Role of HR in M&As

Introduction
 Mergers and acquisitions are almost a daily occurrence in
the life sciences.
 Competition is fierce, and companies must team up to
survive in an industry where specialized knowledge is
king.
 One of the largest, most critical, and most difficult parts of
a business merger is the successful integration of the HR
department with the employees
 Merger brings huge challenge to HR profession, but it
also offers an opportunity to make a positive difference.
The success of M&A always depends on the how well the
HR issues are managed after the merger takes place
Brief about M&A
 Mergers involve two entities of relatively comparable
stature coming together and taking the best of each
company to form a completely new organization. In a
merger, companies join up with each other sharing their
resources to reach a common goal.

 An Acquisition, also known as a takeover, is the buying

of one company (the ‘target’) by another. In an
acquisition, one company acquires sufficient shares to
gain control of the other organization.
Phases of M&A

Pre-Merger During Merger Post-Merger

Phase Phase

• Involves due Diligence, • Different team are • Involves re-distribution of

Negotiations & closing made power between the
of deals. merging firms.
• Appointment of new
• Psycho-social support
board of directors • Revising & adapting
• Generally, the management styles.
companies concentrate • Organization
only on the legal Cultures are defined. • Review Pay scale & perks
issues.
Why do mergers & acquisitions happen?

Increased Financial
Market Power Benefits
Accelerated
Growth To Create Value Tax Benefits

Enhanced Diversifying
Profitability Risk
CHALLENGES IN M&AS

Leadership
Challenges

Financial Operational
Challenges Challenges

Key Integration Challenges

Information
Technology Communication
integration

Human Resource
integration
 Role of HR in M&A
 Facilitates Transition Teams

 Educate Managers and Employees


 Develop Newly Formed Teams

 Reinforce the New Culture

 Carry Out Effective HR Integration

 Help Line Managers to Communicate Effectively During Transition Phase

 Managing Individuals with Dignity

 Developing & Implementing Actions to Retain Key Employees

 Help Clarify Roles

 HR Issues/ Problems in Mergers &
Acquisitions
 People issues like staffing decision, organizational design,
etc., are most sensitive issues in case of M&A negotiations
 Roles, behaviors and attitudes of managers affect
employees' adjustment to M&A
 Impact of the cultural clashes
 Lack of communication
 Loss of key personnel
 Stressed & restless Employees
 Declined commitment, functional efficiency & team work
levels
 Recognition & reward norms, procedures & practices
 Role of HR in making M&A successful

Change HR systems design

Compensation adaptation • Performance
• Align compensation structure • Leadership Management
• Recruitment systems
and profiles
Employee • Training & development
communication • Retention strategy for
Merged key performers
• Revised business Company A entity Company B
strategy
• Future roles

Organization structure
• Organizational
grades
• Reporting
Personnel policies Voluntary retirement relationships
• Terms of scheme
employment • Scheme terms
• Leave, holidays
9
 Problems with Employee
 Stress on employee, caused by differences in HR Practices, Uncertainty
in environment, cultural differences, differences in orgn. structure &
change in managerial styles.

 Dominant culture which may lead to frustration or feeling of loss of

identity.

 Pay differences--- de-motivation

 The M&A activity leads to duplication of certain departments.

Hence the excess manpower at times needs to be downsized
---worried for security of their jobs.

 Fall of morale, loyalty & commitment.

Why Mergers FAIL?
 Employees revert to the old ways of conducting business
 Key people leave
 Minimal top management commitment for HR
 Lack of communication and continual training throughout
the whole process
 Lack of good tools to measure, manage, and deal with
people related issues
 Weak HR functions without reliable voice
Some Other Reasons
 Lack of research
 Diversification
 Poor Cultural Fit
 Failure to Take Immediate Control
 Ego Clash
 Limited Focus
 Failure of Top Management to Follow-Up
 Mergers between Lame Ducks
 Lack of Proper Communication
 Failure of Leadership Role
 Inadequate Attention to People Issues
 Loss of Identity
 Expecting Results too quickly
Case Studies on-

 Kingfisher - Air Deccan ( Airlines)

