Introduction
A merger is the process of a company combining with another company and totally absorbing the infrastructure, facilities and functions (Bontis 1999, p.434). Amalgamation involves merging between commercial companies, and later forming a common name for the merged companies. Two existing companies are unified to form one fully functional company that carries out all activities under one name (Hild 2004, p.2).
When a company is soon to restructure through merger or acquisitions, then there is need to understand the role of human resource management all through the process (Hild 2004, p.3). This means that before and after the merger, the HR must collaboratively work with the workforce to ensure higher levels of a successful merger between companies.
Hilda (2004) notes there are challenges that are bound to face the HR department as a result of mergers and how the takes up the issues and activities directly affect the productivity of the work force (P.4). This is why the human resource management is vital in achieving success or failure in mergers.
Key stakeholders
The merger between Sandstone University and Redbrick institute of technology to form All-star University is one of the many institution mergers in Australia. The merger was important to ensure asset stability in financial assets and build on extra knowledge, talent and technology (D’Souza et al 2001, p.24).
The major shareholder’s of the All-star University includes, the government, Sandstone University’s main sponsor. The government main’s interest is to have the institution offer more courses to the public and acquire as many students as possible to boost the university courses and have people opt for the All star university.
If the school could add more business, related subjects more students would register and the government will reduce its sponsorship to the university.
The students are the second stakeholders, after the merger, the students have been pressuring the university to add more courses to its curriculum. The students are demanding for more courses because the merger benefits the students because they get to be taught by academics that have knowledge, experience and experts in technology (Pattanayak 2005, p.400).
The local business community also has their interest in All-star University because Redbrick staff has been known to have a wide experience. They also take a modern approach to teaching students in business related fields practically, preparing them for the real world.
This coupled with highly educated and experienced lecturer’s the local business community entrust their employees to go through the university to better the company’s human resource (Hild 2004, p.3). The local business feel the school is potential in building their employees talent and they need to add more business oriented subjects.
The academics from Sandstone University and Redbrick also make up the stakeholders, the academics have different interests. Sandstone university academics have a traditional academic approach and still encourage public service, entered academia, banking and consulting. The lecturers also placed research publications above practical experience in the world of academia.
Their main interest is to keep earning according to the union’s agreement and that is according to seniority and also to maintain the prestige of the university. Meanwhile the interests of Redbrick’s academics’ main interest lie on teaching programs that one can apply to modern day business.
The academia’s main interest is to keep graduates into diversified range in the various business related fields. These lecturers’s take pride in teaching excellence and encourage students to be more practical preparing them for the real world.
The last union is the right and left union, the left wing tertiary academics union is involved in determining the Sandstone’s academic staff, which is often on seniority. The union’s basic interest is to determine the academics salary and rate of performance.
HR challenges
The merging between Sandstone University and Redbrick institute of technology is bound to raise a few HR challenges because a lot of attention is on focused on human elements (Hild 2004, p.6). The HR department is bound to witness a lot of insecurity and anxiety among the employees (Pattanayak 2005, p.400).
This was seen first developing from the Sandstone’s academic who expressed their dissatisfaction on the fact that the university was merging with an institution. The staff at Sandstone remain with doubts on job security (Bontis 1999, p. 435); cost and performance was to be used to rate all staff at All stars and the Redbrick staff were better in practical tasks.
Culture clashes are bound to be experienced in All-star university, because Sandstone University has different ideologies from Redbrick’s staff. Sandstone’s staffs believe in the culture of research and theory, the lecturer’s approach is based on paper work. While Redbrick encourages their students to take a practical approach and tend to not take the professors at Sandstone University seriously.
The HR has the challenge to align the two cultures in order to have all staff to work together as a team. Difference in culture could also be seen due to the attitudes and beliefs of the staff, the staff at Sandstone take union and tenure seriously while the staff at Redbrick does not.
The human resource department has the great challenge to create a system that will even out all employees (Hild 2004, p. 8). The Redbrick and the Sandstone staff have different cultural practices and it is up to the HR department to establish what should be optional and what system should be compulsory. If cultures crash the two may not work as a team and this may lead to direct failure of All university.
The staff at Sandstone has 90% of the staff with PHD’s while Redbrick has only 20% of the staff working with PHD’s. The lecture’s at Sandstone feel like they need to continue with the union’s pay system, where the higher lecturers earn more. This may pose a challenge and bring a difference in power and politics between the two forces.
