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HR needs to shift focus to add value in M&A deals

The HR contribution to M&A success survey shows that HR teams quote less financial aspects of the transaction as priorities, including ensuring cultural alignment, internal communications and due diligence support. Furthermore, the majority of respondents (59%) admitted to having only a minor impact, or no impact at all, on revenue growth related to M&A but claim a major bearing on employee engagement and talent acquisition and retention. Only a quarter (23%) of HR respondents gave themselves a & lsquo;highly effective’ rating for business acumen.

The research identifies what HR teams do differently in & lsquo;very successful’ deals compared to & lsquo;fairly successful deals’. During the more successful deals, the level of support offered by the HR function was much greater in the following areas: influencing the effectiveness of senior leaders, clearly defining metrics for success and creating an M&A centre of excellence. This indicates that it is these aspects of M&A where HR has the biggest opportunity to exhibit positive influence and position itself as an integral component of a strong deal team. 

Steve Allan, M&A practice leader (EMEA), said, “The level of M&A activity across sectors and around the world is currently extraordinarily high, so there has never been a better time for HR to carve a niche as mission-critical to deal success. We see time and time again that deals perform better over the long-term when HR teams are engaged early. But, in order to be effective at the table, HR professionals needs to earn the respect and confidence of the core M&A team by demonstrating strategic insight and speaking the same language as the deal-makers, who are mostly likely to have a finance background.

“Traditional HR tasks, such as benefits harmonisation and service delivery expertise, are still vital to sustainable deal-making as part of the employee engagement puzzle. However, our research shows that the HR function can have a material impact on deal outcomes if it is to turn its attention to more high-profile matters such as influencing leadership behaviour. For example, by coaching the senior team to inspire the workforce around the vision and purpose of the deal, taking a leading role in the new organisational design, as well as mobilising the implementation of change.”

Jessica Norton, director of executive compensation at Towers Watson, said, “A key area where HR teams can make a big difference is around leadership retention planning. For example, during deals there is a tendency to focus on retention structures, these are typically a short-term tactic to buy time while the details are firmed up. HR needs to take a more strategic approach focussing on leadership engagement and empowering leaders to drive change, leveraging the window of opportunity that deals create.”

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