International HRM and Its Application in Cross Border Mergers and Acquisitions - Essay Example

International HRM and its Application in Cross Border Mergers and Acquisitions Student’s Name: Institution: Date: International HRM and its Application in Cross Border Mergers and Acquisitions Executive Summary Cross border mergers and acquisitions are complex business procedures which require a lot of business planning and analysis. Human resource management is one of the crucial aspects of management that needs special consideration by firms that intend to take part in international M &A processes. Mergers and acquisitions between firms from different regions expose business firms to a lot of opportunities as well as risks. Business firms should communicate their intentions to take part in mergers and acquisitions to their employees to make them well prepared to deal with changes that are likely to arise. This report will discuss mergers and acquisitions and how they are directly related to productivity, workplace culture, and business integration. The report also analyses the importance of due diligence and why firms need to plan their mergers and acquisitions effectively to minimise unnecessary risks and failures. Table of Contents Executive Summary 2 Table of Contents 3 Introduction 4 Pre- Merger and Acquisition Phase 4 Due Diligence Phase 7 Integration-Planning Phase 9 Conclusion and Recommendations 12 References 12 Introduction Cross border mergers and acquisitions expose business firms to international business practices which determine the manner how they conduct their operations in various markets. A business firms also have to prepare for various human resource management issues that influence the manner in which it conducts its operations in specific locations. An effective organisation has to identify people related issues and plan how to deal effectively with employees. Managers also have to understand different cultural issues that have an impact on human resource management to come up with appropriate working systems. Consequently, all these plans make it possible for a firm to develop appropriate HR strategies which integrate different cultural concepts that are relevant to performance (Erel, Liao & Weisbach 2012). This paper will analyse different human resource phases that are important in cross border mergers and acquisitions and how they affect long term performance in an organisation. Pre- Merger and Acquisition Phase During this stage a firm needs to take note of people related issues which are likely to impact on its operations. A business firm needs to identify the type of skills it requires to help it achieve its long term vision in the industry. Consequently, an analysis needs to be made to determine the manner in which different work systems that are currently being practiced in an organisation are likely to be affected by a proposed merger and acquisition. A firm needs to have effective plans in place to how employees are likely to react to new changes which may come into effect after a merger or a new acquisition has been done. It is important for managers to communicate to employees to make them prepared beforehand regarding changes that are likely to affect how they perform their duties (Rizvi 2010). Since mergers and acquisitions bring about an increase in production, business firms need to evaluate different recruitment, pay and work management systems that exist. Since a firm may intend to reach new markets with its products to boost its profile internationally, it needs to find out whether its employees are adequately equipped to handle new and more complex responsibilities. A firm needs to anticipate different types of risks it is likely to suffer due to the failure by its employees to adapt quickly to new changes in working systems. Expansion strategies which are implemented at the organisational level should not be executed haphazardly without including all key stakeholders (Schmidt 2002). Therefore, all training needs have to be taken seriously to ensure that all employees are willing and capable of performing new responsibilities that are likely to occur as a result of a merger or an acquisition. Planning for due diligence is a critical part of decision making that helps managers to find out if a merger and an acquisition is likely to bring about expected benefits. A study carried out in the U.S. revealed that more than 75% of cross border mergers and acquisitions do not measure up to the initial expectations due to a wide range of reasons (Schmidt 2002). Some firms are motivated by unrealistic expectations to seal risky business deals which in the long term, are likely to erode the value of their equity in the market. Additionally, some firms are characterised by a lot of infighting and bad politics between various board members and company executives. Poor planning for transition and costs, which are likely to be incurred is also another factor that causes most mergers and acquisitions to fail to achieve intended expectations. It is important for business firms to avoid being exposed to harmful risks. A business firm that intends to join an M&A deal must take time to focus on talent management strategies it intends to utilise to strengthen its competitive edge in the industry. Managers need to look at the level of compatibility that exists between the work systems of the firm and the other firm it intends to merge with and the impact this is likely to have on the firm’s profile (Schuler, Tarique & Jackson 2004). All precautions need to be taken to ensure operational synergies that need to be created move ahead without any unnecessary disruptions to enable both firms to be well prepared to deal with different challenges in their respective industries. Both firms that are party to the deal need to form appropriate committees to look into different issues that are likely to impact on workplace performance. A firm also needs to be well prepared to look at the other firm’s organisational culture to find out if it is compatible with