HRMT 4335: STRATEGIC HUMAN RESOURCE MANAGEMENT Course Project (25 %) You are the HR team for ELITE Electronics [EE] in AlKhobar, Saudi Arabia. EE operates 10 stores, 7 in malls and the other stores as...

Role of Effective Hr practices in Merge
Role of effective HR practices for a Merger
Student Details
  
Role of Effective Hr practices in Merge
Executive Summary
The key purpose of the organizations behind a merger is to enhance the productivity, efficiency, strength, and profitability of the business. Generally, mergers are executed either with an aim to expand the business into a related product or service line or to increase the service offerings using the services of the second party included in the merger.
The Report focussed on the Due diligence of the HR manager in the effectively managing this merger followed by detailed HR action plan, responsibilities, and some recommended practices to help the organization in effective transition during this merger.
This report conducted the study of the logistics and the HR aspect of a merger between two organizations having completely different organizational structures, policies and preferences. During the analysis it was observed that there are certain challenges like possible cultural conflicts, different preferences for Human resource strategies, Different leadership styles of the CEOs and operational policies, being executed by both the organization due to which the chances of success for the merger are extremely minimal.
In order to address these challenges the report suggests unanimously agreed Leadership style Effective communication, effective Transition practices and strategies as the basic recommendations along with the Due diligence of the HR manager in order to effectively Executing this merger.
Introduction:
A Merger is a scenario when two organizations working in a same or different operational domain combine or become one. Mergers are often considered as a means to expand business in search of new opportunities, reduce market competitions, get access to a new market domain or product line, acquire new technology and enhance the productivity of the business. This report aims to study the Human resource aspect of a Merger between two Saudi Arabian organizations, Elite Electronics (EE) and Future Furniture (FF). The report will discuss key challenges, execution plan, HR Plan, and recommended strategies related to the Merger.
Organization Background
Elite Electronics is an electronics organization based in AlKhobar, Saudi Arabia. The organization is involved in the sales of latest electronic equipment across the country as well as in the International Market. The organization operates on long-term contracts and supply
etail basis and has stores and retail outlets across major cities and malls of the nation. The organization has a multi-cultural workforce with approx. 180 employees from local cities, and countries like India, Lebanon or Palestine, Egypt etc. The organization pays its employees on fix salary basis and is known for a high employee retention rate (low and average performers are transfe
ed instead of being terminated).
Future Furniture is the second organization associated with this potential merger. The organizational structure and policies of FF are completely different than EE. FF is a new business operating majorly on warehouse-style stores basis. The employee base of the organization includes 120 individuals from local cities and Lebanon or Palestine. Another notable fact about the workforce includes the presence of young leaders at key positions in the organization. The CEO of the organization himself is 22 years of age. Unlike EE, the sales persons in the organization are on a commission basis, and the employee retention rate in the organization is low.
The report will now discuss different logistics related to a potential merger between these two organizations while addressing the key challenges and differences between their organizational structures.
Key Challenges in Merger (HR and Operational):    Comment by Jatin chha
a: This is a heading, challenges and its examples are given ahead.
As evident in the above background description of the organizations, there is an evident difference between the organizational structure and culture of the organization. The preferences and policies used by both the organizations are considerably different. Hence, there can be a number of possible conflicts in the merger between these two organizations. (Advances In Mergers And Acquisitions, 2013)
Employee retention and downsizing:
Reducing the employee base or downsizing the merged organization will be the primary challenge for the organizations. Additionally, during the background study of EE organization its was observed the CEO of EE does not like to terminate or fire the employees but in order to execute this merger, it will create a conflicting situation for both the organization. The degree of stress and complexity will be high for EE organization due to their ethical and moral practices related to employee retention.
The employee head count for the EE and FF organizations is 180 and 120 respectively, but the required head count in the organization after merger is 220.
