Key to manage cultural incompatibility is to manage post-merger integration phase well: Expert
Mergers and acquisitions (M&A) often lead to anxiety and concerns on employment front among employees due to redundancies of jobs at a merged entity and the fair approach by companies to tackle this is by investing in proactive skill upgradation and outplacement services, experts say.
All M&As carry the risk of anxiety related to job security and especially when the target firm is ridden with poor performance and is financially unstable. While, in cases where the target firm is complimentary and not a competitor, these types of employee concerns are little less.
"Any M&A can potentially lead to employee anxiety and concerns on job security if not managed well. One of the key reasons many M&As fail to deliver the desired outcome is because the acquired and acquiring entities don't plan the transition well and they fail to align their employees," Rituparna Chakraborty, President, Indian staffing federation, said.
Experts believe the key to managing cultural incompatibility is to manage the post-merger integration phase well. It is important to ensure consistent communications during the pre and post-merger phase.
"Many companies today invest in proactive skill upgradation and re-skilling of the employees to ensure that they stay relevant to the business. Companies are also offering outplacement services to employees, who may not be required in the post-M&A phase," Chakraborty added.
Generally, there are two possible ways that an acquirer may look at treating the acquired business. Merging the acquired business into the buyer's existing business (or) operating the acquired business as a separate standalone entity under the umbrella of the acquiring company.
The most effective manner to mitigate them is through effective and timely communications which should be focused on addressing the employee's pain points.
"During an M&A scenario occurrence of job/role redundancies are obvious. The most effective and fair manner to approach this is through structured manpower planning and talent assessment exercises," Aon Consulting India Chief Executive Officer Sandeep Chaudhary said.
Chaudhary further said, "for those employees with multiple skill sets and dependable performance levels, organisations may also identify alternate roles to be offered to such employees and continue with the organisation".
According to specialist staffing firm Xpheno co-founder Kamal Karanth, ideal M&As should have a joint leadership team which has an equal number of people from both sides.
Citing an example when HP bought Compaq in the early 2000s, Karanth said the India MD and HR Heads all came from Compaq and not from HP. This allows for a faster assimilation of the target company's dynamics and culture.
He further noted that for addressing redundancies companies should hire a competent outplacement agency which can counsel and prepare the affected employees and help them in their preparation for future employment.
Moreover, while deciding severance package, companies should focus on the experience level as at a junior level it would take 3-6 months to get a new job, while at senior level it could be 6-12 months.
"These timelines need to be taken care of while deciding on the severance package. Also, the line managers need to provide written references in advance to the departing employees to aid them in future jobs," Karanth said.
(With inputs from agencies.)