Question

Strategic Human Resources – Assignment Sheet 2
Case Study:
In the past, the decision criteria for mergers and acquisitions were typically based on considerations such as the strategic fit of the merged organizations, financial criteria, and operational criteria. Mergers and acquisitions were often conducted without much regard for the human resource issues that would be faced when the organizations were joined. As a result, several undesirable effects on the organizations’ human resources commonly occurred. Nonetheless, competitive conditions favor mergers and acquisitions and they remain a frequent occurrence. Examples of mergers among some of the largest companies include the following: Honeywell and Allied Signal, British Petroleum and Amoco, Exxon and Mobil, Lockheed and Martin, Boeing and McDonnell Douglas, SBC and Pacific Telesis, America Online and Time Warner, Burlington Northern and Santa Fe, Union Pacific and Southern Pacific, Daimler-Benz and Chrysler, Ford and Volvo, and Bank of America and Nations Bank.
Layoffs often accompany mergers or acquisitions, particularly if the two organizations are from the same industry. In addition to layoffs related to redundancies, top managers of acquiring firms may terminate some competent employees because they do not fit in with the new culture of the merged organization or because their loyalty to the new management may be suspect. The desire for a good fit with the cultural objectives of the new organization and loyalty are understandable. However, the depletion of the stock of human resources deserves serious consideration, just as with physical resources. Unfortunately, the way that mergers and acquisitions have been carried out has often conveyed a lack of concern for human resources.
A sense of this disregard is revealed in the following observation:
Post combination integration strategies vary in tactics, some resemble to “marriage & love’ but in reality, collaborative mergers are much more hostile in implementing forceful decision and financial takeovers. Yet, as a cursory scan of virtually any newspaper or popular business magazine readily reveals, the simple fact is that the latter are much more common than the former.
The cumulative effects of these developments often cause employee morale and loyalty to decline, and feelings of betrayal may develop. Nonetheless, such adverse consequences are not inevitable. A few companies, such as Cisco Systems, which has made over 50 acquisitions (https://www.cisco.com/c/en/us/about/corporate-strategy-office/acquisitions/acquisitions-list-years.html), are very adept in handling the human resource issues associated with these actions. An example of one of Cisco’s practices is illustrative. At Cisco Systems, no one from an acquired firm is laid off without the personal approval of Cisco’s CEO as well as the CEO of the firm that was acquired.

QUESTIONS:

1. Interview someone who has been through a merger or acquisition. Find out how they felt as an employee. Determine how they and their coworkers were affected. Ask about the effects on productivity, loyalty, and morale. Find out what human resource practices were used and obtain their evaluations of what was helpful or harmful.

Answer 1

Suppose a sports goods manufacturer merges with another sports equipment manufacturer. Prior to monitoring and evaluation, each company has its own employees dedicated to production, advertising, analytics, accounting and other work. After concluding an agreement with M&A, some employees may be laid off. In the short term, this means that employees for both companies may need to relocate or be fired.
Although mergers and acquisitions are commonly used as an umbrella term to represent two companies merging to become a single company, the two terms have slightly different meanings.

Merger is when two corporations merge to form a new entity. Mergers usually involve companies of the same size, called equal mergers. Shares of both joint ventures were transferred and new shares were issued for the joint venture.

Acquisition is when one company takes over another company and the acquired company becomes the owner of the target company. In other words, the acquired company no longer exists after the acquisition as it was held by the buyer. Equity of the acquired company continues to trade. However, the shares of the target company are no longer traded and its shareholders acquire shares in the acquired company. However, the ratio of the buyer's share to the target company's stock is based on the terms of the purchase. This is usually not done one by one.

Understandably, employees of the target company will feel anxious. Those who hired them may no longer make important job decisions. Beyond the actual change of release or relocation, the continuation, performance and loyalty of the surviving employee depends on the effectiveness of the monitoring and evaluation process itself.

Mergers and acquisitions can affect the stress levels of the employees involved. Many mergers require the approval of local authorities, lawyers and regulators, who can withdraw this process for more than a year. The time required to complete the merger can be difficult for employees of both companies involved.

Uncertainties arising from mergers or acquisitions are indicative of the Company's employees. This uncertainty can manifest itself in a negative way if the employee does not agree to the change. It makes sense to assume that employees who feel threatened or intimidated may be less effective than those who feel safe and satisfied.

Historically, mergers and acquisitions have typically led to job losses. Much of this problem is due to unnecessary operations and inefficient efforts. Threatened jobs include executives of target companies and other senior executives who are often given a delay package and released. However, the management of the acquired company will try to increase the combination of costs to help finance the acquisition of shares, which usually leads to job loss for unwanted employees.

For example, if two banks merge or if one bank is acquired, the combined bank will have no longer needed operations and a sales office. The new entity may not need all the branches and may not need two mortgage departments, two corporate accounting offices or two verification departments that process all deposits. Of course, all unnecessary positions in the target company will not be eliminated, as the combined company will have more customers and operational processes. However, a merger company will not need all the people from both companies in the area unnecessarily. In practice, the employees of the target company usually take on the main responsibility of no longer being needed.