When an organization goes through a merger or acquisition, a lot of responsibility falls to HR leaders. They must address a number of crucial areas which include:
- Consistency in benefits offerings and administration
- Cohesive and compliant compensation structure and pay practices
- Potential layoffs
- Adaptations to company culture
- Significant changes in management
A savvy HR department will identify potential challenges and preemptively update policies and procedures to ensure compliance, anticipate employee concerns to minimize the impact on engagement and hone in on opportunities for cost savings and beneficial process improvements.
Areas of focus during mergers and acquisitions
Communication is key during a merger and perhaps the most difficult part to get right. The organization must first determine the level of transparency they intend to maintain, establish a timeline of when and what information will be released, and agree upon clear messaging. Maintaining intentional and consistent communication throughout the process will help to prevent rumors and facilitate a smoother transition for everyone involved.
It is important to consider the retention of high-performing employees during times of transition. Your employees may be concerned about layoffs, compensation, relationships, and changes that impact how they do their jobs. It is critical to communicate clearly and alleviate as many concerns as possible to maintain positive employee morale. If layoffs are an outcome, outline a plan for how this will be implemented and messaged to employees. Your employees will be paying attention to how you address separations and layoffs, which will impact retention and employee engagement. Handling employee separations and layoffs compassionately and with clear communication about what comes next (severance pay, benefits, transition programs, etc.) not only provides these employees with a sense of direction during a time of uncertainty, it helps the employees who will remain feel valued.
Each company has its own culture and values established, which come with certain expectations for the workplace environment. Mergers and acquisitions present the perfect opportunity for the organization to assess the company culture and values and make an intentional decision about what the company culture will look like moving forward. Evaluate the organization’s mission, vision, and values to ensure they reflect organizational goals. Remember to document and communicate them frequently to ensure they remain front of mind and consistent throughout the transition process and beyond.
Management changes are inevitable. It is helpful to define the company’s values and establish cultural objectives early in the process. These pillars act as a point of reference to help management and leadership team members understand the reshaped company’s main goals and the strategies that have been selected to achieve them while fostering the workplace environment the company is striving to achieve. This can be tricky, but it is strengthened by leadership development and management training. Investing in strategic management training will make the transition easier for managers and employees alike.
Create a cohesive HR Program
1. Establish a united company
The HR team, along with the leadership and management teams, play an important role in creating a united company. Work together to establish a consistent company culture and ease concerns that may arise. Their attitudes, values, and how they exhibit the company’s culture will directly affect employees and their perception of the emerging company. The HR department can help coach these leaders by training managers about significant changes and the company’s expectations regarding culture and values.
2. Assess the current state of the HR department
Mergers and acquisitions provide the perfect opportunity to get a pulse on the current state of the organization and its HR program. Conduct audits to provide valuable insight into the HR program as a whole, as well as what policies or practices are disparate and which are successful. Not only will you get important information on where the HR program currently stands, but you can use this data to optimize practices and programs that are not up to par.
Important questions to consider during an audit include:
- Are there any identifiable gaps?
- What metrics are in place to measure employee engagement and retention?
- Are there any policies or procedures that pose a risk?
- Is the company fully in compliance across all states where employees work, including remote workers?
- What systems are working well? What systems can be improved?
- Are there any efficiencies that can be gained?
- How is internal communication with employees?
- Do they know where to go to find answers about benefits, policies, etc.?
- How can the company make internal support for employees even better?
3. Establish employee benefits
During a merger, employee benefits offerings must be carefully assessed to determine gaps and inconsistencies. The process of changing benefits is a huge undertaking. Employers can ease the process by staggering benefit changes. Consider keeping employees on their current health insurance and retirement plans through the end of the policy period instead of switching them to a new plan immediately. Consider keeping employees on their current retirement plan until the new year to ease some of the administrative burdens. Paid time off is another policy employers might want to maintain through the end of the fiscal year. Staggering these changes not only alleviates administrative challenges for the HR department but also makes the process easier for employees.
4. Construct a cohesive compensation program
Each of the businesses will have unique job descriptions, compensation philosophies, pay structures, and pay practices. It is necessary to standardize a compensation program that streamlines pay decisions, complies with employment laws, promotes pay equity, and responds to changing market conditions. If the primary organization already has an established compensation structure in place, fold the new organization’s roles into the existing pay structure. Ensure pay equity aligns across all new jobs and functions by conducting internal audits for salary and job description continuity. This will provide valuable compensation data and insight for setting priorities, establishing timelines, and maintaining equitable pay practices. Consider local and state employment laws, which may be applied differently or across new regions as a result of the acquisition.
5. Review compliance with employment laws
Review the employee handbook and various company policies across the entire organization to ensure compliance with federal, state, and local employment laws. Multi-state mergers pose a compliance challenge because many states have unique and even conflicting employment laws; ensure compliance across all states and locations. Consider remote employees and their state’s laws as well. Important areas to consider include harassment prevention training, mandated policies, paid leave, salary and minimum wage, overtime, and pay equity requirements. Ensure all bases are covered to minimize employer risk.
HR opportunities during mergers and acquisitions
During the transition process, the HR team will uncover gaps and opportunities for improvement. They will get a pulse on employee engagement, compliance, and the overall health of the HR program. Audits will provide valuable information for making data-driven recommendations that drive cost savings, efficiency gains, and risk mitigation. These may include ways to make processes and procedures more efficient by utilizing systems more effectively, improving the structure of the organization, and making program improvements.
Mergers and acquisitions come with a unique set of challenges for HR professionals; however, they also present an opportunity to reassess culture and values, improve inefficiencies, and enhance employee engagement and communication. There are many resources available to assist with and simplify the merger and acquisition process, including hiring experienced consultants who specialize in this process or outsourcing some or all of the related tasks to a third-party administrator.