Question

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.

Q2. If 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?

Answer 1

Answer:

Cisco believes in the acquisitions of those businesses that are proving successful in the long run and have the lowest risk and the highest adventurous culture. The greatest thing Cisco does after any acquisitions is the work guarantee for all of the company's acquired employees. There is an acquisition department that validates the competence of the acquired company's workers, the technology used in the business, and the partnership between employees and the company. The team informs the acquired team after all the assessments of their future roles according to company policies. There are several internal as well as external factors that will affect the process of implementation of the particular strategy. Nonetheless, must plan to promote the fulfillment of strategic management priorities for human resources to resolve any challenges that could obstruct the human resources strategy. Generally, the HR management department offers ideas for handling employees strategically as company tools, including recruitment/hiring procedures, employee compensation, and skills training.

HR is responsible for designing the workforce and culture which best fits the business. While departments are aware of the status of their employees, and managers can make changes in them, the HR needs to track and control changes, as well as anticipate how they will affect the processes that are already in place. The risk of failure rises if the workers believe like there is no cohesion between management and human resources, even though the buy-in is necessary. Employees serve as a depiction of the culture of your company. Hence it is important in the company to have the right people in the right positions. HR recognizes and anticipates the potential of the organization to balance the workforce by matching workers with the best positions according to their skills. It creates and thinks of creative and inventive ways to ensure that employees are valued and compensated to keep them engaged with the business. Department of Human Resources is far more than the place to go for employee support, the dispute with staff, or enforcement problems. The department plays a major role in contributing to the execution and advancement of business plans that will help meet the needs and priorities of both the organization and the workforce as they manage the workforce' entry and departure, and everything between them.

Cisco's HR management department makes personal files of the recruited staff and periodically holds training sessions to prepare new workers according to Cisco standards. The team is often eager to assist with any question of acquired employees that provides a sense of ease between them and they are satisfied with the acquisition. It is stated that one of the main reasons for the failure of a merger or acquisition is focused on a lack of Human Resources. Problems with human resources are the main vulnerable field, typically overlooked in mergers and acquisitions. Whenever a proposal is made for mergers or acquisitions, an organization analyzes the viability of sales, money, and legal fronts, Yet the value is given to the human capital of the organizations concerned is not recognized. Corporations that do not understand the value of human capital within their companies and their role in the success of the transformation is bound to fail in the long run. Mergers and acquisitions' initial benefit is that it offers a surplus power that allows for improved efficiency. Most mergers don't generate the desired shareholder value. Some of the most common causes of failure are the combination of cultural differences and an ill-conceived human resource management plan. Given the well-publicized battle for talent, I am continually shocked at how little attention is paid to the HRM problem during mergers. The possible reasons for ignorance of human resource aspects of mergers and acquisitions:

• The belief that HRM aspects are too fragile and thus difficult to handle.
• Top management loses concern about the effect on workers, labor unions, and collectivity.
• Lack of understanding or agreement that issues related to people is important, and No spokesperson to express these issues.
• No model or framework which can serve as a tool for systematically understanding and managing people's problems.
• The focus of the M&A activities is on other activities such as finance, accounting, and fraud.

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