The five biggest mistakes HR makes during an acquisition – and how to avoid them
Mergers and acquisitions make for some of the most challenging times in the life a business. During periods of such risk, stress and uncertainty, top management relies heavily on Human Resources managers. They have a unique opportunity to positively impact the efficiency of the restructured entity. Studies have shown that in the first six months following a merger, productivity may fall by as much as 50%, so HR leaders must be prepared to take action.
In doing so, they must also avoid missteps that can set back, or even critically damage, the new company. Here are five mistakes to avoid:
1. Not being part of the due diligence
Due diligence is about more than financials. The human element must be considered, and early in the process.
HR managers must be prepared to help determine how the value of human capital will be maximized. There are questions of pay and benefits, even pensions, and, concerns to be addressed with respect to retaining key employees. Inattention in this area has itself resulted in failed mergers.
Success comes when two organizations each recognize the strengths of the other. Oftentimes, company strengths are personnel driven. HR managers have to be ready to offer those assessments, even to those prepared to focus only on the numbers. In the end, it’s the people involved who ultimately determine whether a merger is successful.
2. Failing to settle power issues
When one company acquires another, conflicts inevitably become struggles for power. HR managers are well positioned to anticipate these situations, and to urge top management to settle such questions quickly and honestly.
HR managers may be able to offer coaching to key executives on navigating these situations. They can even take a more active role, helping top managers agree on specific goals for the merger and settle on workable integration plans that don’t overwhelm employees.
Power issues are particularly thorny, so it’s incumbent on HR managers not only to make them a priority, but to propose solutions.
3. Inability to create a cohesive culture
In most mergers, integration efforts focus on consolidating key resources as well as financial and physical assets. Also important is recognizing the differences between the cultures of the companies involved and determining the path to establish the new desired culture. Long-term success here starts with drawing on the best practices of each company.
First, identify the cultural differences that are obvious, such as organization and decision-making, and those that are more subtle, like rewards systems and dress codes. Next, work with management to define the issue of culture clearly for the new entity: how people work, the new values, and the collective personality of the company so that you can clearly communicate that to all employees.
The goal is for the bestof each company to be preserved, resulting in synergy and increased profit. HR has an opportunity to have a profound impact on this integration.
4. Ineffective communications
The grapevine can become a major source of headaches during the already daunting task of combining two companies. Constant, consistent, and honest communication from leaders and HR is essential to keep gossip from becoming gospel. In the absence of credible information, the grapevine will spread inaccurate rumors with amazing speed.
Start with a strong strategy that maps out communications to employees and to customers. These should address power issues and deal with cultural issues.
Initial communications to employees should be clear and direct. Start with addressing key points like operational questions, payroll issues, dress code, holidays, etc. Include information including organizational charts with key employees’ positions to cut down on guessing and conjecture.
Remember, the more time people devote to exchanging rumors, the more productivity will drop.
5. Not providing enough help to the newly unemployed
After a merger, some employees may be gone, but they shouldn’t be forgotten. After all, not only were they casualties of the merger, but they are still in contact with those still at the company. So they indirectly affect the mood of those you are counting on to be productive.
Your outplacement strategies should be as well thought out as the strategies you’re implementing to integrate the two companies. While large severance packages are likely out of the question, helping those in need with effective job search strategies shouldn’t be.
Focus on career transition assistance that has direct impact on their day-to-day job search: resume assistance, help with the online job search, and interview coaching with HR professionals.
By helping your former employees transition into their next jobs faster, you promote goodwill with everyone involved, and will see that translated into quicker improvements in efficiency and profitability.