managing hr during mergers &; acquisitions
TRANSCRIPT
By Anushka Kapoor
Emerging issues & Challenges in SHRM
Emerging issues poising challenges to SHRM
Managing HR during M&A
Impact of Technology
Ethical issues
Work-life balance
Dealing with workforce diversity
1. Managing HR during Mergers & Acquisitions
Mergers and acquisitions represent the end of the continuum of options that companies have in combining with each other.
In a merger, two companies come together and create a new entity.
In an acquisition, one company buys another one and manages it consistent with the acquirer’s needs.
Mergers for market dominance; economies of scale.
Mergers for risk spreading, cost cutting
Growth for world class leadership and global reach.
Survival; sales maximization.
Bigger asset base to leverage borrowing.
Financial gain and personal power.
Gaining a core competence to do more combinations.
Acquiring talent, knowledge, and technology
Reasons
According to studies
“One of the major reasons M & A fail is improper handling of HR issues”
Strategic management of HR during organizational restructuring
Uncertainty of job after acquisition
Transfer fear
Loss of identity
New leadership styles
New rules and regulations
Change of hierarchy
Work culture
Prestige power and status
New appraisal methods
Restructuring of key positions ..
Areas of employee concern post merger:
New board composition
Human resource audit
Effective communication
Retention strategy
Integration of HR functions
Cultural integrations
For effective HR management during M & A following issues must be addressed:
Post merger new board of decision making is needed
a. New board composition
Members of old firm
Members of new firm
Audit should be done before starting merger process
Human capital audit should be focused on 2 dimensions
b) Human Resource Audit (Due Diligence)Being preventive
& focused on liabilities
• Obligations
• Employee litigations
• Outstanding grievances
Talent audit
• A powerful tool for business leaders to understand an organization's capability to change and develop.
Should be carried in such a way to avoid confusion & mixed messages
Management should clearly communicate to employeesRoles of employeesFuture Goals Inform Overall process of M & AJob description
c. Effective communication
1.Helps to alleviate tension among employees
2.Communication feeds the top management about the integration that should take place between partners
3.Encourages widespread acceptance of the merger process
Uncertainty during M&A often makes talented lot to leave
For long-term and sustainable development companies should safeguard their intellectual assets
d. Retention strategyTo prevent separation, companies should:
1. Identify those employees with gifted skills and capabilities
2. Work out strategies which would help hold back those talented individuals.
3. One to one and heart to heart communication
Compensation system
Performance appraisal system
Training system.. etc
e. Integration of HR functions
Effective planning
No. of Changes
Communication
Leads to smoother implementation of process
Chances of successful merging organization increases
Cultural differencesHow organization define/measure successBenefits employees enjoys
Personal timeInsurance
How problems are handled within the organizationsOverall attitude of employeesLanguage barriers
f. Cultural integrationCultural audit is thus conducted.
•It raise awareness of potential difficulties and issues in merging
•Helps in minimizing cultural clashes by building an effective communication system
1. Not being involved early enough
2. Not understanding employees’ need and concerns
3. Not involving and empowering the incoming leadership team
4. Not working with the receiving business unit
5. Underestimating the time, work that acquisitions & integration require
Top 5 mistakes in M & A
Stage 1 •Pre- combination
Stage 2
•Combination- integration of companies
Stage 3
•Solidification & assessment of new entity
THREE-STAGE MODEL OF MERGERS AND ACQUISITIONS
HR Issues HR Implications and Actions
•Identifying reasons for the M & A•Forming M & A team/leader•Searching for potential partners•Selecting a partner •Planning for managing the process of the M and/or A •Planning to learn from the process
• Knowledge and understanding need to be disseminated • Leadership needs to be place • Composition of team impacts success • Systematic and extensive pre-selection and selection are essential • Conducting thorough due diligence of all areas is vital • Cultural assessment • Planning for combination minimizes problems later • Creating practices for learning and knowledge transfer
I. Pre- combination
HR Issues HR Implications and Actions
•Selecting the integration manager•Designing/implementing teams • Creating the new structure/strategies/leadership • Retaining key employees • Motivating the employees • Managing the change process • Communicating to and invoicing stakeholders • Deciding on the HR policies and practices
• Selecting the appropriate candidate • Creating team design and selection are critical for transition and combination success • Communicating is essential • Deciding on who stays and goes • Establishing a new culture, structure, and HR policies and practices is essential
II. Combination- integration of companies
HR Issues HR Implications and Actions
•Solidifying leadership and staffing • Assessing the new strategies and structures • Assessing the new culture • Assessing the new HR P & P • Assessing the concerns of stakeholders • Revising as needed • Learning from the process
• Leadership and staffing of the new entry are essential • Creating and evaluating a new structure • Melding two cultures needs assessment revision
• The concerns of all stakeholders
need to be addressed and
satisfied • The new entity must learn
III. Solidification & assessment of new entity
TechMahindra-Satyam
Example
The acquisition of Satyam by Tech Mahindra
A company of around 23,000 employees, whose business was mostly centered around the Telecom sector acquired Satyam, a much larger organization of around 45,000 employees, whose business was much more diversified and global.
•The entire acquisition process was not a very pleasant experience for the employees of Satyam.
•The company underwent a major change in its organization structure to align itself with that of Tech Mahindra for ease of integration.
•A lot of downsizing had to be done in the process as there were many redundant positions in both companies.
The HR department was faced with the challenge of retaining employees and
their clients, and restoring their faith in the company. The following are some of the initiatives that were undertaken to
address these issues -
Sales Reboot Campaign
Special Induction
Programmes
Recognition and Reward
Schemes
Communication channel
The senior management conducted a 3 day program for its sales force and gave them some much needed motivation to pursue new clients.
Sales Reboot
Campaign
The Satyam scandal tarnished the
image of the company.
Employees quit the company in large
numbers, and it was almost
impossible to recruit new employees
for the vacant positions.
So Satyam advertised for these
vacant positions within the
organization.
The members who were willing to
join were given an intensive 2-week
induction program in Sales and
other functions so that they could be
quickly be made productive and
posted in regions abroad
Special Induction Programm
es
As the company initiated a variable pay cut for all employees,
The senior management had to devise new strategies to motivate and retain their employees.
They decided to identify Star Performers and 'Excel-lerators' within each division and give them special recognition for their efforts.
Recognition and Reward Schemes
Since there was a lot of anxiety and uncertainty in the minds of the employees
The HR department created a communication channel between them and the top management of both Satyam and Tech Mahindra.
This was done via many forums such as Blogs, Direct from the Board Webcasts Several Open House sessions in
an informal environment
Communication
channel
HR facilitated the movement of Satyam employees into TechM offices by organizing get-togethers and other events to promote bonding between employees of TechM and Satyam.
They organized cultural and sports activities such as singing competitions, cricket tournaments, etc. to promote bonding between the two sets of employees.
On the anniversary of the acquisition, the HR team distributed fliers and stickers to all employees advertising the successful integration of the two companies.
Thank You