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Merger integration programs pose demands on the HR team collectively and on HR executives individually that are typically tough and sometimes unreasonable. It is the unavoidable result of the dual pressures of simultaneously having to provide business support to help get right the myriad “people decisions” in the merger, and having to deliver significant synergies by combining and streamlining the HR functions of the two merging companies.
This article describes why and how HR is critical in a merger integration program, the challenges the HR function will face, and what HR executives need to know and do to help make the merger a success for the company, for the HR team and for themselves.
Mergers can be risky and expensive, are time consuming to plan, and almost always extremely difficult to execute correctly. Mergers often tax even the most well run and experienced companies, and demand all of those involved to be at the top of their game.
Quickly getting a combined organization in place following the completion of a transaction can be critical to minimizing the employee uncertainty that will otherwise become a drag on company performance.
In most cost-focused mergers, the vast majority of synergies are expected to come from elimination of overlaps, best practice transfers between the two companies, and transformational efforts in select areas to further drive performance beyond that of either of the two companies. Invariably, that can result in redundancies. Managing the severance process swiftly and smoothly can have a significant impact on company results due to the time value of money.
Organizational changes and redundancies can both generate deep uncertainty among employees. Not only should the processes surrounding them be implemented quickly and professionally, but a big effort will likely be needed in communications with employees to reduce this uncertainty.
Finally, the HR function itself is likely a rich source of cost synergies. Synergies of 10 to 30 percent of the combined HR cost base in a merger of two similar-sized companies with overlapping activities are typical.
Merger integrations are a huge challenge for any company. Accenture has established six rules that HR can consider to help turn it into a success:
Understand what is expected of HR and of you. Meet with the CEO to thoroughly discuss the deal and understand factors such as how important it is to the company and what the expectations are for HR, and where HR can make the greatest contribution.
Position HR and yourself as a contributor. Proactively present solutions to the HR issues that can be expected for the CEO and integration leadership to react to. That way, the HR team will be the ones helping with the answers, not the ones asking the questions.
Use resources wisely. Decide which on-going HR transformation activities should be put on hold to free up resources for integration. Create clear roles and responsibilities to help ensure the success of the integration.
Use the unprecedented opportunity to change HR. The merger integration presents an opportunity to make long-desired changes to the HR function that may not previously have been possible due to internal resistance.
Don’t mess up execution. HR will be driving or closely involved in activities that not only have a significant impact on people, but are also seen as key indicators for how well the merger is progressing. That makes flawless execution all the more imperative.
Take care of your people. The HR team will experience increased pressure during a merger and will likely require more personal attention to the well-being of HR team members than what’s normally required during day-to-day business.
An HR executive’s daily job is no day at the beach during normal circumstances. Providing ad hoc HR support to other executives, running an efficient HR function and getting the most out of the HR team are just some of the myriad challenges HR executives must address. During a merger, those challenges are intensified many times over, and are joined by others that many HR executives have no prior, direct personal experience with. Thus, it’s not a stretch to say that mergers, while difficult for all involved, are disproportionally challenging for HR functions.
By following the six simple rules, HR executives can actually better position themselves to turn the challenge of a merger into a raging success—for the company, for the HR team and for themselves.
Markus Rimner leads the Accenture‘s Mergers & Acquisitions practice in the Nordics and also serves as the Global Resources industries M&A lead. Rimner focuses on helping corporate and private equity clients through the entire M&A cycle with emphasis on portfolio, acquisition and alliance strategies, carve-outs and divestitures, commercial and operational due diligence, and integration planning. He is based in Gothenburg.
October 23, 2013
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