Essay on Human Resource Management Planning and the Success of Acquisition

Acquisitions have increasingly become the dominant mode of growth for corporations seeking to gain a competitive edge over their contemporaries in a dynamic and increasingly complex business economy. Acquisitions, additionally, fulfill various other corporate objectives including diversification of risk and reducing the possibility of hostile takeovers. The stated reason for most acquisitions, however, is to achieve the synergistic effect commonly stated as two plus two equals five.' Acquisitions may range from cross-border complex billion-dollar deals to small acquisition-hires' involving individuals although only about 30% of acquisitions succeed (Weber & Drori, 2011). Various researches and studies have attributed the low success rate to the continued neglect of the human resource planning side of acquisitions. Most acquisition deals are driven by the strategic and financial considerations, yet most of the deals fail to find success because of the post-acquisition people and culture issues that emerge after the initial optimism (Kalleberg, 2009). It is therefore important to analyze the role of human resource planning in the determination of venture outcomes. The best way to analyze this is by examining the complex interaction between the initial type of pre-acquisition human resource culture and the terms and interpretation of the kind of acquisition deal that the parties enter.

Human Resource Problems in Mergers and Acquisitions

Weber and Drori (2011) suggest that to effectively point out the complex human resource issues that may arise during an acquisition, it is important to adopt an effective framework that breaks down the acquisition process into phases.

The Pre-Acquisition Stage

The first step in acquisitions is strategic planning and organization. Here, the acquiring firm formulates its mission statements and decides the type of acquisition it intends to seek and how the selected acquisition type achieves the corporate objectives. In the next stage, the firm is principally concerned with the organization- building a team to oversee the acquisition activity. Antila and Kakkonen (2008) have shown that most corporate executives neglected the incorporation of human resource aspects into the acquisition process. Consequently, during the pre-merger stage, financial, legal and structural concerns predominated. Human resource managers, who are adept at managing the crucial human resource side of the process, were seldom engaged by the core planning group. Antila and Kakkonen (2008) further demonstrated that the human resource planning function was not integrated into more than two-thirds of the companies that reported post-acquisition failure. With such results, Gomez (2013) stresses the need for the inclusion of human resource managers in the core planning group. Because people and culture problems are an important part of acquisition failure, including human resource experts in the very initial stages of the acquisition process is a crucial part of the acquisition strategy.

The search for potential acquisitions and the relative benefits of each is a major step in the pre-acquisition stage. Of particular note concerning Human resources is the finding by Gunter et al. (2011) in a case study survey, that some of the most crucial factors in the evaluation of potential acquisitions were the management principles of the top management and the talent of the acquired employees and middle-level management. They further stated that some acquisitions are made partly to acquire the invaluable asset of a competent and talented management team. Retention of the management team and ensuring minimal interruption of the management philosophy of the acquired team, therefore, becomes an important component of the acquisition strategy. The subsequent analysis and offer, which seeks to determine the level of fit between the two firms is important in ensuring the success of the process. During this process, three levels of fit are identified and analyzed; financial, structural and business. Here, organizational compatibility, which includes organizational culture and human resource, is paramount. Organizational fit effectively determines how well the two firms can be integrated. Generally, the greater the difference between the two organizations in this aspect, the harder it is to achieve complete integration of the two cultures (Weber & Drori, 2011).

The Post-Acquisition Transition

The transition following the acquisition is arguably the most crucial phases of the entire process. The stage is extensively the most complex and regarded with the highest level of suspicion and uncertainty. According to Weber et al. (2012), transition management is almost always shambolic in the organizations reporting failure after the completion of the process. The management of this stage requires the almost delicate balancing act between the provision of a stabilizing influence on the organization and fostering a climate for change. Uncertainty, anger, family disruption and withdrawal are rife at this particular stage (Weber, Moore, & Shlommo, 2012). Employees that choose to leave the company voluntarily indicate that the uncertainty created by the pervasive changes lead them to do this. The importance of ensuring a smooth transition is emphasized by who states that negative worker reactions are commonplace in failed acquisitions relative to successful ones. Negative employee responses, however, are expected and typical to a threatening situation- job insecurity. The nature and magnitude of the backlash from the employees is, therefore, determined their perception of the level of threat posed on their job and the level of control they appear to wield over their futures. The level of threat and their perception of control, in turn, will be a function of the employees lack of clarity concerning the roles they are expected to fulfill in the new corporation. Myungweon (2011) discovered a direct correlation between the perceived level of job threat and subsequent resistance to change. Individuals encumbered by threatening situations have been shown to resort to learned patterns of behavior, even when inappropriate. Therefore, since the transition stage is meant to herald change, feelings of uncertainty and insecurity are counterproductive (Myungweon, 2011).

