Strategic Role of HR Departments in the Mergers and Acquisitions

Abstract

Wordsmith is one of the reputed bookstores in Australia having more than 30 outlets, and has acquired Mainly Books’ which is also a good book stores with 16 outlets. In this research review report the focus has been on key issues that are related to managing the workforce, reducing the redundancy and establishing the smooth process and systems for HR management of the outlets and also the new online stores. The possible solutions and the strategies that could be adapted has been discussed in this report based on inputs from the case study, and the literature review and the recommendations has been detailed in this report.

1.0       Introduction

Mergers and Acquisitions have a significant importance and unless every business function, tasks and the dynamics are given sufficient attention, the purpose of the mergers and acquisitions, the objective of such an attempt could be at stake. One of the key issues that have to be taken in to consideration while handling the acquisition process is the Human Resource Management and Development role in both the organizations and also in terms of the new entity. (Lindquist, 2007)

Irrespective of the acquisition of a new company, even in the case of an organization, the strategic role of human resource department is much important than handling the routine administrative activities and the personnel administration. It is very evident from numerous studies and researches that when a company has a significant importance to the human resource development, there is significant quantum of development that is envisaged for the organization. (Lindquist, 2007)

The case scenario of Wordsmiths, which is one of the leading bookstores in Australia, having its presence with more than 30 outlets, when they have acquired Mainly Books, which is also having some kind of presence and market share, the need for strategic role of human resource management is also very important. The HR manager of the company Gemma, rightly identifies and presents the reasons to the CEO Alan, on how the strategic issues of human resource are to be given the importance and what sort of strategic changes are to be adapted by the company in terms of handling the functions of Wordsmith retail stores and also in preparing the company for the new online stores developments which the company has been planning.

In this case scenario, the focus and emphasis is to review the existing HR practices of both Wordsmith and Mainly Books and evaluate the best practices that could be implemented in such a way that the current challenges of work overload on HR department and also the issue of excess full-time strength in the Mainly books, and what could be the best practices that the company could adapt in order to ensure that the strategic role of human resources could help in the overall organizational development.

2.0       Existing HR Scenario of Wordsmith and Mainly Books

It is very essential that the companies have their focus on the business attributes like the marketing strategies and the financial strategies when they are looking at acquiring a company from the similar lines of business or could be for a forward or backward integration, but it is very essential that the companies take in to consideration the Human Resource issues also. It is very essential that the companies have to have right kind of organizational cultures; the practices from the entities could be very much different in terms of HR policies, methods and the working culture.

Even in the case context, between Wordsmith and Mainly Books, there are various aspects of Human Resource Management practices which are being very different between the entities. In this section of the report, the focus is upon the key factors of human resource management factors that are being different in both the organizations.

2.1       Workforce Management

Workforce is an important asset for an organization, and if the human resource management and development is not effectively planned by the organizations, then it might become very challenging for the organization to ensure effective business process management. For any organization, having a right kind of combination is very important in terms of optimum utilization of resources.  Depending on the need analysis, the companies can choose to have some full-time employees, some part-time employees and also few in the manner of contract period staff, and it will help the company in having a balanced approach and also might not burden the company during the lean cycles of business.

In the case of Wordsmith, it has been rightly planned with the ratio of full-time, part-time and the contract staff, having around 600 staff the company was able to maintain more than 30 outlets, whereas in the case Mainly Books for a than half of the stores size of Wordsmith, they were maintaining more than 225 employees and majority of them being full time staff. This depicts the critical fact that unless the companies have an focused approach on the demand analysis, it could lead to more complications. In the case of Mainly Books, it is evident that because of so many full-time employees, the operations cost of the organization is being very high. The HR department of the organization should have been strategically worked out the ways to reduce the cost on human resource management, but failing to have resulted in the burden of management costs on human resources.

2.2       Core Functions

Human resource department in an organization plays a vital role in increasing the organizational efficiency and the overall performance. If the right kind of people are employed and the organizational work culture is maintained in a positive manner, train the resources, and ensure that the employee engagement, performance reviews and other key aspects are handled effectively, then the companies can have strong workforce that could support in the overall organizational development.

