In our prior articles, we examined the HR Horror Stories resulting from mishandling of cultural alignment and the negative effects of a transactional view rather than a transition mindset. Another challenge to avoid is mismanaging the HR team assigned to work an acquisition project. Let’s now turn our attention to developing your best HR support model to effectively integrate acquired companies.
Having researched multiple high-performing acquirers, I have found some key questions to consider when determining the proper structure and size of the HR team to manage deals:
- How mature and experienced is the acquiring company? How many deals have been completed? Were those deals successfully integrated? Is there a playbook or are there processes in place to support the project teams?
- How many deals are in the pipeline? How many of those deals are potentially concurrent?
- How complex are the deals? (Complexities could include global or multi-country locations; new geographies and markets; similarity or difference from existing operations; lack of history in the business area; unionized workforces, etc.)
- What is the existing HR support model for the organization? What support model is used for deals specifically?
- What is the current workload or burden on the internal HR team?
- What is the level of HR competence and M&A experience in the internal HR team?
Your response to the questions above can help you determine of the four primary models of HR support would best fit your team.
1) Sourcing External Support
External support may involve hiring outside advisors. The benefit is that experts will be leading, managing and supporting the HR team or process during an acquisition. This minimizes company risk, limits the time invested by the existing HR team and can lead to some transfer of knowledge to the internal staff. But it can be expensive for small deals and doesn’t necessarily lead to the development of company-specific learning or processes.
2) Leveraging Internal or Project-Based Resources
Using interim or project-assigned resources is another option. In effect, this involves tapping people from internal functions to take on the responsibility for a deal. Often, those in HR have another day job so their availability may waiver. From a project perspective, interim or project-assigned resources bring internal organizational knowledge – but they may not be trained, or they may have limited availability and experience. Additionally, there could be cost considerations if different internal functions cross-charge time to projects. Another challenge with this model is the potential lack of knowledge transfer. If the organization assigns someone different each time, any experience gained is immediately lost and they may be stuck “reinventing the wheel” with each new deal. In the long term, this results in inconsistent processes within the organization.
3) Dedicating A Core Team to Support Deals Either at The Corporate Level or Aligned to Specific Business Units
For organizations that pursue multiple deals, especially concurrent deals, they may choose to form a standing HR team, either at a centrally dedicated level or aligned to specific business units. The benefits of this model involve resource availability, flexibility, potentially more consistent processes and stronger internal relationships. The disadvantages may include added costs in maintaining standing teams, especially without a robust pipeline. Another challenge is that different teams can develop inconsistent processes across differing business groups or geographies. This can also result in resource challenges, if one business group is busier with deals than others.
4) Some Combination of the Above Based on Specific Business Realities
M&A transactions are typically approved with specific timelines and costs. If HR is not engaged early or appropriately in the M&A process, the deal is at risk of failure. The areas at risk include failing to identify financial risks, delaying closing, experiencing increased costs for external support and potentially damaging or losing the value of the investment. In one recent deal, the team worked for over one year to qualify and plan for a deal, only to be forced to walk away at the last minute over uncovered pension risks. Had a qualified HR team been engaged early in the deal and given the right information, the problem could have been identified much earlier in the process.
Finally, be aware that you may need to change your model. It is unreasonable to expect that your current HR model will always be able to adequately support deals, along with the additional headcount, locations, and business groups acquired in a deal. And you can’t assume that inexperienced HR people with day jobs can adequately support a deal. The HR team must be able to design the right support model to serve deals, integrations and the transformations that follow. Designing the right model should be done proactively and can be facilitated by external advisors with great success. This can be accomplished by actively defining the needs of the organization and supplementing those selected resources with training and certification in HR M&A methodology, practice and process. For help in evaluating, equipping and supporting your HR team and processes, please reach out to M&A Partners for training, certification and advisory services.
Our next installment of the Getting HR M&A Right series will be posting soon. Ginger is also a featured presenter at The Art of M&A for HR Leaders at the Hyatt Regency Grand Cypress in Orlando January 2019, and seats are already filling up!