MERGERS & ACQUISITIONS BY MULTINATIONALS OF INDIAN FIRMS MANAGING CULTURE TRANSFORMATION IN INDIAN COMPANIES Mergers and acquisitions (M&A) have become an integral part of most corporate growth strategies, and a major portion of this M&A process now spans national borders. The success of this activity depends not only on the operations integration but also on the cultural integration within the firms involved. The earlier these cultural issues are considered, the greater the likelihood of a positive outcome. Cultural integration process begins by setting a vision for the new organization and revised future targets. In order to accomplish this companies should develop a plan for merging. A merger team can be formed that works through to establish a new set of shared values and thus a joint definition of the new culture. There should be a need to understand of how M&A activity fits with the culture and growth strategy of the organization. M&A shouldn’t be considered in isolation but within the broader context of the evolution of the organization. The level of clarity and alignment that exists in the Indian firm regarding mission and strategy, customer needs, internal processes, and expected behaviors and practices must be assessed properly. It can also be beneficial in identifying the cultural traits that the multinational organization would like to retain or develop moving forward so that it can fit within their growth strategy. The ‘due diligence’ period is an opportune time to investigate the culture of the target and identify similarities and differences between the two firms. During this period, a cultural profile of the company being merged or acquired into can be developed. Organizational members from the company are asked a series of questions regarding their way of doing business such as leadership styles, communication, teamwork, performance expectations, pace of decision-making, flexibility, customer focus and innovation. This information can then be used to assess the smoothness of cultural integration with the prospective partner, and identify areas for re-evaluation. Once the cultural profile of the partner has been determined consideration is then given to the similarities and differences with regards performance review systems, performance criteria, compensation systems and other HR practices. With knowledge of these aspects both parties can discuss the proposed nature of the cultural integration. The ‘merger integration team’ can then focus on developing a comprehensive human resources and cultural integration plan. The plan should envisage the organizational reporting relationships, compensation and employee benefits, the new vision, mission and values and a communication plan to ensure effective integration of the two groups. The most important aspect of this is the effectiveness of the communication plan. There are numerous research studies to indicate that the most common reason why organizational mergers so often fail is lack of attention by the top leaders to the cultural dynamics involved in this change such as relationships, identity, role of the senior team. Once the operational plans are put into place and rolled out, it is thereafter so often assumed that the people and the culture will follow, and the old cultures will blend together with little effort or attention which is rarely the case. From the beginning it is important to communicate the benefits of the merger. People are resentful of the unknown and will react in a number of ways. Senior managers must therefore make themselves visible and accessible to all employees and openly discuss as much information as can be made available, thus minimizing the impact of rumours. Leadership is the single most powerful factor in the success of a merger or acquisition. Change brings with it ambiguity throughout the whole organization. Accordingly, it is suggested that the senior leadership in any organization should be thinking about leadership and the individual, leadership within teams or divisions and leadership and organizational culture. Each of the forgoing has their own identity, boundaries, values and limitations, and unless these are understood and addressed in order to create alignment, fractures will soon appear. Weak leadership combined with a controlling attitude, lack of clear vision and direction is a recipe for failure. Hence, in this process of change management, a deep understanding of how change works is essential. The impact of an intensive change programme is directly proportional to the effect that it has on individuals, teams, divisions and the organizations involved. It is, in varying degrees, unsettling, creates doubt, suspicion, distraction, self-interest and pre-occupation which combine to create widespread anxiety. To alleviate the repercussions of these effects/feelings, the role of HR becomes very important. A recent study found that organizations that were strongly HR led, anticipated and overcame many of the integration stumbling blocks that beset other mergers. A gap inevitably remains between HR and strategy albeit this could be set to change. A global survey on people and business challenges found that while 63% of organizations rarely or never consult their senior HR team on mergers or acquisitions (before or after the deal), within the next 3-5 years 82% of the senior leaders surveyed expect HR to be perceived as a strategic, value added function and not just the personnel cost-centre. Additionally, of the 531 senior business executives consulted, leadership development was close to top of their agenda of people concerns (75%), with only the creation of a high performance culture (79%) above it. With the above discussion, it is clear that any M&A brings along with it, a lot of challenges in terms of cultural integration between the two entities involved in the process. Hence to manage this change, the incoming firm should try to match their culture and growth strategy with that of the firm being merged or acquired. They should also try to gauge their way of doing the business (customer centricity, flexibility etc). Due to the state of confusion and unknown future direction to follow, the employees need to guided by the top management. Besides, a strongly led HR team helps in this change management process and paves a way for a successful merger or acquisition. Team Cumulonimbus NITIE Mumbai
Posted on: Tue, 06 Aug 2013 16:33:28 +0000