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 Phase During Merger Post-Merger Phase

Involves due Diligence, Negotiations & closing of deals. Psycho-social support Generally, the companies concentrate only on the legal issues.

Different team are made Appointment of new board of directors Organization Cultures are defined.

Involves re-distribution of power between the merging firms. Revising & adapting management styles. Review Pay scale & perks

Increased Market Power Accelerated Growth

Financial Benefits Tax Benefits

To Create Value
Enhanced Profitability Diversifying Risk

CHALLENGES IN M&AS
Leadership Challenges

Financial Challenges

Operational Challenges

Key Integration Challenges

Information Technology integration Human Resource integration

Communication

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

 eople 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

Compensation
Align compensation structure

Change adaptation
Leadership

HR systems design
Performance Management Recruitment systems and profiles Training & development Retention strategy for key performers

Employee communication
Revised business strategy Future roles

Merged Company A entity

Company B

Organization structure Personnel policies

Terms of employment Leave, holidays

Voluntary retirement scheme

Scheme terms

Organizational grades Reporting relationships

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)

y Three hundred employees of Air Deccan, now rebranded Kingfisher Red, are being laid off by Vijay Mallya-led Kingfisher Airlines, just weeks after the completion of merger. y Many of these employees have been with Air Deccan for nearly five years. y 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 payout).

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

y Have high volumes y Are repetitive and routine y Reflect consistent customer needs y Have opportunities to leverage y Are service and efficiency driven y Are easily measurable in terms of performance

Retain activities that

y Support key business processes y Get influenced by external forces y Require high content expertise y Are ad-hoc, periodic future oriented projects y Are difficult to measure y Have high impact on organization as a result of non performance, failure or mistake

Areas where HRO will work

y Relocation y Recruiting/Staffing y Competence Development y Salary Administration y Consulting and Training y HR Information Systems y Disciplinary Issues y HR Surveys y HR Research y Staff Loans and Perks y 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