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Mergers and acquisitions are set to become an even greater contributor to banks’ growth as markets become more competitive and global.
At the same time, however, banks are under greater pressure than ever to make sure that they attain the proposed merger benefits.
A well-constructed human capital strategy during the M&A can play an important role in helping achieve this goal. Accenture identifies four critical areas on which banks must focus.
There is little doubt that the banking industry is far different from what it was just a few years ago. The market is more competitive and more regulated than ever, while customers are more independent and less trusting. Prolonged economic volatility has also reduced the margin for error.
As banks navigate this new landscape, mergers and acquisitions will increasingly be a significant contributor to growth. But ongoing pressure on banks’ profitability means that acquiring banks have no room for error in attaining merger benefits despite the tumultuous environment in which integration is occurring. A well-constructed human capital strategy—encompassing talent, leadership, culture and organizational architecture—deployed during M&A can help a bank address its financial, regulatory and other challenges and position the institution for long-term competitive advantage.
In the past, M&A teams have tended to concentrate on risk management and regulatory compliance, with HR seen as an opportunity to cut fat. However, talent is a critical determinant of future success in these very areas: with the pace of M&As picking up and media scrutiny unrelenting, banks cannot afford to lose this talent.
In fact, addressing human capital strategy during merger integration offers banks the opportunity to optimize talent management, obtain and retain critical talent, and build the risk management culture needed to thrive in the new financial services landscape. Doing so will make the organization stronger financially, more agile, better at risk management and more competitive as the industry consolidates and recalibrates its basic practices.
In Accenture’s experience, creating a strong human capital balance sheet during and after a merger requires decision making in four key areas:
Design of the organizational structure and business model. Developing the new company target operating model and translating this into processes, organization structure, team and job descriptions and governance processes is challenging.
Repositioning talent. A merger presents an opportunity to revisit talent strategies to see what could provide a competitive advantage. New skills may be required by changing market needs, while the possibilities offered by low-cost locations must be considered.
Performance management. Banks working through integration activities must focus on the long term when designing human capital strategies and supporting performance management practices, but without losing sight of the short term.
Corporate culture. Building a strong risk management culture is a priority given the growing number of regulations in the post-2008 environment. To achieve this goal, banks might have to make long-term structural reforms in the way top talent is compensated and incentivized.
Mergers are challenging, but this should not deter banks from focusing on their human capital strategies to help ensure long-term success and high performance. Accenture is a leader both in M&A and talent and organizational performance.
Katherine LaVelle is a managing director responsible for the Accenture Capital Markets management consulting group globally with a specialty in talent and organization solutions. Her leadership experience driving large scale learning, merger integration, human resources strategy, operating model and workforce transformation projects has been instrumental in developing and implementing innovative solutions for many large financial services companies. Based in Washington, D.C., she also specializes in implementing multi-country, large-scale and complex change programs in capital markets and retail banking.
Tyler Degenhardt is a senior manager specializing in talent and organization solutions for clients in the Financial Services industry. In his work with six of the top eight US banking and brokerage companies, he has managed mergers and acquisitions; stakeholder management; communications planning and execution; and training development and delivery.
Christian G. Ballerstaller, an Accenture Talent & Organization manager and Ty Burton, an Accenture Talent & Organization consultant, also contributed to this article.
February 21, 2012
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