&A. In case the HR notices any cultural differences during the analysis, such problems should be tackled without delay. Similarly, if the HR senses any feeling of disdain between the employees of the merging companies, the issue should be addressed upfront. Thus, it is imperative for human resources to have a firm understanding of the work culture of the organization wherein they work, along with the work culture of the other organization. 

Changing Roles and Corporate Structure: As soon two companies merge or acquire another, both the companies undergo certain structural changes. For example, different teams may be combined for enhancing productivity or the management may decide to get rid of redundant positions. This procedure of introducing change in work culture of both the companies and implementing the change, so that the employees can work jointly without any conflict, takes a long time and the HR managers play a key role here. They work closely with the management to come up with new policies and communicate the same to the employees so that each person understands his new duties and responsibilities in the organization.

Boosting the Morale of Anxious Employees

During the process of M&A, some employees may be reluctant to adapt to the new work culture thus, creating a serious culture clash. It is a common human tendency to resist change and since M&As bring in an element of apprehensions and change for the employees of both merging companies, Human Resources in both the organizations should act as a comforting factor and take measures for sorting out the transition process for employees by—

  • Boosting the confidence of employees
  • Offering adequate training to managers so that they can acclimatize themselves to the nature of change and new organizational culture
  • Brushing away the fears and doubts of employees, so as to retain productivity
  • Ensuring job security
  • Explaining news roles to each employee
  • Expounding the hierarchy structure of the organization post merger
  • Elucidating how the joint venture will affect each employee in person
  • Upholding efficiency by identifying leaders from both organizations
  • Enhancing innovation by placing the right employee at the right position
  • Complying with labour laws
  • Supervising personal records
  • Keeping the communication channel open through constant communication with the employees and conveying their concerns to the management.
  • Providing timely input throughout the M&A process
  • Conducting orientation programs on welfare schemes, compensations, benefits, and company policies

 Last but not the least, throughout the process of M&A, the HR should take effectual measures to assure that issues arising out of cultural differences will not disrupt the M&A deal

Solving Employee Benefits Issues

The objective of due diligence process in M&A is the verification of Seller’s financials by the Buyer Company, along with the confirmation of all deals, customers and other relevant information. This is done by the buyer to assess if the M&A deal make any financial or strategic sense.  HR department of the buyer company particularly evaluates the benefit structure of the seller company to discover the likelihood of any imminent problem such as inadequate funds for pension plan or continuation of any medical insurance plan that may cost an arm and a leg to the organization in the long run.

HR Plays a Substantial Role in Merger & Acquisitions

The HR leadership of both companies should be capable of promptly developing a strategy to help out the companies in accomplishing the synergies they are looking for. Before the merger or acquisition takes place, the HR managers of both the firms should advise the management to map out a roadmap in advance so that the merging companies can stick to it as soon as the M&A procedure gets going. The strategy should stress on the organizational communication structure, layoffs (if any), and amalgamation of corporate cultures. This initiative by HR leaders helps the management to conform to a specific set of objectives, thus driving away all misunderstandings and differences that may come up in future.

The HR of any organization, by extending their intervention, can facilitate a successful M&A. Since Human Resource entails employees of an organization and deals with significant issues pertaining to employees, involvement of HR professionals is indispensable for successful mergers and acquisitions. Thus, during an M&A deal, an HR plays the role of a catalyst as well as a coach to enable employees of merging companies to work collectively and constructively.

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Topics: Culture, #MergersAndAcquisitions, #HR Ready

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