Question:
Individually prepare a Business Report that addresses the human resource issues raised in the case study as provided on the Moodle course site?
1. Purpose:
Today’s business environment is changing rapidly due to various factors like globalization, increasing culture of outsourcing, requirement of speed up growth and continuous shortening product life cycle tend towards the company’s acquisition, it is completely part of the business strategy in order to accomplish their company’s business objectives. The report will focus on the various aspects of human resource regarding to acquisition. This report particularly focuses on effectiveness of HR role during the strategic acquisition. As merger or acquisition is part of business strategy, it is also essential to discuss reasons for its success and failure.
2. Background:
This report talks about acquisition of two book seller companies in Australia. Australian book market is very competitive and Mainly Books Company, 18 stores book retail chain is struggling in its targeted market from last three years it had been facing loss in trading. Hence it has been acquired by another book retail chain Wordsmiths and the acquisition is considered as good opportunity strategically in order to enhance the company’s market presence and gain competitive advantage.
Instead of focusing on the acquisitions reasons the main goal of both the company has to gain advantage for both and deal should benefit both buying and selling companies. Though there are various reasons have been talked about failures of acquisitions, the main area both the companies have to focus and give importance is management process of human resources. The HR of both the companies should managed so as they will retain in the company as well as collaborate to each other effectively with higher levels of performance. The report talks about issues and challenges of human resource due to strategic acquisition, planning for new staffing, legal issues in designing redundancy process, and evaluate HR planning process. Finally the report provides recommendation for acquisition process and HR planning.
Issues related to human resources have to be handles in a unique way at the time of acquisition procedures in order to get successful results. During the international acquisition condition it is obvious that staff cannot comfortably communicate with the top management and a consequence of it after acquisition it can become weakness indication for acquiring company (Wright and McMahan, 1992). Hence in this condition HR management team has to face additional difficulty in understanding the cultural issues. Today merger and acquisition trend is increasing among every fields company’s and does not seem any downturn in this field at least for 10 years, only required to manage the human resource effectively by the professionals to achieve successful acquisition result. When both the sides have new opportunities in front of them the chances of successful acquisition is more. HR managers of both acquiring and acquired firm have big responsibility and acquisition activity impose different and unique challenges for them and it can also have serious impact on employees’ performance during transition time (Gordon, 1972).
Human resource need to recognize particular main issues to increase the opportunities of success and that includes, proper understanding of situation, good acquisition conditions, objective for signing the deal, determine culture differences before finalizing deal (Hendry and Pettigrew, 1990). If all these issues are recognized effectively, implementation of strategies after acquisition gets easy and effective as well.
Here the management team and HR manager Gemma of acquiring company realize the importance of incorporation of human resources in their acquisition strategy. Mainly Book Company has to adopt expertise and other functions performed by their acquiring company but it is observed that most of the firms fail to adopt the diversity. Thinking about the acquired company’s human resources, it may be urgent for them to understand all the goals and ideas of acquiring company and work and perform according to it (Kazmi and Ahmad, 2001). On other hand acquiring company should also have to understand about the acquired company employees, their working situations, and company’s culture because all these things are essential in managing merger process effectively.
In acquisition transferring process has been followed from acquiring to acquired company. Like purchasing stalk, purchasing assets the acquisition process conducted and it is generic term used to communicate ownership handover.
1. Differences in Acquiring and acquired firms HR functions:
According to the case study the acquired firm does not have any HR function and all the matters related to employment are handled by the store manager. Mainly Books store also does not have any program which manages and record all the human resource activities and hence no workforce data is available in the acquired firm. It is known that managing the human resources is important aspect of any company and which company fails to this lead towards issues. The acquiring firm has proper HR department and that department have right to undertake all the decision regarding to the employees working in the company (Lundy, 1994). The WordSmith the acquiring firm current workforce is of 600 employees and in between those half are fulltime workers and remaining working as part time, in the case of Mainly store it is exactly opposite they only have 225 employees and all working as fulltime. Analysis of Mainly stores operation and costs has received that most of the store in this store chain are overstaffed and balance of fulltime and contingent workers are not right. Due to this reason financial performance has been getting poor and hence Mainly books require downsizing. As the acquiring firm WordSmith has good HR system which will be able to generate the reports for workforce characteristics and trends, it get clear that acquired firm needed certain amount of downsizing and dependencies on fulltime workers also has to reduce.