its long term vision and mission in the industry. In cross border mergers and acquisitions, a business firm needs to take note of various cultural, religious and social issues which are likely to affect the performance of its employees. The human aspect of change management needs to be taken seriously (Schuler, Tarique & Jackson 2004). This enables a firm to measure the value it expects to obtain out of the output of its employees by coming up with an appropriate integration strategy. A business firm needs to strengthen its own awareness about critical human related issues which are crucial to performance by making its HR systems more flexible and proactive to deal with new challenges. As a result, this approach is likely to be beneficial to a firm’s long term plans in an industry because it will be able to anticipate different issues that are likely to affect its operations. Due Diligence Phase Cross cultural management strategies are very crucial in any organisation. All managers should find out general attitudes towards work in a given location a firm intends to set up its operations to improve their own understanding. A human resource manager must identify cultural practices which are commonly integrated with work systems in a given location and how they contribute to organisational practices (Tanure & Gonzalez-Duarte 2007). International M& A’s are done within a short period of time and this makes it difficult for managers and other employees to adjust to cultural changes which are crucial to organisational performance. As a result, managers need to find out the best way they can create mutual understanding with employees working under them to improve the performance of their firms in specific industries they operate in. In some instances, hostile acquisitions present a lot of difficulties for two firms which are involved to create a positive environment for their employees who will be affected by an integration of their operations. A firm that carries out a hostile takeover of another firm may find it difficult to convince employees of the dissolved firm to stay on board and share in its vision. In cross border acquisitions, some countries frown upon very aggressive business tactics which some foreign firms use to increase their market share in specific markets ((Tanure & Gonzalez-Duarte 2007). Therefore, a firm’s internationalisation strategy needs to consider the feelings of employees of another enterprise it has interests in to find out how they fit in with its long term vision. It is inappropriate for a firm to transfer business strategies that have served it well in its home countries to other countries without taking time to appreciate the changes in the operating environment. During the transition phase, a firm needs to retain managers of the other venture it has merged with or acquired. Talent retention is one of the most effective ways a firm can learn about important cultural factors that are likely to impact on its operations in a new industry and location (Grosu & Coretchi 2011). Retaining managers and employees who understand customer attitudes and behaviour helps a firm to minimise risks that occur due to poor planning of the transition phase as it integrates its operations with the other venture. Managers that understand cultural situations are able to come up with an appropriate human resource strategy that helps a firm to increase its productivity targets in the market to boost its performance. As a result, a firm is able to plan different human resource activities it needs to undertake to create a strong corporate culture of excellence and integrity. Managers need to institute learning policies in their firms to ensure that the integration of operations between firms involved in an M&A runs smoothly. Integration of crucial work policies and systems should be done gradually to make it easy for employees to adapt to the new operational environment (Grosu & Coretchi 2011). All labour policies implemented must take note of the employees’ cultural practices and how they affect their ability to perform their duties. For instance, in many Muslim countries, many firms allow their employees to be absent on Fridays to go to the mosque and pray. In many other countries, many employees report to work from Monday to Friday. It is important for business firms to understand how to implement such policies in their internal work systems to boost their own performance in different industries they are operating in. This approach ensures that the firm is able to meet its competitive targets within a particular industry it operates in. In some instances, firms that are taking part in a cross border M&A may opt to segment their operations to suit specific geographical and cultural conditions in countries they are operating in. As a result, the two organisations in a merger continue to operate in the same way they were doing before they decided to integrate their business operations (Coffey, Garrow & Holbeche 2002). This approach may work for organisations that do not want to unsettle the organisational cultures of both firms by making them more autonomous in their operations. However, one drawback associated with this approach is that managers in a firm may find it difficult to coordinate different functions that have an impact on both firms in a merger. This also makes it difficult for senior managers in a firm to implement change management systems because some employees may not be willing to embrace new challenges they encounter. Integration-Planning Phase In the integration and planning phase a firm needs to understand the most effective way in which change management processes are going to be implemented. A culture- sensitive communication strategy needs to be put in place to guide employees on how they are expected to perform their duties (Schuler & Jackson 2001). An international M&A policy should look at the language of instruction used by managers in a firm to assign and allocate responsibilities to their employees. It may be necessary for the policies