According to Kalleberg (2009), continued predominance of negative attitudes resulting from uncertainty causes the workers to anticipate the worst possible scenario and begin to consider jobs elsewhere. The workers the post-acquisition corporation can hardly afford to lose, the most valuable employees, often tend to lead the exodus. The exodus of workers can occur in such scales as to turn a previously profitable venture into one that barely stays afloat (Myungweon, 2011). If the management does not instigate an interventional strategy to deal with the negative reactions, the long-term behavior and morale of the retained workers is affected irreversibly. Subsequently, the probability of post-acquisition success drastically reduces. Important human resource interventions at this point target the reduction of the incidence of negative reactions principally through emotional support. Additional activities reducing the level of anxiety and promoting realistic expectations of the future are put in place- sometimes as early as during the negotiation phase. To counter feelings of powerlessness, employees are provided with information to counteract the threat of job security (Kalleberg, 2009). Commitment to the new firm can be enhanced by demonstrating to the employees the presence of opportunities and the likelihood of achieving success in the new organization.

The Post-Acquisition Integration

Gomez (2013) states that the integration phase is crucial for the implementation of al the changes that are designed to create synergistic relationships. The primary goals of the stage, which is often poorly managed, is to standardize the procedural relationships of the new firms and maximize productivity. In most cases, the operating procedures of the larger group often dominate over those of the smaller group. The consequence of this, however, is the perception among the employees that the bigger group is superior and that its workers are better and wiser. Weber Y. (2011), in an in-depth qualitative research, notes that progressively, the smaller group continues to lose identity and eventually conflict may result between the two factions. The bigger group often tries to centralize the operations of the new firm, particularly concerning expenditure. Weber et al. (2012), however, suggests that this approach causes human resource problems since most of the managers that choose to leave firms after acquisition cite loss of autonomy and control. Discovered that in more than three-quarters of the failed acquisition events, there were reports of disturbed levels of managerial autonomy and the reporting relationships in the company after the acquisition. Of businesses that reported no post-acquisition problems, more than half left their administrative structures and reporting relationships unchanged (Weber Y. , 2011). When the dominant firm decided to centralize the essential functions after the acquisition event, there was a doubling in the rate of absenteeism and a reduction in turnover by half as compared to when o change had been made.

In addition to procedural integration, the two firms undertake the process of physical integration where the two corporations utilize the mutually exclusive assets of the two companies to capture synergies (Angwin & Meadows, 2015). The process renders the common assets redundant necessitating job cuts. Workforce reductions, however, inevitably lead to problems with about 70% of the companies that reported effecting workforce reduction after an acquisition reporting post-acquisition problems. After job cuts, the remaining employees may experience considerable anxiety and security, affecting their productivity. The tension is particularly evident where the remaining workers feel that the downsizing criteria was based on rather inappropriate or unclear criteria. Organizations that undertake downsizing events after acquisitions tend to shift the workers focus to personal survival rather than productivity resulting in a phenomenon commonly known as the vicious cycle of disintegration (Angwin & Meadows, 2015). Here, post-acquisition cuts lead to a reduction in workforce morale and significantly decreased performance necessitating further cuts. The manner in which a firm undertakes its employee cuts is therefore crucial in determining the performance of the company in the period directly following the acquisition.

Sociocultural Integration, on the other hand, plays a central role in averting a clash of cultures in the new firm (Weber & Tarba, 2013). It is arguably the final and hardest leg of the acquisition process. A notable source of conflict in the new organization occurs when the dominant organization appears to subvert the cultural practices of the smaller firm. According to a study by (Mirrja et al., (2016), the three main reasons for the conflict are; the imbalance of power between the two firms, the subversion of the culture of the smaller firm resulting from a unidirectional flow of cultural ideas and active resistance by the acquired firm to lose their culture and adopt the culture of the bigger firm. The pace of cultural changes after the acquisition is also important. Early changes minimize the levels of uncertainty among employees. Since most employees expect change to be effected during the acquisition period, they are...