It’s Wednesday morning. Harry, an HR Business Partner at a large corporation, has just returned from a business unit leadership meeting. Competition is continuing to grow, uncertainty in the markets is increasing, and leadership has decided that an acquisition is needed. Facing this critical business move, Harry thinks about HR’s previous role in the company’s M&A deals, which hasn’t been particularly robust, mostly weighing in on compensation and benefits. He knows HR can play a more strategic role.
Harry’s right—HR can and should play a pivotal role in helping the organization realize value from M&A activity.
Business and HR leaders continue to face massive disruption across industries, sectors, and within the workforce, and now more than ever many leaders are struggling to create a plan to determine the future of their business and navigate each disruption successfully.
While facing disruption is becoming the norm for organizations, disruption is magnified during a merger, acquisition, or divestiture. With the enormous change and additional work that an M&A transaction brings to a company and the HR function, it is often daunting to plan for months into the future, let alone years. As a result, topics such as the Future of Work are often pushed down the road, in the hope that future trends will be addressed once the new company has stabilized.
Unfortunately, this approach fails to recognize how M&A activity can be a key enabler of the shift to the future. HR M&A groups can capture momentum by bringing the right Focus to a transaction; building a fit-for-purpose Lens through which HR delivers services; developing a Mindset that the workforce understands and is bought into; and providing the right set of Enablers to support the workforce. And their involvement can carry through each critical phase of the deal, from the run-up to Day 1 to post-close integration.
The initial strategy and target screening phases of M&A work are generally the least structured, and often don’t involve HR leaders at all. Potential acquisitions or divestitures are explored through potential revenue or cost synergies, or even a casual CEO conversation.
HR functions are already working to be more agile, operate more strategically, and better provide valuable insights to the business—a true high-impact operating model. This applies in potential M&A environments as well. By adjusting the lens in which they view M&A, HR leaders can actively insert themselves into those conversations, enabling smoother transactions and voicing alternative perspectives in the C-suite.
By forming agile M&A “tiger teams” composed of a diverse group of experienced, motivated personnel interested in tackling business initiatives, HR can provide strategic input to and integrate thoroughly with the business. This will shape a culture of trust, inclusion, and accountability within leadership so that HR can be viewed as an essential voice in the screening process, rather than a compliance and control group to pull in post-announcement.
During diligence, traditional areas of focus within the HR function are tangible financial assets such as pensions, benefits, and overall headcount. By looking at simple dollar values of this limited scope, HR leaders can miss the bigger picture of how a target can jumpstart a transformation through enablers that are currently in use.
In the Future of HR, organizations should focus on a unified engagement platform centered on productivity: HR technology must be engaging, accessible, automated, and adaptable. By highlighting the target’s use of automated process, cognitive solutions, and social platforms, leaders can uncover additional deal value and incorporate the knowledge of the target’s technology landscape into planning for which technology solutions to integrate for Day 1 and beyond.
In an increasingly digital environment, it is essential for any company to shift from simply “doing digital” activities to truly “being” a digital organization. The future of enterprise is distinctly tied to certain traits and behaviors, or Digital DNA, that digitally-native companies inherently possess.
For HR leaders to inorganically embed these traits in a company can seem daunting, but even the most static and traditional organizations often take on many of these characteristics during an M&A transaction. Concepts such as agility, intentional collaboration, and constant disruption are all inherent in an M&A environment.
HR should take advantage of this unique opportunity and help instill a digital mindset that remains after Day 1. Encouraging behaviors that support collaboration and agility outside of M&A related activities will shift the enterprise toward more sustainable future state.
After the transaction closes, there is often a sigh of relief, shortly followed by the realization that now the real work has to begin. To quickly capture the value as two organizations merge together (or a new entity is officially separate from its previous parent company), there should be a renewed focus on workforce experience and satisfaction.
If new employees are not actively engaged and satisfied with their work, productivity often slips, leaving unrealized value even as business models are combined and optimized. As such, HR should listen to employees—understand what went well during the transaction, what components of their organization they love, and what they wouldn’t mind parting with.
Further, HR should empathize and co-create with the workforce as the new organization develops. Rather than changes happening “to” them, workers should feel the transformation of the company is “by” them. By highlighting that leaders and the rest of the organization are collaborating to drive the future of the company together, the business can win buy-in from employees and increase productivity gains.
Taking the lead
Now more than ever, HR is being asked to take the lead on behalf of the enterprise in making shifts and changes to thrive amid constant disruption. M&A environments can provide an ideal opportunity to do so.
Back in his office, Harry thinks about the upcoming acquisition. He sees the potential to use it to not only elevate HR’s role in the business but also shift the business itself toward a more fluid, agile way of working. Excited by the possibilities, he starts mapping out his ideas to share with his BU VP.