Because the professors may feel offended and lack to corporate with the other lecturers, since they feel superior to the Redbrick’s staff. The staff at Sandstone being more learned than the Redbrick staff may feel superior and expect better and special treatment. The HR has the challenge of treating the professors as equals and also encouraging the other staff to feel appreciated.
The HR has to estimate the budget that will fund the transition cost that will help all staffs to go through training to adopt the new system. The HR has to first come up with a system for both staff and allow training schedules for the employees (Hild 2004, p. 8). The program established will need an implementation stage and a monitoring system; these procedures will require funding to the last step.
The HR has got to plan for this transition period and ensure the training is effective. The Sandstone staffs already have a negative attitude towards the amalgamation, and this may affect the level of cooperation among workers.
The 20% reduction in workers is to an extent a delicate issue because the HR manager has to choose from the Sandstone University and the Redbrick University. Both have their strengths and weakness and the HR department is faced with the task of having to choose the best employees. The HR is faced with the risk of lose or mismanagement, which could affect the productivity of the company.
This could then lead to financial drain because the employees left in the company will be a liability to the company. The HR has to come to terms with layoffs, which bring anxiety and tension among workers, this is a major de-motivating factor among companies.
The other issue involves facing an un-anticipated turnover of events, which could see some academics resign from the institution (Secord 2003, p. 267). The academics in Sandstone University feel that merging with an institution would be lowering the university prestige among the local community.
This is because Redbrick only has 40% of its total staff as PhDs holders while 90% of Sandstone’s staffs have PhDs. The lecturer’s feel at Sandstone that they have more long term experience in teaching and have the best approach to lecturing, due to the long experience.
The third challenge that the HR managers could face is procedural integration, where they have to combine the two company systems and structures (Pattanayak 2005, p.401). Sandstone has full time students mostly, while Redbrick has full time and part time students. This may mean reshuffling the courses, dates and time schedules.
The pay for Sandstone staff members is determined by the left wing academics union and it depends on the seniority. Redbrick on the other hand are paid on contracts and less than 50% of the staff at redbrick have a union. 85% of the staff at Sandstone has tenure, while only 20% of the Redbrick staff has tenure.
These differences in systems that dominate each institution will have to identify a way to integrate the central control function for both institutions to one major body (Hild 2004, p. 8). Sandstone University has a more formal approach as opposed to Redbrick the HR will look in closely to ensure that a compromised is reached.
All stars are covered with a 10 million loss and to keep up with the budget guideline, the university has to reduce the head count by 20%. This is also one of the greatest challenges for the HR department because the HR managers have to screen very carefully from both institutions and consider the best candidates to select (Secord 2003, p. 268).
90% of the Sandstone’s staff holds a PhD while Redbrick has only 40% of the total staff holding PhDs. However, the Redbrick lecturers are more practical and excellent in the way they deliver lecturers. This means the HR has to carry out an appraisal to ensure that the best employees are retained, the HR should be cautious to strike a balance in both institutions.
The HR department according to Pattanyak (2005) has to look closely at the effectiveness of each employee and how well they will blend with the new company policies (P.403); a reduction of 20% is a large number means that many employees will be rendered jobless. While this may see some academics laid off, the pressure of the HR department is to see that the ones who remain are the most productive and resourceful.
The pay may also pose a challenge to the HR department once the two companies are merged (Secord 2003, p.268). The Sandstone staff is paid according to seniority, while the Redbrick staff is paid on contracts and depends on their specialty. The HR department has the challenge of reviewing the remuneration package of each employee and come up with a pay package.
While doing this they are posed with the challenge of causing negative attitude amongst the staff (Pattanayak 2005, p. 405). The Sandstone academics feel that they are senior in their profession and have a research role and should be compensated better that the Redbrick employees who only have a few PhD holders.
The Redbrick staff has a practical approach and while they consult, their courses have become popular amongst the employees. This means that as the HR plans for the remuneration package there is the risk of job dissatisfaction from some lecture’s who may feel underpaid (D’Souza et al 2001, p. 25).
Lastly social cultural integration May arise as a challenge to the HR managers; this is because both institutions have their own organization cultures and belief which they hold dear (Hild 2004, p. 8). The Sandstone academics are research oriented and believe that a research publication is better than a practical experience.
Redbrick academics on the other side believe that a practical approach rather than theory based learning is the best way to lecture the graduates. These differences could break down employee communication when the company is merged. The HR department has the hard task of addressing culture and integrating the system, and finds a common ground from which the staff can start sharing (Pattanayak 2005, p. 405.
