Important Human Resource Considerations During a Merger or Acquisition
We are witnessing a great deal of M&A activity once again. While tough times produce many wonderful buying opportunities, all come with inherent risks. There are numerous risks you want to audit for from a human resource perspective including:
- How do the cultures of the two organizations different? Peter Drucker claimed that 2 out of 3 M&A’s fail due to cultural reasons. As Dr. Deming taught us, you have to drive the fear out of the situation. Fear that the acquired executives and employees will not respect your ways of doing business and fear on the part of the newcomers that you won’t be considerate of their insights. Great leaders take these fears head-on so that the M&A doesn’t get destroyed by unnecessary dramas.
- You want to look at the best HR practices from each organization. Does one company hire employees better than the other? How do they manage performance or motivate employees? What standards do they set for promotions? How do they manage compliance concerns? What sorts of training programs do they operate? Who has the “best practices”?
- The M&A process implies there will be a culling of the herd. How will you identify who is left off the bus in a way that doesn’t let go of the wrong employee and prevents you from getting sued in the process? Have your criteria for the inevitable layoffs and terminations been reviewed by employment counsel?
- Compensation and benefits is another very important consideration during the M&A process. Inevitably, executives and employees will be paid differently for doing the same or similar work. This will be an excellent time to revisit your compensation and benefit plans and strategies in general. Are you paying competitive salaries and wages? You have to look to the marketplace for that answer. What would you have to hire one of these employees for today? Are you using competitive benefits? As mentioned in previous posts, a dollar spent on benefits versus a dollar spent on compensation has a greater perceived value to employees. Consider this fact at a time when many companies are looking to shed benefits. Lastly, what can you learn from each other’s incentive programs? What boosts sales or productivity?
HR should be instrumental in making sure the “soft stuff” is addressed during the M&A process. HR That Works Members have access to an entire M&A audit that they should consider using during such a process.