HR needs to rethink M&A tactics to boost its influence and impact
High number of deals creates opportunities for people function to shine
HR’s role in any merger or acquisition is vital but the profession needs to refocus its approach to ensure the value it brings to the deal is recognised, Towers Watson research has shown.
This shift in thinking is particularly important now as the number of M&As worldwide “is currently extraordinarily high”.
The HR Contribution to M&A Success survey showed that HR prioritises the less financial elements of M&A deals, including cultural alignment, internal communications and support in completing due diligence.
However, this approach translates into 59 per cent of respondents admitting that they only had a “minor impact, or no impact at all”, on revenue growth related to these deals, the study said. Respondents did say that they had a significant effect on employee engagement, talent acquisition and retention, although only 23 per cent gave themselves a ‘highly effective’ rating for business acumen.
An analysis of what HR teams do differently in ‘very successful’ deals compared to ‘fairly successful deals’, showed that during the more successful deals, the level of support offered by the HR function was much greater around ‘influencing the effectiveness of senior leaders’; ‘clearly defining metrics for success’; and ‘creating an M&A centre of excellence’.
Researchers said that this suggests these are the areas where HR has the biggest opportunity to exhibit positive influence and position itself as a critical part 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, 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.”
Allan said that traditional HR tasks, such as benefits harmonisation and service delivery expertise, remained vital to sustainable deal-making as part of employee engagement.
“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,” he said.
The survey was conducted with around 50 HR professionals who had been involved in one or more merger or acquisition in the past four years.