Logical and practical recommendations
For the HR managers to overcome the above issues, before the merger the human resource managements need to spend time with the financial analyst to see how the merger will affect the employees financially (Donaldson 1994, p. 46).
The management at All star University have to take up the leadership policy seriously. The staff will adopt the new system easily based on how well they are led; if the management is disorderly then the staff members will exhibit the same (Donaldson 1994, p.46). The leader also must have an implementation strategy for the new company, for it to succeed; the management must outline the implementation plan and how to follow it up.
The managers of All Star University must have well thought goals and objectives to see through the merger. The staffs at Redbrick and Sandstone University have a lot of differences, and this will mean that the managers will require a lot of planning and strategizing to turn these differences to similarities.
The HR for instance must find a common remuneration system that pays both the Redbrick and Sandstone staff. The HR department must carefully draw a new tenure system that allows all staff to join and this system must share a common interest, without discriminating.
The HR has to be diligent on soft issues such as the reduction of staff from both the University and Institute. Reduction of workers in a company may lead to conflict of interest on the HR side, where the manager may feel obligated to retain some employ. Here the managers should act on behalf of the organization and carry out their duties without favoring anyone.
The managers should use past experience from companies who have undergone amalgamation successfully (Hild 2004, p. 8). This way they are bound to borrow a few strategies that could be of great help to the company.
Many companies due to the tough economic times undergo merging to strengthen their financial position. All Stars should borrow the best practices of such firms and adoption techniques applied to see through the combination.
Key talent should be identified early before the merging process so as to ensure that the key players in both organizations are retained (Hild 2004, p. 8). The staffs at University are highly educated and most possess Ph.D while the staffs at Redbrick are experienced employees who take up a practical approach, making them popular amongst physical companies.
This means the managers need to look into such issues so as to make structured decisions on who stays and who is laid off. The staff needs to show also the will to adopt, it would be useless to take up an employee who is not willing to adapt to the new environment.
Communication is key for any merger to be declared successful; this should involve the stakeholders of both the university and the institute. The University has the government, parents, students and the community at large to consult before they implement the whole process. The process of communication allows the stakeholders to have time to prepare for the different environment.
Communication also communicates the key objectives and future plans of the organization (Hild 2004, p. 8). Lastly communication paves way for planning and strategizing for both management and stakeholders. Every plan needs to be established and ruled carefully to ensure its clear and well applied in the whole process.
Getting people from both the Sandstone university and the Redbrick institute of technology, absorbed together earlier in stage. The two institutions of learning should be brought together and explained to the process of the merger and explain the reasons behind it and its benefits. Honesty is an important aspect because the HR is dealing with adults and being transparent eases less tension among the employees (Pattanayak 2005, p. 407).
Since the All University will need to do a 20%, reduction the HR should not do the reduction all at once to but in stages. During the reduction the HR should look careful at both sides and consider the best resources to stay and who to release (Bontis 1999, p. 455).
The HR department should ensure that they integrate and orient the employees who remain into the system and carry out seminars to train the employees on how to cope in the new systems and strategy (Donaldson 1994, p. 50). The HR department should draw a new organization structures and define the roles of each employee with clarity, and assign the different tasks favorably.
The pay package guide should be explained to both sides and all factors should be considered to compensate the workers laid off (Secord 2003, p. 270). Manpower planning should be realistic in all to ensure the retained employees are up to the task and can deliver efficiently.
Conclusion
Managers in an institution need to remember that human resource is essential to the success of the company. When commercial companies decide to merge the workforce is always affected especially where the new formed company has to lay off some staffs.
This poses the HR challenge of having the human resource to retain the best employees and inculcate them to the new organization. The nature of success highly depends on how the human resource is handled in the company. The HR should make it an important not therefore to take the workforce through the merging process.
References
Bontis, N. (1999) Managing organization knowledge by diagnosing intellectual capital: framing and advancing the state of the field. International journal of technology management. 18(5). P.433-462
Donaldson, G. (1994) Corporate restructuring: managing the change process from within. New York: Harvard Business school.
D’souza, et al. (2001) Determinants of performance improvements in privatized firms: The role of restructuring and corporate governance. New Orleans: AFA.
Hild, A. (2004) Empirical evidence on shareholder value effects of corporate restructuring. Journal of business economics-investment and finance. 7(2). P.1-12
Pattanayak, B. (2005) Human resource management (3rd Edition). New York, Routledge.
Secord, H. (2003) Implementing best practices in human resource management. London, Person Hall.