The Role of HR Analytics and Workforce Planning in Mergers and Acquisitions
In a previous career, I spent 11 years as an automotive engineer. During those 11 years, I witnessed many mergers and acquisitions (M&A). Even more recently, this industry saw 303 mergers and acquisitions in 2011 and another 264 in 2012.
In the airline industry, we’ve seen 9 companies merge into 5 since 2005. Not counted in that total is the merger underway between American Airlines and U.S. Airways. With internet companies, we’ve seen too many to mention.
So, what’s the difference between a merger and an acquisition? In an acquisition, one company takes over another and establishes itself as the new owner. The target company ceases to exist legally.
With a merger, two companies, often of roughly the same size, agree to move forward as a single new company. Both companies' stocks are surrendered and new company stock is issued in replacement. As an example, Daimler-Benz and Chrysler ceased to exist when the two merged; a new company, DaimlerChrysler, was formed.
In reality, actual mergers of equals don't happen often. One company will buy another (acquisition) and, as part of the deal, the acquired company can claim that the action is a merger of equals. Why would they want to do this? Being bought out carries negative connotations. “Branding” the action a merger can make the takeover more palatable.
HR has both a hard and soft role in M&A. The softer side relates to topics like engagement and satisfaction. The harder side deals more with turnover numbers, headcount and costs. For the remainder of this article, I will focus on the data-driven side.
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Before a company’s HR can begin M&A-related activities, the first challenge is to pick an HR team to perform these actions. If Company A is merging with Company B, whose HR team do you select or do you form a team from both companies? Usually the first thing to merge in these situations are the support functions (Finance, Accounting, and HR). You, as HR, might be working on merging two support function teams together while another team is working on eliminating one HR team. Aye, there’s the rub.
So, what are the steps to merging? Here are four steps which are simple to describe but difficult to execute.
1. Gather data.
2. Analyze data and interpret the results.
3. Represent the results (tell the story).
4. Align the workforce.
Let’s use merging the workforce as an example. In the first step, we collect data regarding critical roles, the current state of the workforce, revenue forecasts and analyses of duplicate functions.
In Step 2, we can assess which teams are more efficient, which roles contain critical skill sets, and establish mathematical connections between headcount quantities and workload drivers. With this information, we can attempt to predict the future workforce quantities and cost.
In step 3, we “tell our story” and provide recommendations regarding future headcount values and possible outsourcing and policy changes.
As the final stage, we align the workforce to its recommended future state by executing headcount, policy and communication plans.
The same general procedure can be used to merge other aspects of two companies like compensation plans, cultures and data systems. For each of these, there are phases of the project which need to be supported through HR analytics and / or workforce planning processes. It is recommended that these professionals be sought as soon as a merger has begun (or sooner). In reality, HR often finds out about a merger far too late to invoke valuable supporting analytics.
Tracey is the author of “HR Analytics: The What, Why and How” and "Strategic Workforce Planning: Guidance & Back-up Plans" and the editor of NI Magazine. She holds degrees in Mathematics, Engineering and Business from universities in Canada and the U.S. and has over 20 years of experience in the areas of Human Resources, Supply Chain and Engineering. She was born in the U.K. and has worked in both Canada and the U.S.
Tracey is an independent consultant and her company, Numerical Insights LLC, helps clients in the areas of HR Analytics, Workforce Planning, and HR Process Improvement.
You can find Tracey on the web at:
Web Site: www.numericalinsights.com
Magazine: “NI Magazine: Numerical Insights for HR”
Email: publications@numericalinsights.com
Facebook: www.facebook.com/numericalinsights
LinkedIn: http://www.linkedin.com/pub/tracey-smith/0/523/77a
Twitter: @ninsights
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