Human Resource Management in Mergers and Acquisitions

Company B has acquired Company B. Even though the two companies have been staunch rivals for some time, some ethical and strategic goals are in place to ensure a smooth transition through the acquisition. Firstly, the newly formed company wants to manage information sharing and communication. Secondly, it wants to efficiently manage changes and consolidation and thirdly, manage employee relocation. Between the two companies, there exists an extensive diversification of employee backgrounds, ages and genders. Therefore, the main aim is to ensure that an effective workforce is created to allow for continuity and success as the two companies merge and move forward. To achieve these the company’s management has to identify all the information required to manage this acquisition’s project goals, identify all the challenges and threats that may face the implementation process and come up with various recommendation to mitigate these challenges and threats.

Introduction

With the business world expanding daily many similar product or service providing companies are cropping up daily. This results to intense competition in the market as every organization is trying to find a strategic way to gain competitive advantage that will enable them to conquer or dominate the market (Dowling, Festing & Engle, 2008). One strategy through which organizations are able to dominate markets is through mergers and acquisitions. Acquisition is the process whereby one firm such as Company B takes or buys another firm say Company A. A merger is the combination of two firms. These mergers and acquisitions have enabled firms that produce similar or almost similar products to become exceedingly strong and enhance their consumer acceptance stats. This is largely because the firms are more resourceful and able to enhance their production abilities. Therefore, when Company B acquire Company A there is a need for strategic arrangements and alignments of operations to ensure that performance is enhanced. The first exceedingly vital responsibility of the firm is human resource management. This is meant to ensure that all employees comprehend their roles and that they understand the reasons behind the acquisition or merger. Therefore, the firm has to develop efficient strategies through which they can achieve the goals of managing information sharing and communication, changes and consolidation and employee relocation.

The needed information

In the case of managing information sharing and communication, human resource requires a lot of information on the aspects and functionality of an organization to ensure that they are effective in planning and coordination. Some of the initial information needed is organizational charts, employment contracts, salaries, compensation plans and any other benefits. Additionally, there is need for prescreening of all employees that will entail individual information on all employees including their performance statistics (Ghanawi, 2011). In this case, the employees’ handbook can come in handy. There is also need for analysis of the organization’s human resource information system to identify the changes or modification that can be required. It is also necessary to find out whether there are any ongoing litigations facing employees.

It is imperative for any organization to keep its employees informed and updated on how an acquisition will affect them and how it is going to be conducted. One thing that the strategic director of human resource can do to manage information sharing and communication is to conduct an analysis of the cultures in the existing workforces. For instance, the Hofstede cultural model can enable one to categorize all employees depending on a variety of cultures. Through this categorization, one can be able to develop or choose effective communication styles that are sensitive to each employee. Conducting projections for the new company to assess its sustainability and strategy can enhance the way the management will communicate the acquisitions effects to employees (Ghanawi, 2011). This is because the employees need to be informed of the areas that will be contracted or expanded as well as technological changes, additional training, new communication protocols or new management structures brought about by the acquisition deal. For this to work, one has to have first-hand information on the action or execution plan of the acquisition. This will enable him to have the appropriate and need to know information for employees in both companies.

There is a need for strategic workforce planning which entails forecasting and front-end diagnostics to identify each and every capability and resource that is needed (Kotter, 2014). This allows the organization to identify what it needs and what it will be looking out for in its employees. Additionally, through this strategic analysis the organization can be able to illustrate to its employees the direction that it is taking and how they will be affected by the change to come. There is no need of overwhelming employees with anxiety and deadline date news and in turn affecting the consolidation and changes part. Through forecasting, the company can identify the departments it can keep and those that need to be abolished. Additionally, identifying capabilities will ensure that the company is able to retain the most appropriate employees and lay off the non-performers if need be (Kotter, 2014). It is essential to note that in this company, diversity is exceedingly dominant and management should ensure that retaining and laying off of employees are based on the needs of the company and performance and not on issues such as gender, race or age.  Comprehending the needs of the company and been able to illustrate and show them will enable management to justify their decisions on abolishing departments and hiring or firing.