In the case of Wordsmith, the company has maintained effective HR information systems and policies, whereas in the case of Mainly Books, the records which are very essential pertaining to the employee information has not been maintained effectively, and rather the HR function was not being handled as a different department. The managers of the outlets have been given charge of recruiting and the payroll functions have been outsourced to the third parties. Though this policy could work to certain extent to the company which is with limited size of operations, still it is very essential that the companies have some kind information systems on the employees for the records and analysis. The aspect of making the store managers in-charge of recruitments could provide costly in the long term. There could be various issues like biased approach, or some kind of miss-representation of facts or even in terms of having a unified approach of selection process might not be effectively implemented in such cases.

2.3       HR as a strategic Role

There are many changes that are taking place in terms of human resource management and development. Various innovative techniques, tools and trends are adapted by the organizations in order to attract the talented workforce, retaining such efficient workforce. However the issue of concern is that even today, there are various companies which are looking at HR only as a department to handle the routine activities related to personnel departments, whereas few organizations are realizing the importance of HR as a strategic role in the organizational development and the vision for the future.

In  one of the research study report that has been written by Sean Graber, on how the companies are perceiving the issue of HR role, the author states that despite the fact that majority of the CEOs around the world look at the human capital issues as priority issue, still they certainly do not give importance to the HR functions. In the report, the author quotes the PwC study which emphasize that only 34% of have responded that the HR departments are well prepared to capitalize on trends which are emerging in the current scenario.

This scenario is reflected even in the case of Wordsmith, where the CEO Alan admits to Gemma, about the need and importance of HR involvement in strategic discussions, and how it was ignored. However when the importance of the HR as strategic role has been identified it could be provide potential solution to the organization.

In an emphasis of the need for effective HR management, Sean Graber supports describes that “By reorganizing HR activities along the lines of the service delivery model, companies can free their cost-focused services to provide excellent support without having to grapple with illusions of strategic grandeur. And they can empower the truly strategic services — talent acquisition and learning and development — to create value without having to view every decision through a cost-cutting lens” (Graber, 2014)

This emphasize the fact that there is need for strategic approach from the organization toward handling the issues pertaining to role of HR management in the case of Mainly Books, reducing the full-time work force, adapting right kind of strategies for managing the overload on the HR department of Wordsmith and also in having right kind of hiring for new online stores that are planned by Wordsmith.

3.0       Effective Strategies to Implement

Wordsmith has certain factors which are being its strength like the HR manager being proactive in terms of envisaging the challenges that could come up from acquiring the Mainly Books as the entity has the issue of excess staff for which some sort of corrective measure is to be taken up and the issue of lack of employee information systems might make it little challenging in terms of analyzing the performance of staff of the organization. Also there are few practices of mainly books like the outsourcing of payroll activities if can be handled by the company could be very resourceful for the HR department of Wordsmith in terms of having more strategic role than working on routine activities and tasks.

Andrew F. Giffin, in his research report states that “Unfortunately, many mergers and acquisitions fail to meet their objectives, which are typically to accelerate growth, cut costs, increase market share or take advantage of other synergies” and this emphasize the fact that the right practices from the divisions has to be taken in to consideration from both the entities and also from the other global practices and adapt them for the development of the organization. (Giffin & Jeffrey A. Schmidt, 2002)

There are few key aspects like reducing the workforce, adapting some global practices towards planning the HR process for the organization, configuring the information systems and the issue of choosing or not choosing the out-sourcing models for the administrative HR functions. In the following section of this report, the possible alternatives that could be potential solution for the HR department of Wordsmith in handling the new entity development, has been discussed in detail.

3.1       Legal issues in Redundancy Process

Globally there are many companies who encounter this scenario of looking at reducing the workforce for one or many reasons. In the case context of Wordsmith, the way they have been handling the demand efficiently by having the combination of Full-time employees, part-timers and the contract staff, even in the case of Mainly books also have to adapt the same process. When the downsizing exercises in the case of workforce from Mainly books have to be taken up, there are various aspects like legal factors that have to be taken in to consideration.