Conflicting Human Resource strategies:
The Human resource practices and preferences of both the organizations are extremely different. EE organization has an employee base from a mixed culture, with accountants from India, Salespersons from Lebanon, and administrative profiles being occupied by the Egyptians. Moreover, the focus of the EE organization is on hiring experienced individuals and then retaining them in the majority of the cases. Whereas on the other hand, the FF organization is highly reliable on the young and fresh workforce. Such a situation might increase the chances of cross-cultural conflicts in the organization. For example: Whether the leadership profiles should be given to the young employees or to the experienced ones (as per the believes of the CEOs of FF and EE organization respectively).
Believes, values, and preferences (both personal and professional) of different cultures are distinct and it might create a conflicting situation in the organization leading to a failure. (Sakas & Konstantopoulos, 2010)
Conflicting Operational and administrative policies of the organizations:
The organizational policies and operational preferences of both the organizations are on entirely different planes. EE organization prefers to have experienced employees at leadership profiles whereas the FF organization is highly reliable on Young employees at leadership profiles. This might create a direct conflict between choosing either of the experienced mindset or innovative and out of the box approach. Similarly, the EE organization wants to employ salespeople on fixed salary basis whereas the FF organization persists with commission based earnings for sales profiles. At last, the distribution channel preferences of both the businesses are extremely different. The EE organization operates in stores and Malls in high traffic areas whereas FF uses warehouse-style stores to operate their business.
Different leadership style and preferences:
Leaders are the most crucial pillars for the success of an organization. It is the responsibility of a Leader to align the interests and the efforts of the employees with the goals and objectives of the organization. In case of this merger, the leadership styles of both the CEOs are extremely different. The CEO of EE organization exhibits a relaxed leadership style (Facilitative and transformational Leadership styles are mostly exhibited) and uses positive motivation to encourage the employees towards enhancing their efforts. Whereas, the approach used by the CEO of FF organization is highly a
asive and a practices Autocratic leadership style. The CEO of FF prefers results and success over the relationship with the employees.
In case of a merger both the Leaders will have to make unanimous decisions but due to different preferences, styles and leadership approach, this might create several conflicts leading to reduced productivity of the business due to slow decision making, conflicting views and practices, unclear approach for the subordinates to follow and hence leading to the failure of the merger. (Davies & Liang, 2011, p. 7)    Comment by Jatin chha
a:     Comment by Jatin chha
a: Example instance for this challenge
Anatomy of the Merger: (The Merger process and plan)
According to academic and industrial experts, there are 5 key phases associated with a smooth and effective implementation of Merger. This section will provide a detailed action plan along with the description of each phase and the responsibilities of the various transition team members in implementing this merger.
Following is a description of all the 5 phases.
Phase 1. Pre-Deal Preparation and Evaluation of Transactional Assumptions
The idea behind this phase is to analyze the macro and micro environmental factors that can impact the merger and the organization in the market. All, the analysis activities of the transition team members are ca
ied out in this phase of the Merger. (Davies & Liang, 2011, p. 3)Roles and responsibilities of these members will be defined in the next section.
Involved managerial personnel:
· HR manage
· Finance person
Phase 2. Due Diligence
This phase involves the analysis of the legal, strategic and financial elements of the merger or the transition. The idea behind DUE diligence is to validate the assumptions made during the Phase 1 of the merger planning and execution. (Ceil, 2013) The transition team members (Financial, HR as well as IT team) will analyze the environment and organization’ performance against different KPIs.
Involved managerial personnel:    Comment by Jatin chha
a: Response to the second comment of the student:The key activities of each of these personnel are explained further in details.
· HR manage
· Finance person
· IT Team
The Transition team members are responsible for developing the recommended strategies, action plan and policies related to the merger. (Ceil, 2013, p. 9)
Phase 3. Spreading the vision
This phase of the merger aims at ensuring that the vision and the objective of the merger are well communicated to every state holders involved in the transition. This includes the suppliers, workforce, managerial employees and other shareholders associated with the organization. Phase 4. Planning
On the basis of the analysis and the validations done in phase 1 and 2 of the recommended strategies of the merger are identified and finalized. Additionally, the terms and conditions of the merger are negotiated at this level (after identifying the needs of both the organization associated with the business). ("Culture-performance relationships in mergers and acquisition: the role of trust", 2012, p. 4) This phase can also be refe
ed as the “signature phase” where the contract or the agreement of the merger is signed.