2. Incorporation process of acquired firm:
In the given case findings it is observed that employees are the key towards making merger work, human resource related problem occur during the acquisition such as both the firms culture classes has been observed, disputes between management level people, change does not managed well due to inability (Schuler and Jackson, 2007). It is needed to incorporate the acquired firm workforces into acquiring firm human resource management system. The Mainly Book stores staff has been handled by the acquiring firm after acquisition. Incorporation has to be done effectively in order to sustain financial performance inability, recover from loss of productivity, gel between each other’s culture, sustaining the key talent and management styles without any clash and managing the changes effectively and understanding.
All the above points are part of the strategic management of human resource and handling cultural differences between both acquired and acquiring companies, because it can be the barrier to the success. IN the pre-deal stage, main focus has to be on organizational design, especially on assessing and choosing correct persons for leadership. Remuneration plays important role and required to be considered from different angle of strategy, which would impact employee, employers and cost (McGovern et al., 1997). Other vital role playing areas are maintaining and building morale and loyalty. After acquisition takes place HR responsibility also get increase and they have plan and manage the integration process.
HR management does not involve much before the acquisition, and hence it then goes long way to explain why the issues related to workforce, culture of organization has to be overlooked, and it strongly feel that for assessing such issues the management team is not properly trained (Wright and McMahan, 1992). Acquisition has profound impact on both companies workforce and in order to establish successful transition in certain aspects like leadership, business model this impact has to be managed well. The impact of acquisition on each staff member has to identify and respond well and HR managers planning can decide long-term success or failure of the new company.
1. Ethical issues:
It is not possible that the merging companies are identical in all aspects and hence at the time of acquisition of the two companies, there are certain areas of mismatching between them and further it lead towards very serious issues (Becker and Gerhart, 1996). One firm wants to invest on the labor while another firm mostly focuses on share holders and customers. Due to the cultural and legal differences between the firm issues can be raised. In this situation where differences are more, the HR managers of both the companies must have to fight with the differences and also have to indentify the fair sets of issues between them and find out solutions to help them out in order to build the cohesive organization with single ethical standard. In order to minimize the insecurity and doubt of employees in both the companies, there is need to establish strong communication between employees and HR department. The management has to take employees in confidence and ensure them about their job security, need to clarify their doubts and answer to their all questions (Boxall and Purcell, 2003). Senior management team has to make less distance from employees to understand their views and clarify the issues.
2. Cultural Integration:
Both the book companies had their own culture and own standard in the targeted market and obviously had their own culture, values and belief, hence after acquisition the main challenging area for HR managers is the about the cultural (Mathis and Jackson, 2008). It is one of the most difficult aspects to understand and change according to the combined firm. Most of the cases barrier in cultural integration creates hurdles for success as every company has their own business culture. Sales mentality may dominate companies or some firms have paternalism of culture and others are more democratic. Hence while trying to bring culturally different organization there is possibility of creating frictions.
Gemma is HR manager of WordSmith book organization, Australia which acquired Mainly Store which had been struggling in very competitive book market from last three years. The company have to consider some legislations and obey them while performing acquisition and are given as below:
1. property registration authority act:
Registration of Deeds and Title Act 2006 [PRA Act] establishes the property registration authority act. Some functions of authority has been provided by the Act which should be followed by acquirer before acquisition (Bratton and Gold, 2007). This Act would help in managing and controlling the Land and Deeds registry. The Act will require promoting and extending the land ownership and require creating legal registration of it.
2. Chief Executives:
PRA Act also provides the right of getting appointment by the Minister under the Public Appointment Service recommendation of CEO. The Person on the post of CEO should act as civil servant and must followed the functions such as performing the implementation and policies related decisions of the Authority (Desssler, 2008). Also the right has been provided in which they perform managing and controlling of their staff functions, administrative department of business and should perform all the functions come under his or her job position rights and according to the Act.
