Human Resources Management in Mergers and Acquisitions'

      Human Resources Management (HRM) is a vital component of mergers and acquisitions. HRM identifies the customer, budgetary constraints, and productivity relating HR processes involved with the merger. The pre-acquisition period allows planning strategic integration of facilities. The HRM has to focus on the components: recruitment and retention, training and development, performance management, compensation and benefits, regulatory compliance.

      Strategic Role of HRM

      The basic merger and acquisition activities HRM include screening the target company, carefully to avoid variable conditions such as stock value. During the pre-acquisition phase, HRM plays the role as advisor for retention, and benefits package values.

      HRM has to have a communication plan in place in the early phases of the merger about how the merger will influence the organization. Some key elements to include in the plan are selection, outplacement, and relocation for instance (Daniel,2001). HRM will also provide input on structure makeup, separation, integration, and transition placement teams as well (Daniel, 2001). Communication during the merger with employees is crucial. Communication will alleviate panic regarding the unknowns.

      HRM is responsible for issues ranging from restructuring, contracts, union agreements, taxes, incorporating an understanding of the vision, mission, values, and new goals to the workforce. Executives sometimes have to work proactively as, “profit consultants” (Adams, Making a merger work:, 2002, HR Magazine).

      Evaluations of HR procedures and practices have influence with deal breaker decisions. An extensive examination of lawsuits, pertaining to customer and, employee determine what is valuable culturally (Adams, Heading in new directions, 2002, HR Magazine). Any audits conducted might be a warning flag fiscally. Evaluation of employee surveys, retention, turnover, and grievance reports give an indication of the organizational culture and employment practices (Adams, Heading in new directions, 2002, HR Magazine). 

Recruitment and Retention

      Executive level transitions include review of the change-in-control provision so the severance package does not fiscally harm the buyer. The review consists of deferred compensation plan documents, executive contracts, change-in-control agreements, broad based severance plan, stock option agreements, all associated communications, and proxy statement executive compensation disclosures (Adams, Making a merger work: 2002, HR Magazine). Organizations traditionally do not want to undermine the value of the executive.

      Recruitment for, the AOL Time-Warner plan consisted of a talent review of executives, consolidation of networks, and foreign HR department consolidation (Adams, Making a merger work profile, 2002, HR Magazine). The recruitment team hired consisted of executive level recruiters (Adams, Making a merger work:, 2002, HR Magazine). AOL Time-Warner redesigned the online application process. The redesigned process detects “transferable skills” (Adams, Making a merger work, 2002, HR Magazine).  If one applied for one position, but the system found the skills suited for an available position, the system would suggest the position. 

      The retention plan for AOL Time-Warner consisted of creating a tutorial about the merger who, what, where, when, why, and how. The tutorial also consisted of business operations and how it relates to career advancement (Adams, Making a merger work:, 2002, HR Magazine). Part of the planning phase must include retention strategy.  

Training and Development

      HRM integration advisory role develops performance management programs with communication strategies, training programs, meetings relating to organizational changes, and goals of the department.

      AOL-Time Warner developed an e-training program consisting of acquisitions, customer strategies, and the process of making money in the digital age. The “rank and file” employees attended one-day seminars for specific projects, and duties (Adams, Heading in new directions, 2002, HR Magazine).

      General Motors in 1997 created General Motors University, a program designed to the needs of the employees.  The traditional format includes online education (Leonard, 2002 Society for Human Resources Management HR Magazine).

Employee Performance Management

      Performance management is one indicator of talent, competency, professional development, and achievement. Compensation programs, bonus, and profit sharing are indicators as well (Leonard, 2002 Society for Human Resources Management HR Magazine).

      The key element in performance management is to rely on job satisfaction for the individual. During volatile times, employee satisfaction is a major element for first line managers. Communication reduces resistance to change and provide a sense of security. As long as job satisfaction remains, productivity will not suffer.

Regulatory Compliance

      Review of Health and Welfare benefits include plan documents, and reports. Retirement benefits review includes defined benefit plan documents, recent actuarial valuations, and Trust statements from 401k statements (Daniel, 2001). The compensations commitments and retirement review require the variable pay and retention program documents, and related communications (Daniel, 2001). Unemployment Insurance tax payments require reporting on the Initial Status Determination forms submitted from the buyer to the US Department of Labor Statistics (Mikkelson, 2006). Mikkelson discusses the need to provide clear and consistent “reporting successor processing systems to avoid duplicate, overlapping information, and missing data elements” (Mikkelson, 2006). 
 

Compensation and Benefits

The contribution plan during evaluation is a component protected under The Employee Retirement Income Security Act of 1974. The act provides protection of pension benefits Part of the protection require the parties to have account balances be the same (Daniel, 2001).  A plan sometimes is not transferable. To prevent financial loss for the employees offer-vesting employees under the sellers plan, or count services with the buyer for vesting (Daniel, 2001).  The buyer can decide against adopting the pension plan or medical plan because the unfunded liability does not fit into the plan for the buyer (Daniel, 2001). If the buyer does not adopt the medical plan, Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) requires continuing coverage of the health care benefit, but the company will not continue to contribute financially.

      Severance plans are problems that some courts have ruled that if the purchaser does not adopt the plan the rights of employees to severance pay will forever be lost if the sale does not trigger a payout (Mikkelson, 2006).  Benefits offered should equate to what the buyer has in effect. Components of HR review of benefits are profit sharing, base pay, and retention bonuses. During the base pay analysis, there are a number of alternatives to explore to determine appropriate pay (Daniel, 2001).

Conclusion

      Strategically, HRM has factors involving successful integration of a merger.  HRM has to understand the why of the decision, to start planning to meet needs of employees. Money, HRM has to evaluate post-merger financial valuations in pre-merger planning. The HRM planning process strategically for mergers involves key area's including recruitment and retention, training and development, performance management, compensation and benefits, regulatory compliance. Communication is a vital part of the process.  










 

Resources

Adams, M. (2002, HR Magazine, March). Heading in new directions. Retrieved November 16, 2009, from b BNET: http://findarticles.com/p/articles/mi_m3495/is_3_47/ai_84238038/pg_5/?tag=content;col1

Adams, M. (2002, HR Magazine, March). Making a merger work: AOL Time Warner-the largest merger in history may succeed because of hr leadership- Mergers & Acquisitions-human resources company profile. Retrieved November 16, 2009, from b BNET: http://findarticles.com/p/articles/mi_m3495/is_3_47/ai_84238038/pg_3/?tag=content;col1

Daniel, T. A. (2001). The management of people in mergers and acquisitions. Quorum Books. Westport, CT, USA. Retrieved from: http://books.google.com/books?id=hxoCfMj6BBkC&pg=PA185&lpg=PA185&dq=employee+performance+management+with+merger&source=bl&ots=zhDRVpca1d&sig=id3xMXeFgBl2jKEQJw0ewyUiLE0&hl=en&ei=pqEBS6DKIYndlAfZ28SOCw&sa=X&oi=book_result&ct=result&res.

Leonard, B. (2002 Society for Human Resources Management HR Magazine). GM drives hr to the next level: GM undergoes a transformation, and hr helps to steer changes-strategic hr-general motors corp;.human resources-company profile. Retrieved November 16, 2009, from The b BNET: http://findarticles.com/p/articles/mi_m3495/is_3_47/ai_84238037/pg_5/?tag=content;col1

Mikkelson, G. U. (2006, December). Identifying and accounting for mergers and acquisitions in measuring employement. Retrieved November 16, 2009, from U.S. Bureau of Labor Statisistics: http://www.bls.gov/osmr/pdf/st060160.pdf