Phase 5. Execution
The final phase of the merger includes the execution of the desired strategies. After the change or the merger is executed, it is important to manage and control the change effectively. (Srivastava, 2012) The execution may take a time of 6 months to 2 years, hence it is important that the whole process is controlled and managed effectively.
Transition Team for merger:
In case of a merger the organization experience a great degree of transition from one environment to another. From changed (new) management personnel to new policies and organizational structure, there are a number of factors that the organization has to adjust to. Effective analysis and understanding of the situation, merger details, policies, and contracts can help the organization to better adjust or integrate the new environment within. ("Culture-performance relationships in mergers and acquisition: the role of trust", 2012, p. 6) Hence, it is important to have a transition team in place who will be responsible for analyzing the merger against different KPIs to better understand the future of the merge. Following is a list of different members and their respective roles in the transition management of the merger.
Financial Person:
The financial person like the Chief Financial officer or an operational executive is responsible for analyzing the merger from the financial performance perspective. The person will be responsible for analyzing the KPIs or performance indicators like:    Comment by Jatin chha
a: 2 or 3 things will be important for them
· Capital
· Assets
· Liquidity
· Stock values
· Market share etc.
The person will be responsible for measuring this KPIs of both the organization on a cu
ent basis and predicted values for this after the merger. ("On Mergers, Acquisitions, and Liquidation Using Specified Purpose Acquisition Companies (SPACs)", 2013, p. 4) Thereafter the Financial person would be responsible for conducting a benefit analysis of the merger for both the organizations. This analysis will act as the basic deliverable that will act as a blueprint while negotiating the contract of the merger.
Human Resource Manager:
HR’ manager’ role before the merge
The HR Resource manager will be responsible for analyzing the culture, payroll practices, employee relationship practices etc. in both the organizations. The HR manager will also work over KPIs like:
· Tax information
· Insurance policies
· Recruitment strategies and effectiveness
· Employee headcount
· Budget analysis
· Employee turnover rate etc.
To understand whether the culture and the policies of both the organization can co-exist or not. Additionally, the HR manager will be responsible for effectively communicating this change and its need for the organization and its employees. The key deliverable from the HR managers include a proposed plan or recommend figures for all the above mentioned KPIs. Some key questions that the HR must answer include:
1. What are the priorities behind this mergers?
2. Are the goals behind the merger clear?
3. What are the hidden liabilities in this merger?
4. What is the target headcount for employees?
5. How can we manage retention?
6. Who are the key stakeholders in this merger?
7. What should be communicated to the stakeholders?
8. What are the interests of the employees?
9. What are the genuine areas of concern for the employees?
10. How to prevent the interests of the employees?
11. Is the new system suitable for the interests of the organization?
12. Will the proposed merger ensure growth for the organization?
13. Which profiles and positions will be restructured?
14. Identify the employee-related change cost.
15. Identify the cost of aligned the rewards.
16. How to execute the change?
17. What are the post-merger practices?
18. If any training program is required?
19. What kind of conflicts can raise?
20. Which conflicts should be of priority?
HR manager’ role after the Merger:
After the Merger has been implemented the HR’ key responsibility will be to create a cultural fit for managing the expectations of the employees as well as the organization. ("Large Wealth Creation in Mergers and Acquisitions", 2018, p. 12) The HR manager will be responsible for creating a strategy that can effectively address the following parameters:
· Employee selection and Downsizing plan
· Which employee will be retained and who will be relieved from the job?
· What will be the criteria for the same process?
· Employee Compensation plan
· Compensation to relieved employees
· Employee benefit plan
· Training and development into the new structure
· Managing employee expectations
· Managing conflicts
· Managing Cultural Differences
· Managing behavioral differences
· Managing managerial expectations
· Effectively implementing new policies and strategies
· Helping the organization and the employees to transition in the new structure.
