Merging companies fall down on HR

Companies taking part in mergers and acquisitions are ignoring people and HR issues, according to research by Mercer HR Consulting.

The study* of 20 major companies that have taken part in transatlantic mergers and acquisitions reveals the effects people issues can have on deals further down the line, while highlighting HR’s current lack of recognition in M&A.

The report reveals that only half the companies interviewed used employee satisfaction and staff retention as an indicator of a successful deal.

All but one respondent used cost savings as a measure of post-merger success, with most also using net income and revenue as measures.

Richard Coates, European partner at Mercer HR Consulting, said: “Financial results are obviously relatively easy to measure, but what drives these results is an organisation’s people. If you don’t address a wide range of people-related, organisational and cultural issues during a merger, you can be sure they’ll come back to bite you.”

Half of the respondents found the process of creating a new organisational structure following a merger difficult. This was the most commonly cited problem area in the survey. Participants only gave themselves a rating of 31% for their performance of this task.

Harmonising company cultures was also a challenge, with 40% of respondents reporting they struggled. Their average performance rating was 38%.

Coates said: “In a newly-merged organisation, the priority should be to identify and retain those individuals and teams with the right skills, and establish clear roles and objectives for them. Companies should have a clear vision of what the new organisation will look like and how it will work, and be able to anticipate problems.”

When the participants looked back at their merger experience, all but one said that moving quickly and business continuity were the key factors in achieving successful post-merger integration. Three quarters of respondents said keeping communication lines open with employees was vital, and the same proportion saw harmonising company cultures as key to the integration process. Seven out of ten respondents thought retaining staff was crucial, despite the companies earlier admitting they had struggled with people and HR issues during the merger and had failed to cite employee satisfaction as a post-merger indicator.

The report highlights seven key lessons for achieving successful transatlantic M&As: establish post-merger metrics and targets clearly and quickly, frequently monitoring progress; expect organisational and cultural issues to present the greatest difficulties; involve management to foster participation in the integrated business; appoint project managers and teams to deal with integration; act quickly on major revenue-related post-merger activities; communicate with customers immediately after announcing the deal; view revenue generation as more important, but more difficult to achieve, than cost savings.

* The Mercer Survey of Transatlantic Mergers and Acquisitions is available at www.mercerhr.com/pressrelease.