What Is A Challenge for Human Resource Management During Mergers?

Companies often acquire or merge other businesses to enter new markets and get their hands on new technologies. That’s where human resource management comes in. Acquiring businesses also reduces their competition. Merger is a process of combining two businesses together and making it one company. Whereas, acquisition is a process of taking over another company. 

Mergers help companies become more powerful, efficient, and profitable. For instance, when a gas company merges with an oil company, it leads to beneficial results. Similarly, when a manufacturer of a pharmaceutical company merges with a pharmaceutical distributor, the company will face effective outcomes.

Mergers require a lot of financial and legal work. However, in between the chaos, company owners mostly forget about employees. Hence, it leads to a decrease in productivity and efficiency of the work. During the merger, the team of human resources is most likely the one who faces more challenges. 

Role of Human Resource Management During Mergers

The Human Resource Management team plays a significant role in the process of the merger of your company. However, people in HR face tons of problems while dealing with employees. They usually help employees understand the new changes they have to face due to mergers. They guide them through new policies, work culture, infrastructure, and even the layoffs of the company. 

If your company does not have the proper resources to address these newly brought changes to the employees, then it may lead to severe damage to the company. The company may have to face less motivated workers, which directly leads to a decrease in productivity. 

HR team members need to be transparent in their talk while addressing these concerns and risks to the employees. They also do one-on-one meeting sessions with employees to fairly explain to them the reason for changes happening in the company. The HR team must tell employees the company aims to do a smooth merger without affecting the morale of any employee. This provides comfort and assurance to the employees. The HR team members ensure that your company faces employee resistance-free merger. 

Importance of Human Resource Management During Mergers

Due Diligence Process

Companies can significantly reduce the stress that mergers cause by assisting the HR team in the process of due diligence. Buyers usually investigate the credibility and value of the company they will merge with. HR team members check every single detail of the company during the investigation to find differences. If both companies have big differences in the contracts and benefits of employees, then it may cause issues after the merger. 

HR team members must ensure to find out the changes before closing the deal, instead of bringing them up after the merger. The HR team needs to be transparent during the whole deal and must answer the questions of employees honestly. So that they can make themselves ready for the new changes.

Allowing Employees To Adopt

The HR team helps employees understand the new changes they may have to face in their positions. The assistance from the HR team guides employees to go through new transitions in the workplace. They also suggest employees with new positions and roles, if they feel unsatisfied with their current positions after the merger. Moreover, the HR team also recommends employees take workshops to upgrade their skills if needed. 

If mergers cause employee layoffs, then the HR team helps them find successful job posts in other services. Also, they ensure that employees will leave their positions on a happy note while remaining employees feel comfort and assurance. 

Top Human Resource Challenges During Mergers

Cultural Differences

The merger may cause cultural issues after the merger of two companies. One firm may emphasize sales, whereas others may value product development and customer services. Both companies may have an opposite decision-making approach. One may use a democratic method, while others use an innovative method. Hence, it is the responsibility of the HR team to compare the compatibility of both companies and then allow them to merge. 

The main aim of HR is to compare the working culture of both companies and propose a method where both align together. HR team must analyze the work culture, demographics, and company values to develop a better working environment. If there are issues with the workplace or working methods for employees, then they must quickly be addressed and removed. 

If both companies are located at different places and have a major work culture and values, then the HR team needs to develop an understanding between them for a better working environment. 

Talent Retention

Each merger process is unique and varies from other mergers. Sometimes, a merger brings no changes at all in the system, while other times, it may cause major changes. 

When one company moves to a new place and merges with a new company, then it may lead to talent retention. Retention allows you to restructure the company’s work system. The main aim of restructuring is that current employers stay in the company and enjoy their working process as they used to do. This typically points out in ensuring that their job is safe. 

Employees usually face negative reactions due to mergers and they feel threatened. The Human Resource plays an essential role in ensuring and gaining the trust of such employees. If your company is aiming to do well in foreign markets, then you surely don’t want to lose the great talent of your company. 

The restructuring also applies to high-level executives and managers. If the company loses a manager during a merger, then it will directly impact the productivity of the company. 