IT Team
In addition to these two members of the transition team, the IT Team will also play a crucial role in executing the transition. They will be responsible for studying the cu
ent IT structure of both the organization and analyze whether the requirements of both the teams can be integrated into a single solution or not. The key deliverable from IT team will include a new IT system that can address the requirements of both the organizations.
HR Action Plan for the cu
ent Merge
Figure 1 represents the Action plan for the HR.
Recommendations:
As evident in the above analysis there exists different challenges and requirements in the effective implementation of the merger that can lead to a possible failure. Following are some recommend practices (for HR and the management) that can help the organization to ensure a smooth sail during this merger process.
· Creating a new and unanimously agreed Leadership style is important in this case due to the distinct preferences of both the leaders. It will help them communicate the key goals of the organization to their subordinates and create a supportive ecosystem for the business. (Stein & Cuadrado, 2016)
· Effective communication of the change (merger) and its requirements is mandatory in order to encourage the employees to align their interests with the organization and in turn the cu
ent merger. Failing to do so may lead to conflicting situations and potential failure. Hence it is important to communicate the bigger picture.
· Implementation of effective Transition practices and strategies is required in this merger. Both the organization are unfamiliar with the practices and policies of the other organization hence it is important to inform and make them familiar with the meaning and motive behind the new strategy. ("Large Wealth Creation in Mergers and Acquisitions", 2018, p. 8)
Conclusion:
There exists a number of differences between the preferences, operation styles, leadership approach and the ideologies behind the two business which can significantly impact the success of the merger. The severity of these challenges is extremely high, with strong predictions of a failure for this merger. In order to avoid a failure, both the organizations needs to implement a change at a massive level in their mind set as well as their operational believes.
References
Advances In Mergers And Acquisitions. (2013). London.
Ceil, C. (2013). Role of Due Diligence in Mergers and Acquisition. SSRN Electronic Journal. http:
dx.doi.org/10.2139/ssrn.2294836
Culture-performance relationships in mergers and acquisition: the role of trust. (2012). European J. Of Cross-Cultural Competence And Management, 2(3/4), 252. http:
dx.doi.org/10.1504/ejccm.2012.052603
Davies, D., & Liang, W. (2011). Human resources management in China. Oxford, UK: Chandos Pub.
Large Wealth Creation in Mergers and Acquisitions. (2018). Financial Management. http:
dx.doi.org/10.1111/fima.12212
On Mergers, Acquisitions and Liquidation Using Specified Purpose Acquisition Companies (SPACs). (2013). SSRN Electronic Journal. http:
dx.doi.org/10.2139/ssrn.2221349
Sakas, D., & Konstantopoulos, N. (2010). Marketing and management sciences. London: Imperial College Press.
Srivastava, R. (2012). The role of
and equity on mergers and acquisition in the pharmaceutical industry. Journal Of Strategy And Management, 5(3), 266-283. http:
dx.doi.org/10.1108/17554251211247571
Stein, G., & Cuadrado, M. (2016). Mergers and People: Key Factors for an Effective Acquisition and for Surviving One. SSRN Electronic Journal. http:
dx.doi.org/10.2139/ssrn.2736815
Identify the Key addressable areas(Due Deligence)
Analyse The KPIs (Due Deligence)
Communicate the need and motive of merger to the employees
Analyse and address the possible concerns of the employee
Create recommended set of strategies and policies (Due Deligence)
Validate the strategies and its results
Finalzing the Employee Count
Finalizing the Selection and Retention criteria for the employees
Create compenstaiton plan for the terminated Employees
New organizational HR policies
Payroll policies
Healthcare, Insuarce and taxation polcies
Effective communication of the change and its requirements.
Communicating Potential benefits to the organziation and employees
Identify and adress Cultural issues
Employee traingin programs for new IT system if implemented
Identifying possible areas of conflicts
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