Role of HR in M&A’s

An article which I submitted for an event at XLRI.

Investment bankers have a narrower training, and are rewarded for making deals; human issues tend to get lost or overlooked.

Before, during, and after the merger, HR may be responsible for assuring that cultural issues do not derail integration; for increasing innovation; for keeping communication going in all directions (upwards, downwards, across departments, across organizations); and for lessening the impact on those who are “survivors”.

In pre-acquisition phase things that need to be taken care of:

• An assessment of the cultural and organizational differences, which will include the organizational cultures, role of leaders in the organization, life cycle of the organization, and the management styles.
• To ensure that both organizations have a strategy mapped out in advance. Once the merger starts taking place, people will often be too busy to keep a strategic perspective.
• Communications to employees and customers as to where layoffs will take place (if any do), and how the cultures should be merged.

During the merger, HR plays an important role in:

• Communication – As people look inwards to try to find their place in the merged company and attempt to see their future in it – or outside it – productivity drops. Consistent and honest communication from the HR is very essential.
• Power and Conflicts – HR can help bring out conflicts to the surface and deal with power issues honestly. Employees often get wrapped up in turf wars which are destructive to both sides, rather than trying to figure out roles for both sides and have a win-win situation.
• Culture – HR may need to raise the issue of culture – how people work, how they think, what they value, and how they view the other organization. These issues must be addressed up front.
• Operations – In many mergers and takeovers, power relationships determine operational changes, rather than actual efficiencies or quality concerns. By making changes with facilitated cross-platform teams, HR can help to ensure that the best of the two organizations are preserved.

Post-acquisition, HR would have the following critical roles:

• Power equations between management and trade unions (if any) needs to be dealt with utmost care. These are the issues which are very brittle.
• Designations for the employees
• Compensation structure and performance appraisal systems

HR no longer plays a dormant role and is emerging as a strategic business partner where key initiatives undertaken such as communication, training, counseling, career planning, support workshops, building trust, coaching and compensation planning, have significant business impact.