Alan the CEO of Wordsmith is pro towards redundancy process by removing the people who are close to retirement, and this could be an effective manner in which the downsizing can be initiated. It is a feasible approach, however the crux is that, one has to take in to account the kind of experience these staff carry with them. Might be that if all the senior staffs are removed from the team, the team might lose the balance in experience part and also it is very essential that the company adapts the legal process, laws and compliances.

In view of the redundancy managing acts and laws of the land, it can be stated that Wordsmith should look at evaluating the possibility and the option of training the staff towards the requirements of the online stores and could shift some staff to the new development and this can be beneficial for the organization. (Dudley, 2014). If the management has to ensure that they remove the workforce, then the company should follow the policies and compliances under the Fair Work Act 2009 (Cth) under the sections of 119, 139, 388, 389, there are various clauses under which the employer has to file the records which depicts that there is no need of that particular work to be carried out by anyone. (Redundancy)

3.2       Information Systems Management

The Information systems should configure data related to the employees from all key aspects like the personal profile, the work experience of the resources, the nature of association, and the routine aspects like the payroll related data, performance inputs. The reports which are generated from the configuration should be able to help the team in taking decisions on the resources that could be chosen for training, the group that should be considered for redundancy or deployment in other areas. Unless the systems have the right kind of inputs from the existing data, it might be challenging. However the workforce data in terms of evaluating the performance, the tenure of association with the company, the outcome of systems has to be taken in to consideration which could help in adapting right strategies towards managing the workforce for both outlets and also for the new online stores.

 

3.3       HR Planning Process and Approach

Having a qualitative approach could be very much effective for the existing scenario of Wordsmith, where the current process of maintaining the combinational workforce is delivering the results, the organization should focus on similar lines even after the case of acquiring of Mainly books. Having an effective strategic approach towards handling the work culture, and having a well-defined HR process could ease out many issues pertaining to the challenges of handling the workforce. (Sutanto, 2000). By adapting the qualitative approach, it will be easier for the organization in determining the number of resources required and the minimum acceptable qualities that are essential, and this will enable the HR department have a right kind of approach towards maintaining the adequate workforce to carry out the business process smoothly.

3.4       Options on Outsourcing

In view of the case context and the scenario of developments like the plans for new online stores and developing the outlet presence by acquiring  Mainly Books, it is very evident that the workload over management and the HR departments shall go high, and keeping in view the changing dynamics and the need for the HR department to have strategic role in the business functions, it is very essential that the primary focus of the HR department should be on strategic development rather than routine functions like Payrolls and the Attendance tracking etc, hence it can be outsourced to the companies who take it as a core function. By outsourcing the administrative process, the key team in the department can reduce significant cost on resources used for those works and also can utilize their services for other developmental activities like quality training, process management, employee engagement etc. Hence it is recommended that the outsourcing of the administrative activities should be considered.

4.0       Conclusion

In precise, it can be stated that for an organization to have an overall performance and development, it is very essential that the HR department should involve at the strategic level rather than focusing only on routine tasks. It is also important that when Wordsmith is aiming at the acquiring of Mainly Books, having the role of HR in the strategic approach is very essential, as the human capital is the top priority for the success of any organization. Unless the human resources related issues are identified early and the strategies are planned for mitigating any kind of challenges it could be very complex for the organizations to handle the workforce related issues.

5.0       References

Dudley, B. (2014, Sep 11). Avoiding redundancies: redeployment and contractor use. Retrieved Dec 23, 2014, from workplacelawandstrategy.com: http://www.workplacelawandstrategy.com.au/2014/09/avoiding-redundancies-redeployment-and-contractor-use/

Giffin, A. F., & Jeffrey A. Schmidt. (2002). Why HR Can Make or Break Your M&A. IMAA, 1-9.

Graber, S. (2014). It’s Not HR’s Job to Be Strategic. Harvard Business Reveiw.

Lindquist, K. (2007). HR’s role in mergers and acquisitions. Strategic HR Review.

Redundancy. (n.d.). Retrieved Dec 23, 2014, from Fairwork Ombudsman: http://www.fairwork.gov.au/Ending-employment/redundancy

Sutanto, E. M. (2000). Forecasting: The Key to Successful Human Resource Management. Jurnal Manajemen & Kewirausahaan, 1-8.

 

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