Question

LP5 Assignment

1. What do you think went wrong here from a Human Resource point of view?

2. What occurred behaviorally within the top management team?

3. What would you have done differently as VP of Human Resources and why?

4. What strategy do you think the CEO was using in keeping others away? What potential logical motivations might he have had?

5. In a due diligence process what usually takes place especially from the HR Department in a company the size of Scorecard?

6. Do you think the dynamics of the executive team will change now given the failure of this acquisition?

INTRODUCTION

A strategic imperative underlying a merger or acquisition is to create “synergy;” a strategic and operational advantage that neither firm can achieve on its own (Schweiger & Weber, 1989). During the 1980s, acquisitions and mergers became a major part of American business as evidenced by the 12,000 companies that changed hands during that decade (Lubatkin, 1988). “Merger mania” (Geber, 1987) was often used by business researchers to describe the landscape of sheer volume of activity that permeated all parts of the economy, from defense to food services, to automotive, to insurance (Ulrich, Cody, LaFasto & Rucci, 1989). As daunting as it may be, mergers and acquisitions continued at a frenzied pace with the first half of 1998 ringing up more than $1.3 trillion in merger activity worldwide ( Solomon, 1998). Unfortunately, statistics have shown that, overall, acquirers have less than a 50-50 chance of being successful in a merger or acquisition (Pappanastos, 1987); Although estimates vary, up to one-third fail within five years and as many as 75% are financial failures long-term (Marks, 1988).

Experts cite many reasons for the high rate of failure ranging from the wrong partners chosen, to the wrong price, too bad timing. A merger or an acquisition is a corporate event that also has the potential to create severe personal trauma and stress which can result in employees feeling psychological, behavioral, health, and survival problems leading ultimately to performance issues (Ivancevich, Schweiger & Power, 1987). An increasing number of newly merged organizations experience dysfunctional changes in employee behavior, lost productivity, leadership struggles, and various other humans (employee) problems (Manzini & Gridley, 1986). One of the key reasons for these problems, and also the loss of value a new acquisition experiences, is the fact that senior executives tend to underestimate the difficulties involved in integrating the organizations (Solomon, 1998).

Top management usually does not bring Human Resources into the process until it is too late.

By so doing the due diligence process may fail to identify any additional problems not evident to those untrained in Human Resources and its many tentacles. A skilled team, a well-defined process, and a focused integration plan can help ensure the overall success of an acquisition (Douglas, 1999). Successful mergers or acquisition have shown that (1) there was a pre-merger evaluation of the potential association from the human resource perspective, (2) a specific human resources strategy for the merged or acquired company was an element in the integration process, and (3) effective and accurate employee communications programs were conducted both during and after the deal (Schuster & Zingheim, 1990. A positive management style, good solid leadership, work rules and processes, training, constant communications, consistent compensation, benefits and incentive programs all lend themselves to a more mature blending of talents and continued successful growth. Human Resources can help employees move past stress and resistance to change resulting from an acquisition or merger in addition to minimizing any post-deal damage if they are involved in pre-deal due diligence. As Marks (1988) reports from a senior executive recently having gone through an acquisition;

“what will make or break this acquisition’s financial success will be how people are treated, not the business decisions. Business losses can be recouped, but if you treat someone poorly early in the game you can never change the feelings that result.”

Answer 1

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