 Reliance – IPCL (Petrochemicals)
 SBI – SBS ( Banks)
Kingfisher - Air Deccan ( Airlines)
Three hundred employees of Air Deccan, now re-
branded Kingfisher Red, are being laid off by Vijay
Mallya-led Kingfisher Airlines, just weeks after the
completion of merger.
Many of these employees have been with Air Deccan for
nearly five years.
These employees were given a severance package
equal to two months gross salary for every completed
year of service (subject to a minimum of 3 months pay-
out).
Reliance-IPCL(Petrochemicals)
 Workers of IPCL undergone a strike in protest against
the move.
 This is a classic issue of rightsizing versus downsizing -
while the employees claimed that the company is
downsizing, the company claimed that it is rightsizing.
 Reliance has transferred almost 1000 people from
Baroda to its Jamnagar refinery for short term duration.
 But a fear has emerged in minds of employees that it
would be not short term but long term one.
 SBI-SBS(Banks)
 A positive aspect of Merger.
 No doubt the employees protested against Merger but it
took place due to the resistance of the members for the
change & for adjusting in new environment, outsourcing
in banking industry, loss of identity.
 But there is no risk of retrenchment or layoff. Few
schemes were designed for the employees early
retirement and that were voluntary.

 Chairman of SBI said- merger does not mean only the

marriage of balance sheets but it goes beyond that, he
added employees would get pay and perks accordingly.
Customers of SBS will also get a greater exposure.
Outsourcing
Outsourcing
What is Outsourcing?
• Outsourcing is a strategic decision to give a task
or activity to an independent contractor who
determines how best to do the task or activity.
• The firm and the independent contractor become
partners and may establish a long-term
relationship.
• Examples of outsourced activities: IT, HR, Legal
services, Manufacturing, R & D.
• Note: Outsourcing transactions are done in the
market.
Why are organizations outsourcing?
Outsourcing Advantages:
• Better quality people and knowledge may be applied to
an activity or task by the outsourcing firm.
• Reduction in administrative costs may be possible when
certain tasks are outsourced.
• Lowering infrastructure and facility costs by having the HR
function administered off-site.
• Improving employee retention and morale by providing timely
answers to payroll and benefits questions.
• “Better, faster, cheaper”
Factors hampering HRO
• Cost factor & Confidentiality
• The fear of losing jobs
• Loss of sensitive information to public/competition
• Ethics and quality of outsourcing vendors
• Possibility of security breaches
• Lack of psychological acceptance
• Lack of fit with company culture
Outsource
activities that Retain activities
that
· Have high volumes · Support key business processes
· Are repetitive and routine · Get influenced by external forces
· Reflect consistent customer needs · Require high content expertise
· Have opportunities to leverage · Are ad-hoc, periodic future
· Are service and efficiency driven oriented projects
· Are easily measurable in terms of · Are difficult to measure
performance · Have high impact on
organization as a result of non
performance, failure or mistake
Areas where HRO will work

· Relocation · HR Information
· Recruiting/Staffing Systems
· Competence · Disciplinary Issues
Development · HR Surveys
· Salary Administration · HR Research
· Consulting and · Staff Loans and Perks
Training · Manpower and Career
Planning
Labor Relations
 Introduction
• Labor relations is a key strategic issue for organizations
because the nature of the relationship between the
employer and employee can have a significant impact on
morale, motivation and productivity.
• Workers who feel that terms and conditions of
organizations are not advantageous to them , will not be
committed to perform.
• Many times workers create challenges for human
resource management. When workers form unions, the
employment relationship becomes more formal through
a union contract under National Labor Relations Act.
• This act allows the unions to bargain with management
over various terms and conditions of employment.
• But union membership is declining now and it can be
attributed to a number of factors.
• Many workers are suffering from union corruption,
misuse of funds, sometimes member will feel that union
membership outweigh the benefits.
• Automation had eliminated many manual labor jobs in
which workers were employed.
• Many unions had refused to be flexible in changes made
by organizations.
Why employees unionize
• Employees join unions because of perceived benefits
that unionization provide them. These benefits can be
economic, social or political.
• Unions often sponsor social events for their members
and their families.
• No benefits come without some cost, so union members
pay at least some fees or dues to support the union
activities.
The National Labor Relations Act
• The NRLA created the National Labor Relations board
(NLRB) to do union elections, certifying a particular
union as the official bargaining representative of a group
of employees, hearing allegation of violations of the act
from employers and unions.
• First step of NLRB to get the signed authorization cards,
which indicate an expressed interest in having union
representation from a specific union (minimum
requirement : 30% signed authorization cards)
• Once NLRB has received the authorization cards and
determined that there is sufficient interest to conduct an
election, it will attempt to determine appropriate
bargaining unit.
Behavior during organizing campaigns