Conclusion:
The report shows role of HR is very important in strategic acquisition of companies. As in the acquisition one company owns another one and hence the insecurity regarding the job role, salaries and working environment make the employees stressed. Hence human resource challenges are becoming vital and at the same time very difficult as compare to other business factors. This also indicated that the existing employees would require gathering and performing synergic collaboration benefits to produce high level performance. The report discuss over the various aspects of human resource regarding to acquisition. This report particularly focuses on effectiveness of HR role during the strategic acquisition. As merger or acquisition is part of business strategy, it is also essential to discuss reasons for its success and failure (Hollenbeck, Noe, Gerhart, Wright, 2003). Today, it is observed that functioning of HR also growing along with the acquisition process of companies. Effective communication is the key element of managing issues related to integration. Thus the report discusses effective participation of HR in the given acquisition case and explains the main factors throughout the report.
Following are some recommendation for both the companies involved in the acquisition process. The recommendations are useful for the acquiring company in making the acquisition process more useful and it also help to retain the employees and also protect the staff rights and can tend acquisition towards creating successful business output.
1. While performing acquisition it is necessary to set clear and strategic vision that is what the companies actually want from the acquisition. According to Mainly Book stores point of view they want to improve their financial performance and their market situation which had gone down from past three years.
2. While acquisition process is starting, it is important to involve HR early in the negotiation process, due to which mapping of companies’ culture, values and working styles get cleared.
3. To achieve greater profit and good result from acquisition, create a new chart of company, and the chart would contain recent staff’s competencies detailed audit, which would help in mapping responsibilities and roles according to new chart.
4. In order to minimize the insecurity and doubt of employees in both the companies, there is need to establish strong communication between employees and HR department. The management has to take employees in confidence and ensure them about their job security, need to clarify their doubts and answer to their all questions. Senior management team has to make less distance from employees to understand their views and clarify the issues.
5. To clearly understand the plans continuous effective communication is needed. There is another option, if required neutral agency can be included for the same purpose.
6. Employees can be engaged in productive work in order to keep then motivated and satisfies, because motivated and satisfied employees are highly committed towards their organization.
Reference List:
Wright, P.M. & McMahan, G.C. 1992. Theoretical perspectives for strategic human resource management. Journal of Management, 18 (2): 295-320.
Gordon, M.E. 1972. Three ways to effectively evaluate personnel programs. Personnel Journal, 51 (7): 498-510.
Hendry, C. & Pettigrew, A. 1990. Human resource management: An agenda for the 1990’s. International Journal of Human Resource Management, 1 (1): 17-44.
Kazmi, A. & Ahmad, F. 2001. Differing approaches to strategic human resource management. Journal of Management Research, 1 (3): 133-140.
Lundy, O. 1994. From personnel management to strategic human resource management. International Journal of Human Resource Management, 5 (3): 687-720.
McGovern, P., Gratton, L. Hope-Hailey, V., Stiles, P. & Truss, C. 1997. Human resource management on the line? Human Resource Management Journal, 7 (4): 12-29.
Wright, P.M. & McMahan, G.C. 1992. Theoretical perspectives for strategic human resource management. Journal of Management, 18 (2): 295-320.
Becker, B., & Gerhart, B. 1996. The impact of human resource management on organizational performance: progress and prospects during Acquisition. Academy of Management Journal, 39 (4): 779-802.
Boxall P & Purcell J (2003) ‘Strategy and Human Resource Management’ Palgrave Macmillan, New York, USA.
Bratton J &Gold J (2007) ‘Human Resource Management: Theory and practice’4th edition, Palgrave Macmillan, New York, USA. (J, 2007).
Desssler (2008) ‘Human Resource Management’ Prentice Hall, Australia.
Hollenbeck J, Noe R, Gerhart B, Wright P (2003) ‘HRM gaining a competitive Advantage’ 4th edition McGraw Hill, New York, USA.
Mathis R and Jackson J (2008) ‘Human Resource Management’ 12th edition, Thomson South-Western, USA.
Noe R (2006) ‘Human Resource Management: Gaining a competitive advantage’, 5th edition, McGraw Hill, USA.
Schuler R and Jackson S (2007) ‘Strategic Human Resource Management’ 2nd edition, Blackwell Publishing, Malden, USA.
Salaman G, Storey J, and Billsberry J (2005) ‘Strategic Human Resource Management: Theory and Practice’ 2nd edition, SAGE publications Ltd, London, USA.
Torrington D, Hall L and Taylor S (2005) ‘Human Resource Management’ 6th edition, Prentice Hall, Essex, England.
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