HR Strategy for Bank Merger: Challenges and Solutions

Introduction: The Role of HR in Mergers and Acquisitions

One of the most important elements for any business is the human resources department (HR). HR plays a vital role in ensuring that the various concerns of employees are met so that the business can maximize its profits. Yet beyond this obvious function, HR plays a more important role during times of mergers and acquisitions, when it is essential in helping to ensure that the staff and management of both companies are able to merge their different policies and procedures into one unified framework. In most situations, the HR department can effectively blend two different cultures into a hybrid that produces the desired effect.

However, merging two different companies can sometimes be very challenging when the managers and staff of both organizations hold completely different views and attitudes about how business should be conducted. Once this occurs, the ability of the HR department to effectively consolidate the various policies and procedures becomes more difficult, and the chances of a successful merger decrease accordingly. A compelling example of this dynamic is the merger between Daimler and Chrysler. The new company was touted as a merger of equals, with Chrysler gaining a foothold in the European market while Daimler-Mercedes would benefit from access to the North American market. However, problems became apparent quickly, as Chrysler favored a more aggressive management strategy toward the automobile industry — one that clashed with the traditional, conservative values that Daimler had long been known for. The HR department was never able to reconcile the two different attitudes about management style. The company subsequently saw a decline in sales and market share as the conflicting views created internal conflict that hurt the overall bottom line. This illustrates how any merger or acquisition requires the HR department to successfully integrate two distinct cultures into one (Mathis, 2008).

In the case of We Will Hang Onto It Savings, its merger with Lenders Are Us Bank could prove problematic, as two organizations with very different approaches to lending are being brought together. We Will Hang Onto It Savings is purchasing Lenders Are Us to prevent it from going into liquidation, after the latter engaged in a number of questionable lending activities over several years that left it in a precarious financial situation once the economy slowed. Making the merger work requires that the HR department implement a strategy encompassing the views of both companies. To achieve this objective, it is necessary to examine the possible challenges of merging the two companies, identify the most effective elements of an HR strategy, and offer recommendations for successfully integrating the two entities.

The Possible Challenges of Merging the Two Companies

The last several years have demonstrated that management must be able to adapt to changes occurring in the broader economy. The merging of these two companies could prove problematic based on the overall culture of conducting business and the differing attitudes toward lending held by their respective staffs. We Will Hang Onto It Savings has a consistent history of engaging in responsible lending practices; during the housing boom, it did not engage in risky lending activities. Lenders Are Us, by contrast, pursued a variety of loan practices considered significantly more risky. When the economy was strong, this inflated their bottom line; however, once the housing market imploded, total delinquent loans rose sharply, forcing the company to seek out this merger.

There are several distinct challenges that will be faced in merging the two companies, including: providing direction for employees, reducing costs, improving efficiency, and ensuring a strong pool of talent.

Regarding the first challenge — providing direction to employees — the merger will create confusion, as employees of We Will Hang Onto It Savings will have different practices and procedures from those of Lenders Are Us. This could involve everything from the way deposits are booked to how earnings are reported to shareholders.

Regarding the second challenge — reducing costs — the merger should in theory reduce costs dramatically. However, because the two entities were structured differently, the practices of various departments at Lenders Are Us could be vastly different from those at We Will Hang Onto It Savings. During the early stages of the merger, this could lead to irresponsible lending practices by Lenders Are Us employees who assume the previous business model will simply complement the new combined institution.

Conclusion

Clearly, an effective HR plan can successfully merge We Will Hang Onto It Savings and Lenders Are Us into one cohesive organization. However, for the plan to succeed, HR personnel must: examine the current situation at both companies; create allies on both sides who can help implement change from within; begin effective training and development as early as possible; establish a meaningful evaluation process; ensure that employee benefits exceed expectations; and actively evaluate and recruit new talent. As the history of mergers and acquisitions demonstrates, cultural integration is often the deciding factor between success and failure. Together, these elements will increase productivity, reduce costs, and provide clear direction for the staff. If implemented promptly, the chances increase dramatically that these two entities will be able to merge into one strong, sustainable financial institution.