Despite having a pivotal responsibility of managing human capital of an organization, HR leadership involvement in matters related to M&A remain quite limited. In many integrations, the involvement of HR is confined to combining payroll, harmonization of employee identity nomenclature, managing redundancy and retaining key employees. I maybe generalizing the components, but I want to highlight the narrowness of thinking on HR collaboration during an integration.
There are many reasons for the restricted thinking. I am sharing some of the more commonly seen reasons:
Under-estimation of scope of work
Expected HR scope during an integration can be broadly put into these following
categories:
-
- Executive and Leadership structuring support. This includes leadership team assessments of the target as well as succession planning and readiness
gap analysis and accordingly, creation of action plans - HR Management. Hiring, Redundancy, Compensation and Benefits, Performance management, Talent management, Organization development, Employee policies and procedures, Pension, Stock options, Job family harmonization, compliance, works council, unions, labor laws and several other facets
- HR Operations and Administration. Payroll, onboarding and employee exit, travel and expense management, employee insurance, employee benefits management including company cars, mobile devices, employee leave and absence management and several other items
- HR IT system. Systems used for HR management, payroll, HR operations and other employee related system and technology tools
- Integration project support. During integration, support from HR is expected by the integration project team in form of change management, communication and culture. HR needs to handle employee sensitivity related to redundancies and synergies due to integration as well as plan for the scheduled redundancies. HR also, needs to work with functional and operational leaders on key talent retention.
- HR team integration. Last but not least, HR teams also need to be integrated
- Executive and Leadership structuring support. This includes leadership team assessments of the target as well as succession planning and readiness
and during integration, there are job redundancies and overlap of management that needs to be taken out as part of integration synergies.
“A company’s employees are its greatest asset and your people are your product” –
Richard Branson
As you can see, HR teams need to be involved in several areas and have a significantly large scope for integration. This vast scope of work can only be managed through proper preparation, planning and resourcing.
Clarity on how to integrate
Strategically this seems to be a no-brainer. However, devil is in the detail. Teams struggle to produce a comprehensive list of all functional areas and corresponding action items that need to be covered during an integration. When I say a comprehensive list, I just don’t mean a list of sub-functions, but individual actions related to sub-functions. Let’s take the example of recruitment. It is not just combining the two teams but also, harmonizing the list of hiring agencies, process of job advertisements, process of headcount approval and the interview process, contract drafting and signing. As you can see, that teams need to go through an intense information gathering and discovery phase to obtain clarity of scope. Once the list is compiled, the HR team in collaboration with other teams, need to review the list, conduct effort-impact analysis, sieve through the list and prioritize actions. Organizations must have sound methodologies and approach to decide upon a prioritized list of actions. To achieve the above, organization HR teams need to have prior experience and knowledge of integrations. In addition, the exercise of gathering information needs strong facilitation and collaboration skills. As you can imagine, many organizations neither have the expertise in-house nor have the right skills to leverage knowledge from external sources.
No seat at the leadership table
HR needs to play a pivotal role in an integration as illustrated in the scope section and yet in many organizations, HR is looked upon as a support function and therefore, left out of any strategic and M&A discussions apart from limited information exchanges. Without the seat at the table, HR teams face obstacles to advise the leadership teams on workforce planning, talent management and redundancies. Many leaders believe that they are in a better position compared to HR to evaluate critical employee related decisions and thereby, hugely undermining HR skills. No wonder, talent management fails during integration. After all, when people with little driving experience take over the driver’s seat, accidents are bound to happen
Lack of project management mindset
Due to huge number of activities under different functional areas with multiple stakeholders which need to be conducted within a certain period, integrations need strong project management skills. Many HR practitioners unfortunately, do not possess project management skills or experience. This shortcoming creates inadequacy, frustration or worst, apathy towards the integration program by the HR team. It is important to acknowledge during a merger that many people who form the
core of integration teams may not have project skills and organizations need to address them upfront.
Capacity of the HR teams
Remember HR teams play a support role in an organization and in general, the size of teams is quite limited compared to other functions. It is quite common to see high ratio of span of influence for HR managers. A single HR manager maybe responsible for a team of 50-70 people. On the other hand, the amount of effort required of the HR teams during an integration as illustrated in previous sections, shows that HR teams may not have enough capacity to effectively support integrations. Due to limited capacities, HR teams often either avoid making decisions or are unable to provide the required headroom to make those calls.
Pressure of day job
Remember HR teams play a support role in an organization and in general, the size of teams is quite limited compared to other functions. It is quite common to see high ratio of span of influence for HR managers. A single HR manager maybe responsible for a team of 50-70 people. On the other hand, the amount of effort required of the HR teams during an integration as illustrated in previous sections, shows that HR teams may not have enough capacity to effectively support integrations. Due to limited capacities, HR teams often either avoid making decisions or are unable to provide the required headroom to make those calls.
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As you can see, HR has a role of immense value during an integration. Yet, to fully leverage the HR team’s participation in an integration, the whole frame needs to be thought through. The teams need to go through the process of divergent thinking to collect and discuss all the areas of work that either HR controls or where HR exerts a significant amount of influence. Once discovered and collected, the teams need to collate and conduct effort-impact analysis. Once the results of analysis are available, the teams need to start with the convergent thinking of sieving and prioritizing the list of actions to be performed under integration. Budget and resources need to be allocated, owners assigned, and timelines need to be assigned for these tasks. Post-merger integration is a complex undertaking for an organization. If properly approached, HR can play a significant role in the merger process. HR collaboration can be the differentiator between a successful and a failed integration. In the next article, I’ll continue on the topic and share a step-by-step divergent- convergent thinking on how to run HR integration.
