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Jan Hills

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Mergers and acquisitions: Creating a stronger HR function

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Jan Hills and Stefania Cappello offer practical advice on how merging HR functions can be implemented, and how it should be seen as less of a daunting task and more of an opportunity for a stronger HR function.

 
Most advice on mergers and acquisitions is about HR helping the business. The challenge for HR is that it is often so busy helping the rest of the organisation to merge successfully, they neglect to focus on merging their own HR function well.
 
We believe this is a missed opportunity in two ways; firstly because you can create a stronger HR function by strategically aligning the function to the new business. And, secondly, because if HR cannot merge itself well, it fails to be a role model for the rest of the business. What are the practical steps to take? How can you make this more of an opportunity than a daunting task?
 
"The key is to help reduce the fear and to emphasise the opportunities."
Get the basics right
 
HR is about people too. Just as the rest of the organisation is worried about the impact of the merger on them, the HR team will be having the same worries. In mergers, employees tend to experience split emotions – the fear of change and the excitement of new opportunities. The key is to help reduce – you will never completely remove – the fear and to emphasise the opportunities. So, one key tool at your disposal is regular communication. Dispel any untrue rumours and keep everyone involved, even when there isn’t that much new to say. Open as many communication channels as possible – get the HR team asking all the questions they have on their mind through different sources such as a confidential email address, town halls or face to face interaction. Answer as many questions as possible and give employees a date for information on unresolved questions.
 
And, of course, the general good practice on communications also applies within the HR function. Examples of these are: 
 
  • Do stick to the known facts about the process and timelines. Only articulate milestone dates if they are in the public domain. Avoid communicating inspirational dates as they will probably be perceived as promises.
  • Don’t become drawn into any follow-up conversations or emails which are undecided. Do refer people to the relevant contact early in the discussion rather than becoming personally involved.
  • Do repeat known information frequently and through multiple channels and even when there is little new to say remind people of what is agreed.
  • Don’t focus only on formal communication, build in methods to communicate informally, keep the door open and talk at the water cooler.
  • Do encourage discussion to engage people in the opportunities and acknowledge the challenges.
An opportunity to align the HR strategy 
 
Once the basics are in place, it’s time for HR to face its real challenge. Can it look at the bigger picture and use the merger as a means of improving the function? This work involves getting the maximum synergy and benefits possible to leave HR as a better function than the two which met in the merger or acquisition. Merging with another HR function can provide HR with the opportunity to revaluate its strategy, practices and procedures, skills and service model. This is essentially an opportunity to:
 
  • Develop an HR people and organisation agenda that fully meets the business strategy of the combined organisations.
  • Form, and gain buy-in to, a service model that will meet the new business needs in an effective and efficient way.
  • Structure the function in the optimal way to meet the business strategy and service model
  • Create policies and practices that are culturally aligned to the new organisation.
  • Select the best and most skilled people to deliver the people and organisation agenda and run the systems and processes in the new organisation.
This all means that you need a small group of people working on the HR integration. This group must analyse the plans of the new business and the implications for the people and organisation. The team must develop and articulate the HR agenda and gain the buy-in of key stakeholders – including those within the merging HR teams – and communicate the vision for the new function.
 
An opportunity to role-model the execution
 
The other opportunity the merger offers HR is to role-model the best execution of the transformation from two organisations to one integrated new function. This is what HR will be advising on and working with the business and line clients to achieve. The management of this in the HR teams is crucial for two reasons. First, it will determine the quality of the resulting function and second, in this process HR is a role model to the business. If you cannot demonstrate that your advice to the business can be practically applied in HR why should the business listen?
 
"If you cannot demonstrate that your advice to the business can be practically applied in HR why should the business listen?"
The key is to manage the change to the function, what we call the ‘hard side’, the tangible actions and steps that are necessary to complete the integration process. The second is to manage the transition, the emotional reaction to the change experienced by the people in the function – the ‘soft side’ of the integration. The irony here is that, of course, the ‘hard side’ is easy to do well. The ‘soft side’ is very difficult to do well but will make the difference in the long term.
 
Some golden rules for the ‘hard side’ are:
  • Set up project streams to manage each major aspect e.g. structure and numbers of people required, selection of people, new policies, IT and systems
  • Ensure project stream leads have excellent people and process skills
  • Set up project management disciplines
  • Ensure project teams are responsible for both what needs to be done and how they gain buy-in
  • Set up clear timetables and measures of successful progress to the ultimate goal
  • Ensure transparent practices and excellent communication
  • Set up cross organisation teams so people from the two merging companies work together
Some golden rules on the ‘soft side’ are:
  • Create clear cultural principles on how the integration will be managed and these principles must reflect the culture of the new organisation
  • Rigorously monitor the behaviour of HR leaders against the principles
  • Create and monitor clear statements of how these principles will be implemented in project streams
  • Comprehensively monitor how well the execution is seen to be meeting these principles. Do this through cross level communication groups that can be used to quickly check on the mood and understanding of the whole function
  • Create informal and formal channels of communication which touch people in a variety of groupings from whole function to small teams through to individuals
  • Carefully monitor what is working, admit mistakes and celebrate success
  • Create opportunities to acknowledge the difficulties as well as the opportunities
  • Focus on and acknowledge how people are feeling – not just what they are doing
"Look back at this experience and identify what went right and what went wrong so that the same mistakes are not made while you are managing this transition."
This change isn’t easy for anyone and HR managers need to be made aware of the emotional strain that this change can have on the people they manage. 
 
Now is not a time to be reactive to change. The business will be looking to HR for guidance and support so HR needs to get its act together and be a role model for the rest of the organisation.
 
Most importantly, learn from your experience. It is likely that your organisation has already gone through a big transformation of some sort. Look back at this experience and identify what went right and what went wrong so that the same mistakes are not made while you are managing this transition. The most important lesson to learn is the thing that makes a successful merger or acquisition is the people behind it. This is equally true in HR as the rest of the business – gain the buy-in of the HR team and the road to success suddenly becomes a lot smoother.
 
 
Jan Hills is a partner, and Stefania Cappello is a consultant, at Orion Partners
 
 
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Jan Hills

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