by David Zatz, Ph.D., Toolpack Consulting Senior Consultant
Opportunities for HR
Mergers and acquisitions are often planned and executed based on perceived cost savings or market synergies; rarely are the “people” and cultural issues considered. Yet, it is the people who decide whether an acquisition or merger works. The opportunity for HR lies in the fact that customer and employee reactions determine whether the newly combined company will sink or swim.. If a convincing argument is made to senior leaders, HR may gain more power to increase the effectiveness of the organization, and may be able to mold the cultural changes instead of being pushed along by them. Hazards for HR
One result of many mergers is the consolidation of staff departments. Eliminating one of the HR departments is sometimes stated up front as a justification for the merger. For the “losing” department, layoffs tend to be a fact of life. The “winning” department may find a substantially higher workload. If both HR departments are kept, there may be issues of interdependence and autonomy, and hard decisions about which policies and services should be shared and which should stay separate. In many cases, the parent company has taken on a great deal of debt to finance an acquisition. The next logical step is to cut costs — and HR is often the first department on the block. Thanks to outsourcing agencies, even HR people in formerly indispensible functions such as benefits administration can now be replaced for short term gains (and, sometimes, long-term losses — but since the stock market rewards cuts in head count, this may not be an overriding issue for leaders). Internal OD consultants may be the first to be cut, since they are not clearly required to keep products or services rolling out. This makes it particularly important for HR managers to make a strong value case to the senior leadership. Fortunately, there are also opportunities for HR to bring out synergies, so that the combined company is stronger than the originals. HR’s role before the merger
The HR leadership has an opportunity before the merger 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. Before the merger takes place, the leaders of both organizations - at least, of the dominant firm - should have a strategy mapped out, including communications to employees and customers, where layoffs will take place (if any do), and how the cultures should be merged. A SWOT (strengths, weaknesses, opportunities, and threats) analysis should be done for the combined company. If possible, a brief culture survey (preferably done via interviews as well as paper or Web/e-mail) should be undertaken in both companies to discover what the cultural differences are. Sometimes this will be obvious in some aspects -e.g. one culture values teams and bottom-up innovation, the other favors command-and-control tactics - but not in others, such as how and whether individuals and teams are rewarded for innovations, how failure is dealt with, whether confiict is addressed openly, etc. This will prevent disconcerting delays between the announcement and the implementation of the merger/takeover. If the real purpose of the merger is to acquire another company’s assets, in terms of a particular product or brand, its factories or patents, etc., that should be acknowledged and dealt with up front. If employees are fooled at first by pleasant words, they will react more strongly when those words become taunts. Finally, before the merger or acquisition takes place, the leadership teams should consider the non-financial issues. Will people in the two companies be able to work together? Will acquiring a company, or merging with it, destroy the properties or drive away the talent that made it worth having? Can a simple partnership, alliance, or even stock...