Question

CASE Study - Cisco Mergers and Acquisitions strategies

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.1 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 from such “love and marriage” tactics in truly collaborative mergers to much more hostile “rape and pillage” strategies in raids 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.2 The cumulative effects of these developments often cause employee morale and loyalty to decline, and feelings of betrayal may develop.3 Nonetheless, such adverse consequences are not inevitable. A few companies, such as Cisco Systems, which has made over 50 acquisitions, 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.4

Answer the following Question in your own words - Details - in word Format  

Question1- Investigate the approach that Cisco Systems has used in its many successful acquisitions. What are some of the human resource practices that have made its acquisitions successful?

Question2- As we know, human resources are a major source of competitive advantage and the key determinant of an organization’s ability to pursue a given strategy. Why have the human resource aspects of mergers and acquisitions been ignored or handled poorly in so many instances in the past?  

Question3- How do you see the strategic role of HRM in Merger and Acquisition?

Answer 1

1. The greater part of the organizations planning for acquisition of another organization check for the similarity in vital targets and operational and financial criteria. Notwithstanding, the most significant resource of an organization, for example, its workforce is dismissed. Cisco Systems comprehends the significance of its representatives and has embraced satisfactory human resource practices to make effective acquisitions. Before securing an organization Cisco checks for the similarity of its work culture, representative learning and specialized know-how, and alter the capacity of the workers of the objective organization. Plus, they accept care of position security of the representatives and don't cut back them except if required. The representatives are given sufficient preparing to comprehend their new jobs and duties. All these HR practices help the organization in fruitful acquisitions.

- Using acquisitions as a key weapon for expanding a piece of the overall industry while upgrading consumer loyalty.

- Targeting organizations that give the best fit to CISCO's own key bearing and corporate culture.

- Determining achievement dependent on the dimension of post-buy maintenance and the reconciliation of recently gained staff and scholarly capital.

- Cisco looks whether there is similarity as far as long haul objectives of the association work culture and topographical nearness.

- Cisco puts stock in an association culture which is hazard taking and audacious. In the event that this is deficient in the objective organization, at that point Cisco isn't persuaded and pulls out from the acquisition.

No constrained acquisitions.

- The organization demands no cutbacks and employer stability is ensured to every one of the workers of the gained organization.

- The acquisition group assesses the working style of the administration of the objective organization, the bore of the representatives, the mechanical frameworks and relationship style with the workers. When the acquisition group is persuaded, a coordination procedure is taken off.

- A top-level mix group visits the objective organization and gives obvious data with respect to Cisco and the future jobs of the representatives of the obtained firm.

- After the acquisition, workers of the procured firm are given 30 days of direction preparing to fit into the association condition.

2. Human resource is a noteworthy wellspring of competitive advantage for an organization and key determinant for its prosperity as it is the worker's responsibility and diligent work that empowers an organization to accomplish its objectives. In spite of this, human resource parts of mergers and acquisitions were not given much significance in a few occurrences, since organizations going for acquisitions focus for expanding their piece of the overall industry, diminishing business sector rivalry, or fortifying their core capacities/assignments by accomplishing the specialized skill of other organization.

3. The strategic role of HRM in Merger and Acquisition are:

- Company Culture

Human resources decide whether the cultures of the two organizations that are getting to be one through a merger or acquisition are perfect. Human resources must have a firm handle on the culture of the company for which they work and should think about the culture of the other organization to make such an assurance. Social contrasts may incorporate how the two organizations characterize and measure accomplishment inside the organization; benefits employees appreciate, for example, individual time and protection; how problems inside the organization are handled; the administration styles of the two organizations; and the general mentality of the employees and chiefs toward business capacities and the business in which they work.

- Benefits Problems

During the due tirelessness portion of a merger or acquisition, which comes after the obtaining company makes its underlying idea to buy the other company, the board from the buying company evaluate whether the arrangement bodes well. Human resources from the obtaining company explicitly evaluate the benefits structure of the other company to reveal any potential problems, for example, an annuity plan that is running low on assets or a medical coverage bundle that will cost a critical sum for the company to keep advertising.

- Employee Concerns

Individuals regularly dread change, and a merger or acquisition makes vulnerability and change for employees both of the acquiring company and the obtained company. Human resources in the two organizations help smooth out the progress for employees, helping quiet any feelings of trepidation just as responding to inquiries concerning how the merger or acquisition influences every employee exclusively. In the event that the employees of the two organizations don't have as much dread over the change, efficiency is more prone to remain at past dimensions. Human resources can distinguish and address any rumours about cutbacks, office migration or different changes employees dread, offering input to the executives about employee concerns.

- Changing Roles and Structure

When one company converges with or obtains another, a few changes to the two organizations may happen, for example, wiping out excess positions or joining groups and divisions. The way toward modifying the two organizations so they work together as one can take a very long time to finish and human resources assume an indispensable job in the changes. Human resources impart to employees changes in whom they report to inside the company, what group or work bunch employees are doled out to just as any progressions to various positions' roles in the organization. Human resources may work with the board and employees to change the sets of expectations of different positions, guaranteeing everybody understands his job in the recently adjusted organization.