Four Reasons to Give Them a Seat
By Jim Jeffries, Chairman of the M&A Leadership Council
As M&A professionals, we’re all familiar with the statistics about deal failure rates. And at the root of these failed deals, you’ll often find people and culture issues that could have been anticipated and addressed if HR leaders had been included on the deal team. The best serial acquirers have learned (sometimes the hard way) that it’s important to make HR a part of an interdisciplinary deal team. Here’s why:
1. Talent is often a major reason for acquisitions.
In fact, people frequently turn out to be the “secret sauce” that makes the acquired company truly valuable. This was certainly the case with the Daimler-Chrysler deal: an incredible team of executives had elevated Chrysler to the most profitable auto company in the world, with 23% of U.S. market share by 1997. That was quite a feat considering that the company had teetered on the edge of bankruptcy several times. Yet soon after Daimler acquired the company, most of Chrysler’s top leadership—the executives whose exceptional vision had driven the company to success—had been pushed out or had left voluntarily. By 2001, the company was losing $3 billion annually.
2. HR is well positioned to answer employees’ “me questions” about compensation and benefits.
Imagine this: It’s Announcement Day, and the employees of the acquired company have just heard the big news. While the executive team and other key staff have already had time to adjust to the idea of being acquired, the rest of the team is probably feeling confused, stressed and even fearful in the face of uncertainty. They want to know, “How will my insurance change?” “Will we still get quarterly performance bonuses?” and maybe even “Am I going to lose my job?” These are the “me questions” that almost always arise on Announcement Day and soon after. Your HR team is already well versed in your company programs and accustomed to “selling” them to your employees. If they’re also included in your M&A activities from the beginning, they can guide decisions about compensation and benefits, and present them to newly acquired employees in the best possible light.
3. The HR team is already a trusted, reliable source of internal communications.
One of HR’s primary functions is to maintain consistent, clear communication with all employees. That makes them uniquely qualified to lead change management; they are used to crafting messages that are meaningful and direct, and they can anticipate the kinds of questions that employees might ask. Thus your HR team can be an invaluable resource to the rest of your deal team, helping everyone prepare for open, honest communication with staff. If possible, go one step further and bring key HR leaders from the acquired company into the process, so that they can provide the same guidance to their executive staff.
4. HR has the tools and training to address staffing redundancies with planning and sensitivity.
Headcount reduction is a common source of cost synergies in acquisitions, but this process must be approached with great care. The way that redundant positions (and even which positions) are eliminated sends a strong message to the remaining employees. Your HR team should guide the process of deciding how to address each redundancy, and how to communicate layoffs to employees appropriately. In the case of cross-border M&A, your HR team can also navigate foreign subsidiaries’ laws and regulations surrounding termination of employment. In many countries, redundancies created by an acquisition are insufficient grounds for eliminating a position.
The first step to bringing HR into your M&A deal team is to provide HR-specific M&A training. Join us in San Diego for The Art of M&A for HR Leaders. This unique workshop brings together industry leaders who share real-world experience and facilitate peer learning through discussions and case studies. Learn more.