mergers and acquisitions - an opportunity

Economic growth cycles often triggers need for re-alignment of industry in many segments. companies exploit opportunities within those re-alignments to strengthen their presence. mergers and acquisitions is a usual strategy. benefits like economic of scales, synergy, operating economies are cited. underlying intent will be growth and profitability always. it could be for consolidation of market segments or even for diversifying the risks with strength. The latter often with an ulterior motive to limit severity of competition by increasing market power. Because of these tendencies, primal it may be, the legal safe guards and governance systems are also largely around financials, market, and resource allocations and at times extending to shareholder rights. For these reasons, the primary law remained to be Companies Act 1956 for a long time. The recent Competition law of 2002, also aims to regulate such ulterior motives mentioned above. FEMA and SEBI's interventions are largely for shareholder rights and investor obligations from a governance perspective. The missing link continues to be on statutes governing HR of the affected companies. The limited scope for intervention provided under ID Act, 1947 has limitations once such a merger or acquisition gets the High Court's stamp of approval. The labour machineries within the ID Act will be forced to recognise and comply with High Court's order. In fact the Industry HR professionals have a greater role to play in such events where a dedicated third party advisor will be essential. HR strategies need to tailored for eg whether it is a vertical, horizontal or conglomerate merger or acquisition. on the other hand in case of an amalgamation, a more synergistic approach maybe needed. Similarly take overs, especially hostile, may need to face equally hostile employee sentiments direct as well as indirect. Conventional hr management exposure and experience becomes irrelevant or challenging for screening lay offs, consolidating functions/departments, weeding out peripheral product and service lines, integrating new talent, streamlining work schedules, defining meaning of 'employee welfare', or merging different payment cycles, shift schedules, integrating cultures, whether it is uniforms, canteen cuisine, children education policy or maternity leave and other absence practices, consolidating conflicting wage elements, or even in deciding which CEO to remain ultimately..!

Lay off: what is in it for long term?

A dilemma for HR ; especially when industry growth goes into dip or remains stagnant. staffing needs are seen as a short term liability rather than a long term asset. While one can understand the need for exercising constraints on operating expenses side, eg on perquisites and other employee related costs, viewing 'employees' themselves as costs, in short term, carry longer term opex risk. To list: talent search, attraction and development costs nowadays far outweigh basic salary costs during recession; especially during growth/revival phase. One cannot escape from those costs, at higher rates, once the revival mode sets in. Research studies show that attrition rate falls when industry growth stagnates or product price margins falls. eg FMCG companies. The inverse correlation with salary growth does not happen when industry is not competitive. Hence reducing operating costs during a recession by tightening wage bills will not increase attrition levels. On the other hand the advantages are manifold for long term operating cost controls. It will help avoid altogether the excessive hiring costs later. Recession phase is a great opportunity to review internal policies and practices, without compromising basic welfare facilities for employees and assuring them job security. That will well turn out to a small price for the huge gains later when industry turn cycles. HR need to be farsighted when Industry faces a rough patch especially in industries where talent needs remain stable over long periods of business cycles. Exception is in case of IT companies where companies use lay-off as a strategy to enrich talent mix during recession, keeping an eye on future talent needs.