International Human Resource Management Regarding Mergers and Acquisitions - Essay Example

International Human Resource Management Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Name Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Course Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Instructor Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 23rd January, 2012. Introduction In the global era, mergers and acquisitions continue to be an important part and puzzle of an organization in light of the organization’s gain of growth and developing strategies for sustainability and competitiveness in the global arena among other reasons (Greenspan n.d.). The term mergers and acquisitions are terms that are generally used interchangeably but in this paper, the term M&A will be used to refer to two firms syndicate to form a single legal entity or the target company changing its path or some parts of the firm to change its belonging to be a unit of the firm conducting the acquisition (acquiring firm). M & A are sensitive issues with extant literature indicating that in most cases, mergers and acquisitions especially in cross borders do not succeed. However, there are various stages which when followed carefully can lead to the eventual success of M & A especially in cross borders. Aerolineas Argentinas, is an Argentinian company that seeks a joint venture with an Australian company, Qantas Airways Limited and which these two companies are to form the basis of our report on HRM regarding Mergers and Acquisitions. Pre - M&A phase While many companies seeking to form M & A primarily centers on the assets of the two companies, for instance the finances and the organization’s systems, soft assets of the two organizations also need to be focused on. Organizations need to be on the lookout for the soft assets of the companies for they too are an integral part in the success of the mergers and acquisition. Aerolineas Argentinas is an Argentinian company while Qantas Airways Limited is an Australian company for which they are to form the joint venture and hence follow the steps of HRM in M & A. Therefore, the first step is the identification of people related issues. Prior to the joint venture between the two companies, the employees have to be communicated to in advance and informed of the merger and acquisition between the two organizations. For instance, Aerolineas Argentinas having employees primarily drawn from their nation and now seeking a joint venture with an Australian airways company, the employees are to be informed of the process of the merger and whether they are to be retained by the acquiring company which is Qantas. The two organizations forming the joint venture also need to communicate to other organization stakeholders for instance; the customers, partners and stakeholders of the organization for poor communication of the joint venture between the two organizations can degrade the morale of the employees and lead to customers losing their loyalty to the organizations. Hence, the aims and objectives of why the companies are to form a joint venture need to be discussed lest poor communication turns sours for the two companies (Angwin 2007). The two companies are also to communicate on the executive integration between the two HRs and the way the employees are to adapt to the changes. It is also crucial to provide the stakeholders with the change management that are ongoing between the two companies for instance, further training that the employees may be required to undertake, motivation of the employees when the joint venture eventually is sealed, the way the systems are to be integrated, the job security of the employees among other issues that are to be discussed in the pre - deal stage. Related integration activities between the two organizations are also to be discussed when dealing with people related issues in addition to the ethics and the norms that the employees are to adopt once the joint venture is finalized. The communication process therefore should be used as a gate way, where the employees after orientation of the joint venture between the two companies sees the joint venture as a means of furthering the organizations goals and objectives rather than as a means of inhibiting the organization’s goals (Angwin 2007). Second step in the pre-M&A phase is the planning for due diligence. Due diligence is one important concept in regard to M&A process. Due diligence is the process of determining the net worth of the deal. The deal’s net worth is determined by evaluating the price on the M&A concern. In this step of the phase, both firms should be able to acquire a good plan and a scheme in evaluating the benefits and risks likely to accrue. The firm being acquired, Aerolineas Argentinas should take keen interest in the evaluation of the acquisition deal’s value while Qantas Airways (the acquiring firm) should be bothered on the extent of marginal value that the deal will add to the company. This will help the two companies minimize and escape financial risks associated with M&A and maximize the shareholders’ value of the two in regard to the transaction (Greenspan n.d.). In Company law of Australia – The Corporations Act 2011, directors of both companies will be liable for breach of their fiduciary duty of care if they happen not perform none or inadequate due diligence prior to acquisition. Due diligence should cover on matters pertaining to financial records, net book value, intellectual property, securities and good will among other important values of the firm being acquired. The Pre - M&A phase also involves working out the organizational/cultural fit. Australia is a country that is made up of the multicultural ethnic makeup of the Asian – Australian people and hence Qantas Airlines company ethical standards and the norms draws from the rich cultural diversity of the country. On the other hand, Aerolineas Argentinas is an Argentine company and hence the cultural practices and the norms of the organization draw from the traditions of the Argentines. In forming an organization/cultural outfit, a mutual ground between the two cultures have to be reached and therefore the joint venture between the two organizations needs to come up with an overarching code of conduct for all the employees. It is important to note that culture dissonance can lead to the failure of the joint venture for culture dissonance between the two organization