The HR Perspective (After-all it's all about people) !

HR has consistently been in the spotlight in relation to mergers and acquisitions (M&As). In fact, HR's contribution can be a make or break success factor. It also provides a high profile opportunity for HR practitioners to demonstrate themselves as a genuine strategic partner. Continuing this series from the previous issue..........

Redundancies: What does matter is to make the transition as smooth as possible, and that is surely the rub. Realize that this is probably not a marriage made in heaven. In any merger, there will be terminations. (You can't call it downsizing since the new entity will have more employees than at least one of the old entities. Besides, downsizing is just a euphemism for permanent layoffs.) No matter how high the payoff, terminations almost always create hard feelings and, among senior managers, crushed egos. Part of the new HR manager's responsibility is to assuage those being laid off because past employees can try and sometimes succeed in hurting the new company's reputation, if only in the short term.

Knowing who to terminate and knowing who to retain are probably the two most important and difficult aspects of a merger. By ridding the company of redundancies, the company saves money, so one of the first responsibilities of HR is to identify the redundancies. Then it must decide whom to retain. In a sense, the redundancies represent the first cut. Redundancies are impersonal.

Next are those whose performance is suspect. With any luck, many of these have already been deemed redundant. But you're only going to note these anyway. Between this audit and the actual merger, some of these people will have already left. And all you're doing at this point in the process is making recommendations.

Keep in mind that you don't know it all and there are gaps in your company that employees in the acquired company can fill. The acquired company may have better employees than you, and now you have to make decisions about who on your own team you will keep, transferred, or let go. Hopefully, you and your management will have many months to make the determination. Often in smaller companies, you have less than six months.

Policies and Practices: Note that I said there is an examination of policies, practices, and past actions of the acquired company. I said this because the actions of the company speak louder than words, i.e., policies. Practices can often be found through interviews with staff as well as in past legal actions, if any, against the company by employees. It's not simply the policies and practices - which can be ascertained by reading their handbooks - that you're after. You really want to get a feel for the "culture" of the acquired company. It cannot be overemphasized: the goal is to have a smooth transition and wind up with the best fit with the greatest potential to meet the goals for this merger. Hopefully, you will find that there are commonalities upon which you can build that entity.

Something Old, Something New: In the old days, most of the information we needed was found in files, paper files. To some extent, it was much easier to study the differences and similarities in the companies.

One of the newest obstacles is IT itself. HR people are not always as technologically proficient as we would like, and that's why in today's mergers, the HR team should bring at least one IT person. Why? Well, again in the last merger I was involved with, we found different HR software, accounting software, payroll systems, and even the databases being used for accruals in both companies. One of the most time consuming aspects of that merger was to decide which was the best system, whether there were alternate systems that could be used, whether to combine the systems, or scrap everything and start from scratch.

Some Final Advice: Make no commitments or promises. That's not HR's job in the merger process. Furthermore, once the merger is official and integration starts, you're guaranteed to find that perspective, personnel, and data have changed. It often amazes me how much change actually does take place between inception and completion. In a large company, true integration can take three or more years, by the way. Sometimes, it never takes place. In smaller companies, the new entity should emerge in the second year. Then you can get back to the usually jousting and politicking for position.

Some of the guiding principles for HR's in an M&A:

* Take definitive action and make decisions quickly - the secret for holding onto good people.

* Assessing the culture of their merging organizations before the deal.

* Put the right people in the right roles during and after the merger.

* Be candid with employees, and treat them with respect. Let them know that the combined entity will be a more valuable organization.

* Successfully communicate the vision and goals before & after the union.

* Whenever possible, use ownership of the company as represented by stock options and stock grants to get everyone pulling in the same direction.

* Be honest about the people decisions that must be made.

* Treat those leaving with the same respect and attention as those staying.

The value of HR's contribution

HR can add value and remove some of the uncertainty around the integration process by precisely measuring the alignment of people in both parts of the merged organization in terms of their understanding of the strategy perceptions and typical behaviors.

Such diagnostic tools now exist and can be deployed throughout the integration process to measure progress and identify where interventions are required to keep the integration on track. This helps HR to find and treat areas that have resisted normal integration efforts. Targeting increased effort only where it's needed helps HR to avoid spreading itself too thinly by responding to problems with a blanket approach.

In recent times, HR has rightly put itself forward as an important contributor to the M&A and integration process. But for HR to fulfill this role, it must arm itself with the right tools and continue building its own capability and profile in the company.

As someone rightly said that, how you manage mergers and acquisitions today are extremely important, perhaps not for you or your children, but certainly your grandchildren. After all, at our current rate of consolidation in 50 years, there will only be six to ten companies worldwide for which they will work. Their future compensation, benefits, and security are in your hands.  

Sabarigiri Varadha is a Serial Entrepreneur and VThree Consulting Pvt Ltd happens to be the part of his series. VThree Consulting Pvt Ltd provides MNCs' the most complicated technology in the world... the skilled human beings. Feedback can be mailed to sabarigv@ vthreeconsulting.com

Issue BG88 July 08

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