Professor Chris Rowley: HR management can prove vital for merger and acquisition success

Chris Rowley

Employees are all too often the invisible ‘forgotten army’ in mergers and acquisitions, because these events are frequently thought of and presented in isolation as easy, glamorous takeovers with important consequences, typically regarding financial and market shares.

However, these are not only overly simplistic and narrow process views, but also ethnocentric, for example ‘what we do is normal’ and by implication somehow ‘better’. In contrast to this, I make the following simple basic assumptions about human resources management and mergers and acquisitions.

First, many mergers and acquisitions fail, and many of these failures are often due to people problems.

Second, the acquiring organisation may not necessarily have the ‘best’ staff in situ, let alone the best systems or processes, corporate culture, etcetera, for the future new organisation.

Third, people-related issues result from the commonly-created merger and acquisition toxic mix of poor communication and leadership.

Fourth, the consequent feelings of loss of control produces role ambiguity and uncertainty, leading to alienation and anxiety, which can produce resistance from employees because they feel confused and unsure how they will fit in with the new organisation. This, in turn, impacts on motivation, productivity and labour turnover, especially of those with the most in-demand, transferable skills who may even be the very key people the new organisation thinks it is gaining and wants to retain. The same negative consequences impact on those remaining, with ‘survivor’s syndrome’, wondering what is going to happen and to whom.

Fifth, there are a set of variables in these HR impacts. Size: it is not a binary ‘yes’ or ‘no’ on impacts, but rather a spectrum from little through to a lot; temporal: impacts can vary and change over time; location: is the person in the organisation being acquired or acquiring?; who: if the takeover was by an business like John Lewis Partnership then staff may be less apprehensive than if a firm [which has received negative public attention and media coverage] like Sports Direct was completing the takeover.

Sixth, motivation and productivity are not generated by fear and Dickensian-like management and businesses trying to out-compete each other, paying the least they can get away with in a ‘drive to the bottom’. Rather it is driven by good management and HR practices, including reward and benefits.

Finally, HR impacts also depend on the organisation’s view of the HR function and its role, including added-value and strategic positions, as well as corporate social responsibility viewpoints. These are linked to the particular leadership of the organisation, as well as its type, ethos, morals and the corporate culture this engenders and supports.

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So, there is a crucial need to maintain employee commitment in the midst of the merger and acquisition turmoil. Yet, HR damage is done because of the speed some mergers and acquisitions are concluded, the lack of early and useful information and leaving human resources management out of the loop. Such problems can be reduced by human resources management’s early and significant involvement in mergers and acquisitions, and meaningful, clear and consistent communication, engagement and leadership, which needs also to be visible. All this makes HR one of the critical aspects of mergers and acquisitions.

Professor Chris Rowley is a visiting fellow at Kellogg College, University of Oxford