HRM aspects in the context of mergers and acquisitions (M&A)

  HRM aspects in the context of mergers and acquisitions (M A)  

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2.1  ORGANISATIONAL STRUCTURE  6

2.2  STRATEGIC HRM  9

2.3  INTERCULTURAL MANAGEMENT  12

2.4  MOTIVATION SYSTEMS  15

2.5  CHANGE PROCESS AND CONFLICT MANAGEMENT  17

2.6  HUMAN RESOURCE ACCOUNTING  20

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HRM aspects in the context of mergers and acquisitions (M&A)

1 Introduction

The purpose of this assignment is a critical review of company mergers and acquisitions regarding different human resource management related aspects. It will be analysed what impacts a merger might have on the organisational structure, on the human resource management strategy and on the required approach regarding intercultural management of the newly created company in relation to the current situation of the merging companies. In addition to that it will be analysed which impact a merger has on the motivation system, the change- and conflict-management and on the human resource management accounting system.

Based on practical merger examples the problems of these areas will be described and analysed and a recommendation for solutions will be given when possible. This assignment will give an overview about the human resource related problems and aspects, which companies will face and should consider when a merger is planned.

The definition of mergers and acquisitions (M&A) is not absolutely clear in the literature. On one hand side a merger is described as the legal and economical connection of two equal companies of the same size, which can be defined as a classic amalgamation, and an acquisition is described as an economical take over of a small company by a big one. ¹ On the other hand side the subject M&A also includes the sale of companies, splitting of companies (Asset Stripping), restructurings, spinoffs, joint ventures and alliances. ² Based on this it is not clear if a merger is the same as an amalgamation. Although the Daimler-Chrysler deal and the Renault-Nissan deal are defined and described as mergers it is not obvious if these were classical amalgamations or more acquisitions communicated and presented as mergers. ³ According to the purpose of this assignment mergers are defined as classic amalgamation and a share or asset based acquisition.

¹ Compare: http://www.flexible-unternehmen.de/kl0908.htm, Jörg Wirtgen ² Compare course material: Financial Management Module M&A, Dr. Frere ³ Compare: http://www.businessweek.com/2000/00_23/b3684147.htm

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HRM aspects in the context of mergers and acquisitions (M&A)

The important item here is that companies with different cultures and backgrounds merge together and have to find a common identity including the consideration of the identities of the merging partners.

In the last years a lot of big and small mergers took place between companies from very different countries and cultures.

Illustration 1: Deal flow within and among regions 2001 in the full automotive ⁴ sector

The reason for the trend of mergers is the still ongoing globalisation and the competition pressure based on shorter product cycles, which cooperates face. A lot of these mergers are described as not successful and a dominant reason for this is that soft aspects like company culture, human resource management and organisational aspects are not considered carefully enough. The main focus is usually on financial and legal aspects because these are easier to quantify than the soft items. ⁵ This fact is reason enough to find out in the following what the human resource related aspects before, during and after a merger are to avoid the negative impact of too less consideration of these items.

⁴ Source: http://www.pwcglobal.com/fr/pwc_pdf/pwc_automotive_sector_full_2001.pdf ⁵ Compare: http://www.flexible-unternehmen.de/kl0908.htm, Jörg Wirtgen

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HRM aspects in the context of mergers and acquisitions (M&A)

2 Elements of HRM

2.1 Organisational structure

Two key aspects determine the organisational structure of a company. The first one is the way a company is built up. Its organisational structure includes the definition of responsibilities, of hierarchies and relationships between the different departments. The second one is the way how the work and processes within the company are organised. This so called industrial engineering develops and defines the processes of a company, which are influenced by the company’s approach regarding the will of giving responsibility to the staff and the individual role of the employees.

The company’s organisation regarding structural and industrial engineering is very much related to its culture and the development of the organisation of the past. The way an organisational structure looks like is influenced by the culture, the values and the history of the corporate environment. 6

In modern western companies usually different organisational forms do exist in parallel within one company. Beside the hierarchical line organisational backbone, organisational derivates like staff line organisations, project organisations, team organisations and virtual organisations between different departments or partners exist. This leads to the conclusion that the organisational structure of a company cannot be described with a single concept like matrix organisation or tensor organisation. A multiple concept, which was created by the theories of Maslow, Herzberg and McGregor ⁷ describes organisations as complex organisms in the best way.

The organism approach of company structures includes that different organisational aspects exist in parallel and that the people working for a

⁶ Compare: Morgan, Ganeth, Bilder der Organisation, p.158

⁷ Compare course material: Walsh, I., 2002

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HRM aspects in the context of mergers and acquisitions (M&A)

company are seen as active participants who want to take part in the creation of a company and who want to have responsibility for their areas of work.

Companies in other countries or cultural environments may have other approaches regarding the organisational structure and the industrial engineering of a company and in connection with this also regarding the staff participation and the delegation of responsibility to the employees. In case a company has still an approach like it was developed and described by Taylor ⁸ where the scientific view of working processes is in the focus and not the need and the wishes of the staff as human beings, the organisational structure and the industrial engineering of such a company is very different. It would result in the amount of inter-department-relations and project organisations. Strict hierarchies and very clear and defined orders can be expected in such companies.

When companies with very different approaches regarding the formal and informal organisational structure and the role of human beings within their industrial engineering are willing to merge, conflicts and problems regarding these aspects are obvious. But these problems might also occur when the differences of companies are not so big as described above. Merging companies have to find a common approach of the way they want to create the new company. But merging companies have to be aware of their different approaches first - this is mostly the biggest problem before the merger takes place. The success of a merger depends on the creation and the development of the organisational structure, the definition of the processes, the definition of responsibilities and the communication within the new company. 9

⁸ Compare course material: Walsh, I., 2002

⁹ Compare: Friederichs, P.: in: Clermont, A., Schmeisser, W., Krimphove, D., Strategisches Personalmanagement in globalen Unternehmen, p.855

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