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HR Issues in Mergers & Acquisitions |
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There has been an unprecedented growth in the number of mergers and acquisitions that took place (or were announced) in last calendar year. The total number of M&A deals announced during the year 2007 rose up to 661 with a total announced value of $51.17 billion as compared to 2006 in which only 480 such deals took place. Sectors like steel, telecom and aviation witnessed amalgamation of big brands and thus, were clear leaders in sectoral values. With such a whooping number of M&As taking place every year, some concerns of employees also rise apparently. This is because HR issues are the most neglected issues as financial considerations are given more importance.
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When a merger is announced, employees of the company become worried about issues like job security, role conflicts, interpersonal conflicts, cultural adaptations, etc. Such factors hold the power to make or break the deal. It is believed that most of the overseas mergers fail because of people centric issues as the management fails to deal with them aptly. It becomes the responsibility of HR personnel of the organization to take care of such issues before and after the amalgamations takes place.
Prevalent HR concerns
The success of M&A always depends on the how well the HR issues are managed after the merger takes place. There are also some major human resource concerns that need to be dealt with before the merger actually takes place. HR issues that form greatest challenge to the success of a M&A deal include the following:
- Dovetailing employees: The uncertainties of M&As shift the focus of employees from productive work to issues related to interpersonal conflicts, layoffs, career growth with the acquirer company, compensation, etc. Moreover, employees are concerned with how well they will go with new colleagues. The mergers involve downsizing, hence the first thing that comes to the minds of employees is related to their job security. Mergers also lead to changes in the well defined career paths of employees, as defined by the acquired company. Due to these reasons, employees find themselves in a completely different situation with changes in job profiles and work teams. This may have a negative impact on the performance of the employees.
- Cultural Integration: An organization's culture defines its managerial style, structure and organizational practices. Each company has its own set of values which may conflict with those of the acquired company. The employees may not be able to accommodate themselves in a new culture and thus may lead to cultural shock. Inability to adapt to a new culture increases stress levels among employees and results in low job performance. The need therefore is to follow a structured approach in dealing with cultural differences.
- Employee communication: Whenever there is news of any merger in an organization, anxiety prevails among the employees. This atmosphere of apprehensions lead to company wide rumors. The employees lose faith in their organization and tend to become demotivated. To free employees from such fears, proper communication has to take place between the management and the employees. The management should instill a sense of security among them.
Attrition: Most mergers bring with them downsizing, reallocation of work, change in work profiles, changes in career paths, etc. Moreover apprehensions about the new company also create anxiety among employees. If they fail to adopt to the new culture they face high levels of stress and thus end up leaving the organization.
- Differences in organizational structures: Another problem is the difference between the organizational structures of the companies. Since the organizational structures are different, differences in compensation packages, and designations can take place. The company has to maintain employees at equal levels. Unable to do so, employees can feel dissatisfied.
Role of HR in making M&A successful
The success of a merger and acquisition depends on how well an organization deals with issues related to its people and cultural integration. The HR department of an organization act as a strategic partner. So formulating strategies while ignoring the employees can be critical for the organization. The role of HR becomes strategic when it takes decisions about what kind of people, capability and commitment the company would want after the deal. To efficiently handle this phase many companies undertake feasibility studies based on which it decides what part of the workforce is to be retained. The HR can help the employee in the following ways:
- HR helps in managing interpersonal conflicts and makes employees better team players. It also helps them in dealing with cultural differences. Clear communication content and channels are customized to address cultural differences.
- HR also deals effectively with the integration issue. Effective employee communication acts as a key here. Questions about job security, relocation, changes in benefit programmes and new reporting relationships are answered by the HR only. Keeping a check on rumors, anxiety, resentment and the loss of top talent, has also to be dealt with.
- The M&A phase is very sensitive for employees as they feel insecure about their future in the transitional times. HR in such a situation makes people retain their faith in the organization. The HR has to retain the confidence of employees and assure them job security.
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