University of Pittsburgh
The Human Resource Issues in the Mergers and Acquisitions
In an ideal merger, the newly created entity pools the best features of the two merging organizations. A well planned process built on the foundations of an open, honest and consistent communication strategy can pave the way.
Statement of Case
The Role Played by the Human Resources Department in the merger of Buchanan, Ingersoll law firm and Klett, Rooney, Lieber and Shoreling law firm into Buchanan, Ingersoll, Rooney law firm.
The people element is the most important, yet the most neglected, during mergers and acquisitions. Most companies focus their attention on talks about the millions and billions, forgetting that it is not possible to rack in those millions and billions if they lose most of their most-skilled employees during a merger or acquisition.
This project is to bring to bare some of the personnel related problems in a merger or acquisitions and how to manage or solve those problems for an easy and successful transition.
On July 6, 2006, Klett, Rooney, Lieber and Shoreling PC and Buchanan, Ingersoll PC merged to be come one of the largest law firms in the country. Our case study is about the role of the human resources department in managing personnel during these critical times.
The phrase mergers and acquisitions (abbreviated M&A) refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling and merging of different companies.
Mergers and acquisitions have become a common phenomenon in recent times. Although the merging entities give a great deal of importance to financial matters and the outcomes, Human resources (HR) issues are the most neglected ones. Ironically studies show that most of the mergers fail to bring out the desired outcomes due to people related issues. The uncertainty brought out by poorly managed HR issues in mergers and acquisitions have been the major reason for these failures.
The human resource issues in the can be classified in two phases the pre-merger phase and the post merger phase. Literature provides ample evidence of difference in between the human resource activities in the two stages: the pre-acquisition and post acquisition period. Due diligence is important in the first phase while integration issues take the front seat in the later.
The pre-acquisition period involves 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. The mergers often prove to be traumatic for the employees of acquired firms; the impact can range from anger to depression. The usual impact is high turnover, decrease in the morale, motivation, productivity leading to merger failure.
The other issues in the M&A activity are the changes in the HR policies, downsizing, layoffs, survivor syndromes, stress on the workers, information system issues etc. The human resource system issues that become important in M&A activity are human resource planning, compensation selection and turnover, performance appraisal system, employee development and employee relations.
M&A activity presents a different set of challenge for the human resource managers in both acquiring and acquired organizations. The M&A activity is found to have serious impact on the performance of the employees during the period of transition. The M&A leads to stress on the employee, which is caused by the differences in human resource practices, uncertainty in the environment, cultural differences, and differences in organizational structure and changes in the managerial styles.
The organizational culture plays an important role during mergers and acquisitions as the organizational practices, managerial styles and structures to a large extent are determined by the...