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HR needs a seat at the merger table

A Society for Human Resources study shows the greatest obstacles for success following a merger and acquisition are HR-related. They include a loss of productivity, a loss of key talent and aligning incompatible cultures.

Despite this fact, dealmakers continue to leave HR out of critical pre-deal and due diligence merger and acquisition process steps. Often, HR is called in as closing activities commence. The result is missed opportunities to identify risks, establish and execute change management and communication processes, and identify critical talent, including what it will take to keep that talent motivated and loyal to the new organization.

The costs of leaving HR out of the due diligence process are high, especially when it comes to identifying hidden burdens that can be buried in pension obligations or Occupational Safety and Health Administration violations. For example, a 2012 Credit Suisse analysis found that of the 341 companies in the Standard & Poor’s 500 Index with defined benefit pension plans, 97 percent are underfunded.

Not only are there hard costs HR can uncover, but HR is critical to addressing the human “challenges” of a merger that can make or break a deal. That is why it is critical to establish a change management and communication plan early in the mergers and acquisition process. The objective is to create an awareness of the deal for your workforce and, over time, build understanding of the vision for the merger to gain acceptance and commitment to its success. The process needs to begin in the pre-deal phase and continue through post-integration activities.

Managing expectations through change management and communication is also critical to retaining key talent throughout the process. HR can help identify high-potential employees and where they will fit in the new organization. HR can also coordinate funding incentive programs to reward high performers who help ensure a successful integration.

When HR is properly positioned as a strategic partner in the mergers and acquisitions process, they can add enormous value toward the success. The mergers and acquisitions process is difficult and time-consuming. However, if synergies are achieved in the end, the merger can create tremendous growth. On the other hand, when proper attention to the “people” side of the transaction is not made, the value of the new organization can plummet as anticipated efficiencies or market share go unrealized.

So, as more mergers and acquisitions activities both large and small continue, it is imperative that business leaders include their HR experts at each stage of process, especially at the beginning stages. It will help to ensure a seamless integration of employees, cultures and business processes that must be realized for the deal to achieve its optimum value.

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Michelle Hicks, a senior professional in human resources, is a director in the communication practice of Buck Consultants, a Xerox company. 

About Michelle Hicks