Mergers and Acquisitions: Human Resources HR Role in Mergers & Acquisitions

Mergers and Acquisitions

Human Resources

The purpose of this work is to access the functions and strategies that must be implemented into a successful process of merger and acquisition within the company in relation to the management of human resources [i.e. employees]. Further to do so from the approach of a "value added partnership" in terms of the substantiation of a Return of Investment (ROI)

During the decade of the 1990's over 150 mergers and acquisitions took place with twenty-percent of those M & A's producing substantially lower share holder value, only marginal returns were achieved by thirty-three percent, thirty percent resulted in substantially lowers values for shareholders and a mere seventeen percent created substantial returns for the company's shareholders. Miller {2001}

According to James W. Walker who states that this work is adapted from a Chapter to appear in the "Handbook of Human Resources Management" edited by Gerald R. Ferris and published by Oxford/Blackwell Publishers in 1994: "Integration of human resource strategy, processes, and the human resource function with the business is necessary for the maximum impact on a business. It is no longer sufficient for plan to be merely aligned or linked ... The human resource staff function is blending into the fabric of management so as to achieve the necessary business impact." Walker (1994) Clemente et al. (1998) states that "You must key on the areas where strategic overlays exist and which, consequently have the greatest influence on devising revenue growth strategies." Further explained by Walker is that there is no other option than the support of business strategy by human resource management and activities within a company as well as the focus of HR in meeting the satisfaction of customers. Walker states that: "It is not enough for the human resources function to be responsive to management, 'customer-oriented," or even aligned as partners with management. The function is an integral part of management -- leading and implementing needed change." Walker (1994)

I. Elements Required for Success in the Merger Process:

Patti Hanson states that the following are necessary steps for integrating workforces during a merger-acquisition process:

1. Development of a workforce integration project plan.

2. Conduct a full HR review.

3. Analysis of differences in compensation and benefits.

4. Devise a compensation and benefits strategy for workforce integration.

5. Address duplicate functions.

6. Prepare employee communications strategy.

7. Implement an employee retention strategy.

II. Each Merger is Unique and Requires Strategic Planning:

There is a unique nature to each individual merger therefore the approach to a merger-acquisition process should be tailored to that particular merger in both the approach as well as in the implementation of the chosen approach. "Strategic planning has been applied by organizations large and small to shape their futures." Galpin (1997)

It is extremely vital that the HR Specialists and administrative staff of both companies participate in pre-merger interactions and discussion in order to create an initial cohesive force that can be built on throughout the merger process. During this interaction the diversity and cultural issues as to methods in communication, policy concerns of compensation, skill sets, as well as company goals can be assessed and a 'common ground' discovered. This process is so vital because this area is that which is likely to hinder integration the most after the process of merging has begun. "Companies that have taken an integrated approach to realigning their influence systems have enjoyed better-than-average performance." Galpin (1997)

III. The Reasons Companies Experience Failure:

Compatibility is crucial between the companies involved in the merger but all too often the bottom-line overshadows the importance of compatibility. Schmidt (2004)

"The primary focus for strategic deals today must be on melding complementary, nonfinancial assets with one eye toward growth and then extending their benefits over the long-term through integration." Clemente et al. (1998) In a survey conducted by the Society of Human Resources Management during the year 2001 stated was the fact that only 43% of the merger-acquisitions are successful due to: "the inability to sustain...

(2000)
The Human Resource manager must wear many hats so to speak during the process "playing the role of project manager," while at the same time "having the intellect of a president." Roberts (2004)

The Society for Human Resources Management Foundation/Perrin Mergers & Acquisitions recommends the best practices in human resources which is based on their experiences as being inclusive of the stages defined as: "Pre-deal, Due Diligence, Integration planning and Implementation." The Pre-deal phase is the same as the pre-merger aforementioned in this work. Due-diligence is the stage wherein the estimation of the "people-related transactional costs" and "related ongoing costs" as well as the "people-related savings" are identified. Anderson (1997) "Sophisticated acquirers are redefining the process of due diligence, by using a structured approach to access traditional and nontraditional components alike." Galpin et al. (2000)

During the integration planning stage there are a subset of suggestions which are: "designing the key talent retention programs, planning and leading integration efforts, developing a new strategy for the new entity, helping the organization cope with and define an organizational blueprint and staffing plan." SHRM Foundation (2004)

The final stage according to the SHRM Foundation is the stage referred to as "Implementation." During the implementation phase the "HR professionals should focus on managing change, managing employee communications, advising management on dealing with people issues, aligning personal total rewards as well as other policies in HR, monitoring the process of organization in terms of "people related integration activities and finally to ensure the capture of synergies via incentives." SHRM Foundation (2004)

Identification of those employees that are critical to the success of the merger-acquisition process. Furthermore, the HR personnel should not only identify those critical to stay but should also sort deciding who will go and who will stay and must do so quickly fairly. The addressing of the employees concerns is important and should be accomplished through stress-management training or counseling if needed. The HR personnel should also make provision of the reason for the merger in terms of that which is hoped to be achieved. "The value of open and honest communication methods at all stages cannot be overestimated; employee communications must continually keep people up-to-date on the progress of the merger and employee participation should be sought whenever possible." Anderson (1999) Further important is the monitoring of the process of the merger on a constant and continual basis. In order to motivate employees and to achieve short-term developmental goals the setting of individual performance standards will: "force employees to become familiar with the firm's goals, motivate employees to attain their performance targets, make employees and supervisors define and communicate their expectations, and clarify how performance will be measure in the new company." Anderson (1999)

Summary and Conclusion:

Merger and acquisition processes are either positive or negative events within the companies involved. The human elements within the merger process are probably the most determinative elements as to the success or failure of the achieving or failing to achieve goals set by parties to the merger. Strategic planning inclusive of open line of communication, fairness, as well as the willingness of the HR personnel in assuming many different roles during the process are all crucial elements to the success of the merger and acquisition process.

Bibliography:

Anderson, Julie Kathryn (1999) People Management: The Crucial Aspect of Mergers and Acquisitions" Industrial Relations Centre Publication [Online] available at the Queen's University website http://qsilver.queens, u.ca/irl/qsirc/.

Branson, Ruth (2000) HR's Role in Mergers and Acquisitions -- Human Resource Management [Online] available at: http://www.looksmart.com/training& development

Clemente, Mark N. et al. (1998) Winning at Mergers and Acquisitions (1998) John Wiley and Sons.

.Frost, Mike (2001) The M & A Transition Guide HR Magazine Vol.46 No.10 ISSN: 10473149 2001…