Challenges

One of the major challenges for human resource managers is identifying the reasons for an acquisition and communicating the reasons to the employees. In this case, the employees in Company A are quite dissatisfied with the move of being acquired by their long-term rival and competitor Company B. Therefore, it is necessary for the strategic human resource director to be able to come up with efficient and appropriate reasons to explain why the acquisition is imperative and how it will be beneficial to them. Employees see change as upsetting and dislocating since they prefer maintaining their status quo. This is in the light that change results to additional effort and competition on their part. For the HR it becomes quite difficult to explain and help employees understand the need for change and manage the stress that comes with the change. Sometimes when acquisitions occur, employees are left in the dark and these can be damning. Fear and lack of appropriate explanations leads to HR’s not providing information to the employees. Therefore rumors fill the employees mysterious minds and these leads to questions such as “why are we merging?”, ”how will this merger affect us?” and ”who is going to support us?”. This creates uncertainty and distrust in the workplace and eventually leads to a decrease in employee engagement (Schlossberg, 2008). Therefore, there is a need to keep employees informed at all times and this applies to all parties involved.

Another challenge in this case is cultural integration. Acquisitions and mergers occur due to business and financial rationale adding up but it fails to consider the cultural aspects of business. Each organization has its own culture and there are many disparities in these organizational cultures. The way people communicate, share information, work and relate to their fellow workmates is different in every organization. Therefore, it is necessary to always look at the people factor and assess culture fits if the HR wants a company to move forward. Culture involves shared beliefs, values, behaviors, assumptions and attitudes in an organization. It is exceedingly difficult for an acquired company to be assimilated into the culture of another organization since people rarely change their underlying beliefs and values. Acquisitions bring with them unprecedented changes in practices, strategies and management and this can have negative effects due to the sudden shift and disruption of culture (Schlossberg, 2008).

Finally, there is the challenge of employee relocation and retention. This can be a threat to many employees on the face of an acquisition or merger since many of this have retention and relocation issues especially for companies in different locations. The threat comes from negative attitudes among employees who are uncertain of their future in the company. It can result from lack of communication and leadership credibility where by employees distrust their organizations and feel betrayed (Schlossberg, 2008). This is vital as there is always a need for business continuity and therefore the strategic human resource director has to ensure that employee turnover and morale is not disrupted by uncertainty.

Recommendations and conclusion

To manage information sharing and communication, the Strategic HR Director should ensure that he or she has all the necessary information about the acquisition and merger as and when top management processes it (Ghanawi, 2011). This make it possible for him to answer any question brought forward by employees and keep them updated of what is going on and how they will be affected by the changes. There is a need for regular department and employee meetings to see this through. Information should be timely and upfront to ensure that employee have the correct information and maintain their trust as the process goes on (Dowling, Festing & Engle, 2008). The HR should create a system to determine misinformation and rumors ensuring that employees can be able to easily ascertain whether any circulating information is true.

In the case of cultural integration, it is necessary for the HR to conduct a sustainable cultural audit that will enable him or her to determine the differences within each company and between them as one (Ghanawi, 2011). This will enable the HR to determine how effective the merging process can be and how training can be implemented. Employees should be given a place and ample time to assess the merger and voice their concerns raising relevant questions and giving suggestions as to what can be done to ensure the acquisition is successful. This will bring the employees together and make them feel like they belong. For those being relocated or laid off, this information should be relayed earlier on in the process to avoid uncertainty and speculation. Those being laid off should be treated respectfully and awarded appropriate severance packages. Notices should be given personally and reasons illustrated in an appropriate manner to avoid damages from legalities. Therefore, laying off employees should be based on critical performance evaluation to avoid biases where diversity exists. Those being relocated should undergo training and orientation (Ghanawi, 2011). They should be awarded proper incentives and enticed in an appropriate manner. All this factors will facilitate a smooth transition that will ensure that the company becomes more successful and sustainable.

Reference

Dowling, P., Festing, M., & Engle, A. D. (2008). International human resource management: Managing people in a multinational context. London: Thomson Learning.

Ghanawi, N. (2011). Leading through transition: Implications of human resource management in M&A transactions, especially in the context of the Change Management process. München : GRIN Publishing.

Kotter, J. (2014). Accelerate: Building strategic agility for a faster-moving world. Boston: Harvard Business Review Press.

Schlossberg, R. S. (2008). Mergers and acquisitions: Understanding the antitrust issues. Chicago, Ill: ABA, Section of Antitrust Law.