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The Human Resources department of every organization is tasked with managing all staff. However, many HR departments do not recognize the role they play in strategy and organizational decision making. The essay looks at the influence of HR on mergers and acquisitions. Additionally, the paper gives a discussion on the concept of Reduction in Force, and how HR can apply it to resolve staff concerns during mergers and acquisitions. It is arguable that HR involvement in mergers and acquisitions processes affects the success of the said mergers and acquisitions.
Mergers and Acquisitions
Bhaskar’s (2014) main idea is that Human Resources plays a considerable role in mergers and acquisitions. I agree with the premise. One of the reasons I agree with the premise is the fact that it is the responsibility of HR to scout for potential companies to take over or to merge. Additionally, HR analyzes the firms’ HR strategies and how they can efficiently find a middle ground for salaries, bonuses, and compensation. Employee skills and capabilities are also in their scope of duties as they will have to determine how roles and responsibilities are split.
It is important to note that when two companies merge, two different institutional cultures are combined. Bhaskar (2014) states that acculturation is one of the main reasons that lead to the downfall of mergers and acquisitions. For example, AOL and Warner were involved in a unification deal that cost slightly over US$ 300 million (Bhaskar, 2014). The deal was, however, a colossal failure as the HR did not manage to merge the two organizational cultures successfully. The acquisition of BellSouth by AT&T is quoted as one of the best mergers of all time (Bhaskar, 2014). One best practice that can be deduced from the merger is the adoption of an integrated organizational culture after the merger.
Different companies employ various strategies in handling organizational issues. When two companies that have been doing things differently start working together, conflict of cultures will arise. Human Resources needs to come up with ways to ensure that the merging process is not only smooth for both parties but efficient as well. Mavhiki’s (2013) main idea is that HR plays a huge role before, during, and after the merger. I agree with the statement. This is because HR comes up with strategies that will help the companies align structures, policies, and procedures before, during, and after the mergers. The merger between Vodafone and Mannesmann can be used as an example towards this end. The HRs of both companies developed strategies before, during, and after the merger. (Avinadav, Perlman & Chernonog, 2017).
According to Mavhiki (2013), the process is usually subjugated by a considerable number of lawyers and investment pundits whose CEOs believe are in the best position to make the process successful. When the team in charge of merging and acquisition is created, HR needs to ensure that the financial management team is included for smooth transition purposes. It can be argued that HR is the backbone of a stable alliance. Without HR’s active involvement, there will be culture and system conflicts that will be detrimental to the process.
Reduction in Force
Reduction in Force (RIF) is every employee’s nightmare (Bhaskar, 2014). Avinadav, Perlman, and Chernonog’s (2017) main idea are that RIF is the permanent termination of employment due to the change in requirements of the job description, reduction in funds, or general reorganization of a company. I agree with the statement since, after a merger, it is common to find some roles and positions deemed redundant. It is the role of HR to not only anticipate such an action but also develop a force reduction strategy.
The primary goal of RIF is to reduce expenses. The first step that HR has to undertake is to identify the roles that have to be eliminated. Secondly, in an attempt to save on costs, HR also has to develop a strategy for the reassignment of duties. Some of the primary considerations for retaining or releasing an employee include performance, skills, qualifications, and duration of employment (Bhaskar, 2014). One can deduce best practices from the case of SABMiller and AB InBev, where SABMiller had to use RIF to reduce not only costs but also ensure a smooth merger with AB InBev (Mavhiki, 2013).
The process of reduction in force must also be very effectual. HR must first notify the affected employees and specify which categories they fall under with respect to groups agreed upon by management. They can either be permanently let go or have the option of being recalled. The terms of the RIF must, however, be made clear to each employee. To this effect, I agree with the opinions of the author since this is a huge task that will determine the attitudes of the employees after the merging process.
Mergers and acquisitions are deals that cost billions of dollars annually. Despite this, many have been unsuccessful. Many employees affected feel pressured to tolerate the new additions while others have a difficult time adapting to the new organizational culture. The manner in which redundant employees are let go also has to be systematic. The concept of Reduction in Force comes into play when discussing mergers and acquisitions. The process employed in RIF through HR should be bounded by policy and ethical guidelines associated with the company in question.
Avinadav, T., Perlman, Y., & Chernonog, T. (2017). Mergers and acquisitions between risk-averse parties. Journal of Operational Research, 239, 926–934.
Bhaskar, U. (2014). HR as business partner during mergers and acquisitions. Human Resource Management International Digest, 20(2), 22-23.
Mavhiki R. (2013). Mergers and acquisition. CFOs and FMs get more involved beyond funding the transaction. Accountancy SA, 3(2), 30-33.