Maintaining Contracts

Another major challenge that the HR team faces while merging is maintaining the benefits for employees. Employees’ benefits comprise a number of things, which include health insurance, pension allowance, childcare subsidies, and annual leave.

The human resource team has to deal with many issues because each employee gets different employment benefits based on their position, status, and role.

The company has to go through a strict financial management process during the merger. Finance and legal teams manage the payment records, employment contracts, and accounts history. The HR team needs to review all the employee contracts to make sure each contract must adhere to the company’s new policy. The review of each contract manually takes a lot of time and effort. 

New Business Regulation

When two companies merge, the HR team has to gain knowledge about the new rules and laws of the current market trends. They have to find out the merger legal fees and trade rules in the market. 

HR needs to understand the fact that both employment and labor requirements change from region to region. It simply means that the employee contract will also need to change and be reviewed again after the merger. A literal example of different employment rules is that European countries allow 14 weeks of maternity leave to female employees, while US companies do not.

The rules and regulations keep changing in the markets, therefore, HR team members need to stay active and adaptive to the new practices. This ensures a smooth work environment in the workplace. 

HR team members have to face a lot of challenges and issues during the merger. However, companies can ease their burden by collaborating with external sources that particularly help you deal with mergers. 

Competing Values

The company’s values present a work environment where each employee respects and understands each other. Hence, company owners must add company values in their merger discussion but sadly, they are often neglected and ignored. 

Companies acknowledge the significance of their work values. However, they do not consider it important to add to the merger plan. Many business analysts noted that companies often do mergers without acknowledging the values of each other company. This may lead to certain issues after the merger. When such issues arise, the HR team has to manage and deal with them. 

Although the two companies may look similar from the outside there could be a major difference in their culture, values, and beliefs. When these values overlap with each other after the merger, then it leads to mismanagement and a decrease in productivity. 

Hence, even if the company looks like a perfect match for the merger, always ensure to study the core values. Culture and values reflect the working system and employee efficiency rate in the company.

Employees Working To Adapt

Employees are considered a basic foundation of a company. When companies merge, it often leads to certain challenges for the employees. Employees have to face and manage changes in the infrastructure, work environment, position, and contracts. 

HR team members need to be available for them to address all the issues and changes they might have to face after the merger. A transparent one-on-one meeting with the employees helps them understand the new work culture of the company and their roles. Thorough communication reduces their fear and assures them of a safe and healthy merging process that will not impact them in any way.

Companies may have to remove old employment rules from the contract and have to add new practices. The HR team needs to prepare a meeting to address the new practices. It helps employees to understand what changes they will face in the future. A complete understanding of the new policies also assists employees to adapt with the new culture easily without hurting them.

Tips For Dealing With Human Resource Management During Mergers

Now you have a complete knowledge about the expected challenges and issues that companies may face after the merger. Here we have some more tips to help you understand the merger process better. 

Put Your Individuals First

The best way to deal with the issues and challenges of the merger is to prioritize your employees. Your employees are the basic foundation of the company. Your company will not have any product, culture, or customers without employees. Therefore, ensure that whatever you plan during the merger must benefit the employees in all possible ways.

Expect Culture Problems

Consider cultural differences between the companies. Address company culture and values at the beginning of the merger meetings so you won’t have to face any problems later. The proactive method helps you identify the problems at the start and find solutions for them that align with both company’s cultures. This helps you seek out cultural differences that benefits the employees of both companies. 

Think Long Term

The merger is not a few months or years. It will probably stay forever. So instead of focusing on the initial problems and challenges, focus on long-term goals. See how the merger will affect your employees and production in the long run. Consider possible challenges that both companies may face in the near future. Companies need to develop a plan that benefits both companies in the long term. 

Conclusion

Mergers help companies grow and improve in the market efficiently. However, the merger may bring tons of challenges for the employees. It also burdens the HR team. They have to make sure that the merger process will go smoothly while dealing with challenges and finding solutions for them. Latam Recruit helps company owners and recruiters find the best merger and ensure that your company faces a smooth transition process without impacting the lives of employees. Reach out to us to know more about the merger details.