Issues and risks in merging corporate performance management systems

What issues might arise as they attempt to merge their respective performance management systems?

Performance management systems play a significant part in the everyday operational success of an organization. When a firm acquires another firm, there are fundamental issues that might emanate as they try to merge their corresponding performance management systems. One of the key issues is that some of the metrics being employed by one company may not be suitable or efficacious for the other company. Majority of the organizations have a performance management practice and procedure that they utilize to measure and assess personnel on objectives delineated by human resources and ascertain bonus payments and compensation. Therefore, the lack of compatibility of the performance management systems of the companies whilst merging implies that the companies may fail to properly assess and manage the performance of the new set of employees and therefore give them the wrong set of dues and also compensations (Eckerson, 2010). The managers of one organization may carry out an ineffective and substandard job in the evaluation of personnel of the other organization. In addition, the performance incorporation and integration may come about devoid of the assimilation of compensation, development, movements and placement within the organization as well as rewards. Moreover, the form that is employed for the merged firm might not be appropriate for all personnel (Besanko et al., 2009). Another issue that is likely to be faced in the course of a merger is misalignment. In particular, mergers and acquisitions generate a fascinating sequence of issues concerning performance management, and especially aspects such as performance reviews. For instance, if the business restructuring or transition takes place just before the performance appraisal phase, then there is a likelihood of encountering instances of the incumbent firm manager letting go of the preceding performance review and also the incoming manager from the acquiring firm having no knowledge whatsoever regarding the performance of the employees (Marr, 2006).

What might be the risks for the combined firm?

There may be some risks that come about from the combined firm. One of these risks is failing to provide proper and detailed information regarding the acquisition and the merging of the two firms. Failing to disclose information to the personnel as a whole regarding the positions that may be affected in the business restructure might be a significant risk taken by the firm. As a result, this might give rise to law suits from some of the employees (Grimshaw & Co., 2016). Another risk that can be faced in the course of the merger is the vague and imprecise alignment with the corporate cultures of the firms. For instance, if one of the firms has a high performance organizational culture, then it is able to afford a stringent performance management practice and have a procedure of setting tough goal and objectives. The goals can be excessively difficult, but they have to be attainable. This can clash with merging with an organization with the friendly organization culture, which has to carry out the softer and less stringent performance management process. This can bring the risk of lack of fit. It is imperative to note that the fit with the organizational culture is fundamental as managers are able to trust the performance management system as a whole (HR Management Guide, 2017).

How could the firm mitigate these risks?

There are ways in which the firm would be able to mitigate these risks. Failure to do so could be detrimental to the new organization as a whole. One of the key ways is the integration of risk intoperfo0rmance management procedures can cultivate and nurture a better understanding of the general organizational risk exposure and enhance business outcomes. Another way to mitigate the risks discussed above takes into account disclosing proper and comprehensive information regarding the acquisition and merging of the two firms. It ought to encompass delineating the employee positions that may be left out and the positions that may be going along. In addition, if at any given point the new firm plans to terminate the employment of some of the personnel, it is imperative for them to be given notice. This is largely because it hands the personnel an opportunity to provide significant feedback before a decision is made (Grimshaw & Co., 2016). Another way of mitigating risks is through undertaking early integration planning processes, which lead to better chances of succeeding. The pre-planning process is purposed to making certain that an examination of the compatibility of performance management systems of the companies take place. In particular, this not only makes it possible to have a good guide on how these relationships are managed but it also simplifies the comprehension of the prevailing culture within the organization. It also sheds light the significance of maintaining as well as enhancing the relationships with personnel and other stakeholders (Marr, 2006). An additional way of mitigating the risk is to make certain that the performance management system has the capability of differentiating employees. In particular, it has to provide apparent and distinguishable output regarding the performance of individual personnel. Basically, the system has to constantly be maintained clear and thereafter delineate the definite and a restricted number of various groups and sets of personnel. This will make it possible to manage the groups of personnel and therefore able to project and manage the costs of every set of personnel (HR Management Guide, 2017).

References

Besanko, D., Dranove, D., Shanley, M., & Schaefer, S. (2009). Economics of strategy. (Fifth ed.). Hoboken, NJ: Wiley.

Eckerson, W. W. (2010). Performance dashboards: measuring, monitoring, and managing your business. John Wiley & Sons.

Grimshaw & Co. (2016). The Legal Pitfalls Surrounding Restructuring and Performance Management. Retrieved 8 June 2017 from: http://www.grimshaw.co.nz/2016/06/13/how-to-understand-the-legal-pitfalls-surrounding-restructuring-and-performance-management/

HR Management Guide. (2017). Performance Management Risks. Retrieved 8 June 2017 from: http://www.simplehrguide.com/performance-management-risks.html

Marr, B. (2006). Strategic performance management: leveraging and measuring your intangible value drivers. Routledge.