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Monday, June 7, 2010

Focus on HR "soft" issues ensures value after a merger

Global merger and acquisition activity could rise as much as 35% this year. But for mergers and acquisitions to succeed, it’s essential that companies address such "soft" issues as effective change management and alignment of culture with strategy. Yet, senior leaders seldom give them the priority they deserve.

That was the conclusion of a study by Right Management of post-M&A performance that surveyed 156 companies in North America, Europe, and the Asia-Pacific region. It found that the top factors correlated to achieving value and growth were, in large measure, human resources issues. Yet, the four composite indices where participants gave their organizations highest marks were productivity, value creation, business integration, and customer focus, while the four bottom-rated indices were talent management, alignment, internal communications, and culture integration. Thus, according to the study, "hard" issues tend to be addressed more effectively than softer, people-oriented factors.

Why does this happen? Part of the explanation lies in the role of HR executives in most organizations. Because they often are perceived as not being conversant in finance and business basics, HR professionals tend to be left out of M&A planning and implementation. As a result, their input is given short shrift.

That’s a mistake. HR should be brought in at the front end of the M&A process – before the ink dries. In fact, because "people" issues are so important to M&A success, organizations should give HR and business considerations equal weight. Business objectives, after all, can only be achieved when top performers are there to make them happen. In the process, HR professionals need to be actively involved in the planning and implementation, and given full-time, dedicated resources related to culture and change-management issues.

But HR professionals also have a responsibility to step up to the plate by calling attention to the substantial value they add to the integration process. To make the case for the benefits they can bring to the organization by focusing on talent retention during and after the transition, they first need to demonstrate to senior leaders their understanding of key business issues. Here’s some of the value they can bring:

-- Facilitation of preliminary integration discussions with business leaders
-- Future focus on workforce strategy
-- Development of retention strategies critical for the deal to succeed
-- Active role in due diligence process
-- A first look at organizational design, cultural issues and leadership
-- Planning the launch of the integration team

If leadership doesn’t include HR as serious partners – they run the risk of undermining the potential value the organization can reap from the merger.

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