to be written in languages which employees are more comfortable in expressing themselves in to make them more willing to participate effectively. The changes brought about by the M&A may necessitate a firm to gradually shed its past image to acquire a new image that speaks about its current objectives in the industry. Consequently, the firm may develop new processes that encourage employees to acquire new values to help it acquire a competitive edge in the industry it operates. Integration efforts that are undertaken must focus on productivity, leadership systems to be adopted and how financial goals can be met after the M&A processes are complete. Business firms that are involved in an M&A need to consult external firms that do not have an interest in the process to get more advice about how to integrate their business operations. In effect, they need to study the experiences of other firms that have been involved in M&A to learn from their failures and successes (Schuler & Jackson 2001). This approach helps both firms to learn about their strengths and weaknesses and how they are likely to affect their operations after integration. Decisions regarding the management structure, internal reporting, restructuring and labour systems need to be made quickly. These decisions have a direct impact on operations and any delays by both firms may result in uncertainty which is likely to impact negatively on performance. The new entity that is formed from the merger needs to have a unified business strategy to ensure all stakeholders are involved in achieving good performance. All stakeholders must be informed about the changes in business conditions and opportunities which the new conglomerate stands to gain in the industry. Both firms need to understand how they will go through different stages of M&A and how they will measure results attained out of various operations they engage in (Coeurdacier, De Santis, & Aviat 2009). An effective strategy can only be executed after the new culture in a firm has been assessed to ensure that it creates a positive environment to employees to achieve the firm’s goals and expectations. Consequently, the new entity needs to look at its staffing needs to find out if it has the right skills profile to help it attain its goals in the industry. The willingness of all stakeholders to accept changes gives the firm the push needed to make its internal processes more competitive. Gradual changes which are introduced in a business entity do not get a lot of resistance as opposed to hasty change processes which do not focus on workers’ attitudes and the industry situations the firm faces. For instance, high quality technological changes need to be done after all employees have been given time to acquire the right skills to operate new technological systems. There has to be a balance between the productivity targets of the new entity and the workplace conditions that are required to actualise such targets (Scullion & Linehan 2004). Constant learning and improvement inculcates a spirit of hard work and innovation at the workplace. Therefore, this makes employees more willing to participate in efforts that are intended to boost organisational performance. All staffing plans must conform to the new business model adopted by the conglomerate after the M&A has been undertaken. The new entity may be forced to focus on human resource diversity to help it improve its performance in the industry. Moreover, the new firm may be forced to standardise its recruitment and selection policies to factor in the new situation it faces in its operations. For instance, the firm may encourage its employees to learn new languages and skills to make them well prepared to perform new responsibilities in another international division. Additionally, the new entity may need new staff to fill in positions in new departments that have been created out of the M&A process (Scullion & Linehan, 2004). Therefore, this requires the HR department to come up with a comprehensive staffing plan that redefines all tasks to be performed by both new and old employees in various departments. Payroll systems, workplace hours and other relevant staffing issues should also be revised to conform to the new changes. Conclusion and Recommendations In conclusion, business firms should take time to understand the implications of mergers and acquisitions on their long term HR systems. They need to look at cultural, productivity and staffing needs that are likely to be affected by these changes and plan accordingly. Business firms need to be well prepared for people related issues which are likely to affect new entities that are created out of mergers and acquisitions. They also need to focus on cultural aspects of human resource that are crucial to their operations. Staffing needs should be assessed to conform to skills needed to perform specific tasks in the workplace. Finally, they need to come up with an effective way of integrating their business operations to reduce time wastage. References Coffey, J., Garrow, V & Holbeche, L 2002, Reaping the benefits of mergers and acquisitions: in search of the golden fleece, Butterworth-Heinemann. London. Coeurdacier, N., De Santis, RA & Aviat, A 2009, ‘Cross-border mergers and acquisitions and European integration’, Economic Policy, vol. 24, pp. 55-106. Erel, I., Liao, RC & Weisbach, MS 2012, ‘Determinants of cross-border mergers and acquisitions’, The Journal of Finance, vol. 67, no. 3, pp. 1045-1082. Grosu, A & Coretchi, D-C 2011, ‘Leadership succession planning in international mergers and acquisitions in central and eastern Europe’, Journal of Knowledge Management, Economics and Information Technology, no. 4, pp. 1-12. Rizvi, Y 2010, ‘Human capital development role of HR during mergers and acquisitions’, The South East Asian Journal of Management, vol. 4, no. 1, pp. 1-28. Schmidt, JA 2002, Making mergers work: the strategic importance of people, Human Resource Management Foundation, Alexandria, VA. 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