Half or more of acquisitions fail to reach their potential, in part because the "people side" of the purchased business gets lost among the number crunching and asset analyses. When cultural compatibility is ignored, workforces are left in the dark, and issues such as retention, compensation, policies and compliance are not addressed, the odds of success drop. Transition begins before an agreement is signed and should involve the human resources team to identify employment-related liabilities and concerns.
HR has a role in the early stages of any acquisition: to evaluate compensation practices, employment contracts, benefit plans, retirement exposure, labor agreements and the talent pool. This due diligence quantifies the potential financial impact of obligations such as accrued leave, bonuses and medical insurance that come with the deal. Identifying employees currently on workers' compensation, or on maternity or disability leave, affects employment offer decisions if these individuals must be kept on the post-merger payroll. HR due diligence also covers review of compliance reporting and internal controls to determine any looming penalties that affect the purchase price.
Compensation, Payroll and Who Stays
Another step in HR's due diligence concentrates on the pay and salary schedules used by the company being acquired. HR studies the wages or salaries attached to job descriptions of key positions and compares them with similar jobs in its own organization. Should HR discover that the targeted firm pays more, then the plans for employment offers and integrating payroll systems merit more attention. Performance evaluations of both employee groups weighed against the combined company's projected manpower needs, in terms of competencies and skills, help HR recommend who should be kept. This provides a foundation for ensuing steps of evaluating redundancy costs, drafting a timetable, and developing policy for severance payments, outplacement and relocation.
Compatible or Clashing Cultures
An HR assessment of the target company's culture can identify potential clashes that can give the combined entity a rocky start or lead to voluntary departures of key individuals. For example, employees accustomed to being empowered to perform their jobs may have difficulty adapting to an approval-needed-first approach. HR comparisons of employee appreciation in both organizations, demonstrated through rewards programs, work-life balance policies, casual dress days, and career development, can highlight vital cultural elements that affect employee satisfaction. Even simple perks, such as free coffee in the break room, can cause resentment and create tension when denied post-merger. Ideally, HR finds enough common ground that it can steer the introduction of a combined corporate personality that preserves the best of each organization.
Keeping Everyone Informed
Acquisitions add stress to work routines and the accompanying uncertainty feeds the office rumor mill. To waylay misconceptions and protect productivity, human resources should outline a communications strategy detailing dates, content and formats -- newsletters, emails and group meetings, for example. Sanjay Sathe, founder of outplacement firm RiseSmart, suggests starting with information about the acquisition's timetable and operational issues such as facility locations, company name and logo and product lines. Payroll issues, benefits and intended separation policy count among the major topics that merit clear and open communication. In addition to learning about their new firm, employees deserve an introduction to each other's organization. Communication should continue post-acquisition to keep everyone aware of the combined company's vision, mission and progress to date. A regular flow of information promotes employee buy-in needed to bolster confidence in the future. (Ref. 1, #4; Ref. 3)
- Business Insider: 6 Reasons Why So Many Acquisitions Fail
- HR.com: Workforce Transition Dramatically Improved When HR is Involved Early
- RiseSmart: The Five Biggest Mistakes HR Makes During an Acquisition – and How to Avoid Them
- Society for Human Resource Management: Acquisition Checklist (Human Resources)
- Empowering Human Resources in the Merger and Acquisition Process: Mark N. Clemente and David S. Greenspan
Trudy Brunot began writing in 1992. Her work has appeared in "Quarterly," "Pennsylvania Health & You," "Constructor" and the "Tribune-Review" newspaper. Her domestic and international experience includes human resources, advertising, marketing, product and retail management positions. She holds a master's degree in international business administration from the University of South Carolina.