5 M&A Concerns that keep HR Managers up at Night
Mergers and acquisitions are on the rise. In 2017, a new record was set, with 15,110 transactions in the United States, an increase of 12.2% compared to 2016, according to the study by the Institute for Mergers, Acquisitions, and Alliances.
But many will not succeed. According to a Harvard Business Review study, 70-90% of M&A advisory deals fail to achieve their intended strategic and financial goals, often due to human resources factors such as poor cultural fit, lack of communication, loss of talent, and declining morale.
HR plays an extremely vital role in the success of a merger. Here are five of an HR manager’s top concerns and some tips for dealing with them.
- Maintaining the Commitment
During an acquisition, the positions are realigned. The duplication of roles, combined with the expense of the acquiring company for the merger. It often leads to the layoff of workers. Employees are anxious and stressed about their future. But they are often left in the dark about the plans that affect them. Feeling helpless, some lose motivation and ‘wait’, performing their tasks automatically until the ax falls, or they are spared.
It doesn’t have to be like that. Good HR managers should work with business leaders to establish and implement a strong and direct communication plan. They are giving employees plenty of opportunities for feedback. They will be grateful to hear the truth, even if the news is unfavorable for them in the short or medium term.
Some HR departments choose an M&A advisor whose sole purpose is to communicate information about the merger. This person works with employees individually and in groups to answer questions and bridge cultural differences during the transition phase.
When employees need to be laid off, treat them with dignity and respect and, if possible, set up a program to help them find new jobs. Other workers will notice how you handle this situation and compare your attitude to who you say you are. If they see your actions as human and reflective of your values, they are more likely to stay engaged, contributing to the stability that is so often lacking after a merger.
- Legal responsibilities
The last thing any company wants after a merger is a lawsuit, and that’s not an unusual case. HR can avoid some of these issues during due diligence.
Many claims arise from the misclassification of employees. Don’t take the other company’s word for their exempt and non-exempt workers – review the documents yourself. Make sure that “independent contractors” are self-employed and carefully check all temporary visas.
Review any ongoing litigation and ask questions about threatened claims, documenting responses. Lawsuits are not necessarily fatal. One or two instances of discrimination or breaches of security you can resolve, but what needs watching closely is a culture of systemic issues. Make sure you get assurances in writing from the other company that they are following federal and state employment laws.
- Disappointing Benefits
Comparing benefits and creating a comprehensive new policy is a huge undertaking that has significant implications for processes, finances, and employee engagement in the post-merger period. Be sure to intervene early to avoid unpleasant surprises, such as missed group insurance plan enrollment deadlines.
No matter how hard you try to design an attractive package that works financially, some perks will inevitably drop off the list. Employees who can no longer accrue annual leave or pay their dental bills may become resentful, disgruntled, or start looking for another job.
Of course, you can’t discuss the details of your benefits’ analysis, but you can include in your communication strategy talking about developing rules governing attendance, time off, confidentiality, harassment, and drug testing. Be as upfront about changes as possible to give employees time to adapt. Consider phasing in policies and benefits that differ significantly from previous policies and benefits. And of course, try to identify opportunities for performance improvement to compensate for disappointments. Even small gains can improve the situation.
- Difficulty of data integration
The information shared by both companies must be accurate and up to date. Sending and returning emails creates organizational, version control, and privacy nightmares. It is best to establish an online “data room” where representatives of both companies can view, update, and share documents securely.
It is also important to document the merging process itself. You need an online project management space where you can create and track the progress of assignments, tasks, and deadlines. You should also conduct pre- / post-employee satisfaction surveys, analyze the results, and act on the feedback visibly.
Once the merger is complete, schedule a review of the entire process, compiling feedback from business units on what went well or not so well. You can utilize this info to update and enhance your processes for future mergers.
- Retention of key talent
Failure to retain key employees can end a merger, according to PwC.
Employees left in the dark about plans begin polishing their resumes and keeping their eyes peeled. The best elements don’t need it. Competitors will approach them as soon as a deal is on, especially if they hear of internal issues. The loss of valuable employees can hurt employee morale and business performance – during and after onboarding.
To avoid such issues, contact the top performers as early in the process as possible, as soon as the law permits. Make sure they have important responsibilities under the new structure. For younger people and for those who will now be part of a more sophisticated company, the promise of enrolling in a leadership development program can be a strong incentive to stay.
HR managers should listen carefully to very high performers and tailor incentives based on their needs, whether it’s a raise in salary or more time with your family.
With so many bases to cover and very tight deadlines, an acquisition or merger involves intense work, long working hours, and stress for the HR team. To give yourself the best chance of success, organize your tasks and documents. Divide your responsibilities into manageable parts, and communicate with your employees early, often, and honestly.