forming the joint venture will create resistance to change that is proportional to the degree of the change created by forming the joint venture (Barmeyer & Mayrhofer 2008). After the pre M & A stage, the initiative of the joint venture needs to be realized and hence the integration process. In the integration process, the management is supposed to develop employee culture – sensitive communication strategy (Barmeyer & Mayrhofer 2008). Though in the pre M & A phase, there was communication to employee about the joint venture, communication process should continue to the integration process and this means that though the management informed the employees about the joint venture, the communication process should continue to be a two way in such a way that the management of the joint venture should follow the employees and seek their sentiments in regard to the joint venture. Therefore, even after the companies merge, the management of the joint venture should constantly keep in touch with the employees for instance through interviews and not only through emails and organizational memos among other communications strategies of the organization. Interviews will make the organization aware of the employee’s responses to the joint venture. Culture – sensitive communication strategies allows the organization to keep in touch with the success of the communication initiatives of the joint venture and also to take appropriate actions where the communication strategy of the joint venture has failed (Barmeyer & Mayrhofer 2008). The second phase in M&A is the due diligence stage. Due diligence phase stand out as one essential phase in M&A. The concept behind the phrase is about proper and adequate understanding of the two parties. Both parties are especially from different countries and hence have different cultures. This does not exclude firms from the same country. Qantas Airways and Aerolineas Argentinas are no exemption especially by the fact that they are not from the same country. Therefore, it is true to say that the two have distinct cultures. In due diligence phase, the directors of the two will work to come out with a defined link or understanding to the cultures from each in order to achieve the set goals (Barmeyer & Mayrhofer 2008). Due diligence phase facilitates or helps in ensuring that during the merger, there should be no occurrence of a culture clash. Merging of the two cultures has never been easy thus in case, the two firms will come up with a culture from the two that will be the best fit to work with. Due diligence phase will work to have a new shared set of leadership styles, information and decision process, operating and management procedures, employees and customer’s welfare, incentive schemes and perception and expectations from the two firms that will be uniform and agreed on (Barmeyer & Mayrhofer 2008). The integration planning phase involves planning and leading integration efforts in such a way that the practices between the two organizations that had been successful are adopted and these practices are adopted throughout the joint venture. This will have the effects of reducing employee defections from the organization in such a way that the employees have something to identify with in the company through the adoption of best practices in the event that the best practice to be adopted throughout the joint venture is familiar to the employees of either company. It is advisable that in the planning and leading integration efforts, the human resource is to take the center stage in the integration process for this field is the one that is crucial and hence HR should take center stage. In the development of a new strategy for the new entity, the process requires that the combined efforts of the two organizations forming the joint venture are recognized. For instance, Qantas Airways has products that are distinct to it and so does Aerolineas Argentinas, and hence the products to be offered by the joint venture needs to recognize the products of the joint venture so that customers can feel at ease when buying the products of the joint venture. The development of the new strategy for the joint venture needs to come up with leverage of the joint venture products in such a way that the two organizations customers are retained without alienation of any company’s customers. The joint venture HRM also needs to ensure that the companies forming the joint venture have successfully adapted to the changes. Cross border joint ventures brings about the integration of different organizational cultures practices and norms. The joint venture company has to deal with diversification in regard to the pool of employees from different backgrounds, the two organizations diverse ways of doing business among other changes. It is therefore crucial especially to the HRM that there is the integration process and training that the employees undertake so that they can deal with the changes effectively. With all said and done in regard to the joint venture between Aerolineas Argentinas and Qantas Airlines, defining an organizational staffing plan is an important step for any organization. The HRM needs to identify the way the joint venture is to be staffed for concerns are to emerge in regard to the various organization posts. For instance, an accountant in one organization may feel superior to the accountant of the other organization in as far as duties and responsibilities of the joint venture are concerned. Hence such issues need to be discussed in length to also avoid conflicts that may arise. In conclusion, from the above outlined processes of M & A, undisputed evidence clearly shows that HR professionals are a stepping stone in joint ventures. Their role cannot be overlooked if the joint venture is to succeed (Angwin 2007). Bibliography Angwin, D. 2007. Motive archetypes in mergers and acquisitions (M&A): The implications of a configurationally approach to performance. Advances in Mergers and Acquisitions. Vol. 6: 77-105. Barmeyer, C., Mayrhofer, U. 2008. The contribution of intercultural management to the success of international mergers and acquisitions: An analysis of the EADS group. International Business Review. Article in press. Greenspan, D. n.d. HR & M & A: 10 Critical Success Factors for Planning & Implementation. California, CoMarketing Partners. Retrieved on 23rd January 2012, Retrieved from, http://www.globalhrnews.com/story.asp?sid=35 Read More