Mergers and Acquisitions
In the past, the decision criteria for mergers and
acquisitions were typically based on considerations such as the strategic fit
of the merged organizations, financial standards, and operational tests.
Mergers and acquisitions were often conducted without much regard for the human
resource issues that would be faced when the organizations were joined. As a
result, several undesirable effects on the organizations’ human resources
commonly occurred. Nonetheless, competitive conditions favor mergers and
acquisitions, and they remain a frequent occurrence. Examples of alliances
among some of the largest companies include the following: Honeywell and Allied
Signal, British Petroleum and Amoco, Exxon and Mobil, Lockheed and Martin,
Boeing and McDonnell Douglas, SBC and Pacific Telesis, America Online and Time
Warner, Burlington Northern and Santa Fe, Union Pacific and Southern Pacific,
Daimler-Benz and Chrysler, Ford and Volvo, and Bank of America and Nations
Bank.
Layoffs often accompany mergers or acquisitions, mainly if
the two organizations are from the same industry. In addition to layoffs
related to redundancies, top managers of acquiring firms may terminate some
competent employees because they do not fit in with the new culture of the
merged organization or because their loyalty to the new management may be
suspect. The desire for a good fit with the cultural objectives of the new
organization and loyalty is understandable. However, the depletion of the stock
of human resources deserves serious consideration, just as with physical
resources. Unfortunately, the way that mergers and acquisitions have been
carried out has often conveyed a lack of concern for human resources. A sense
of this disregard is revealed in the following observation:
Post combination integration strategies vary in tactics,
some resemble “marriage & love,’ but in reality, collaborative mergers are
much more hostile in implementing the current decision and financial takeovers.
As a cursory scan of virtually any newspaper or favorite business magazine readily
reveals, the simple fact is that the latter is much more common than the
former.
The cumulative effects of these developments often cause
employee morale and loyalty to decline, and feelings of betrayal may develop.
Nonetheless, such adverse consequences are not inevitable. A few companies,
such as Cisco Systems, which has made over 50 acquisitions
(https://www.cisco.com/c/en/us/about/corporate-strategy-office/acquisitions/acquisitions-list-
years.html), are very adept at handling the human resource issues associated
with these actions. An example of one of Cisco’s practices is illustrative. At
Cisco Systems, no one from an acquired firm is laid off without the personal
approval of Cisco’s CEO as well as the CEO of the firm that was received.
Question 1:
Investigate the approach that Cisco Systems has used in its
many successful acquisitions. What are some of the human resource practices
that have made its purchases successful?
Question 2:
If human resources are a significant source of competitive
advantage and the key determinant of an organization’s ability to pursue a
given strategy, why have the human resource aspects of mergers and acquisitions
been ignored or handled poorly in so many instances in the past?
Question 3:
Interview someone who has been through a merger or
acquisition. Find out how they felt like an employee. Determine how they and
their coworkers were affected. Ask about the effects on productivity, loyalty,
and morale. Find out what human resource practices were used and obtain their
evaluations of what was helpful or harmful.
