The Hr Issues During The Merger

Published Date: 02 Nov 2017

The demand for petrochemicals has increased and many skeptics have been silenced, considering the recent use of petrochemicals in various sectors of the country. The following are the sectors in which demand and future of petrochemicals are heading towards positive growth:

Healthcare

Food preservation

Hardware

Transportation

Equipments in office

Foreign investments are also being made in the petrochemical industry of India enabling great future prospects in the foreign trade of petrochemicals in India. With the rise in demand for petrochemicals in India, many barriers to the growth of petrochemicals in India have been decreasing during last few years and currently India is keen on investments in foreign technology for the manufacturing of various petrochemical products.

The following products are in high demand:

Polyvinyl chloride

Synthetic fibers and rubber

Jet fuel like, kerosene-fuel type

Polystyrene

The leaders in this field are Reliance Industries and Indian Petrochemicals Corporation Limited. Both have contributed as much as 65% share in the production of petrochemical crackers. After these, Haldia Petrochemicals and Gas Authority of India deserve to be mentioned. Globally, there is high demand for Indian Petrochemicals and the benefits have been enjoyed by the domestic market since 2004.

However, the rising demands for petrochemicals could have been better if the following hindrances could be taken care of:

The pricing of petrochemicals

Increase in use of recycled plastic.

COMPANY PROFILE

The Reliance Group, was founded by Mr. Dhirubhai Ambani (1932-2002),The company is the India's largest private sector company, with businesses it’s in the energy and materials value chain. RELIANCE INDUSTRIES LTD is a Fortune Global 500 company.

The evolution and growth of Reliance was the backward integration. Starting with textiles Reliance used the strategy of backward vertical integration in fibre intermediates, plastics, petrochemicals, refining and oil and gas and production.

Indian Petrochemicals Corporation Limited ( IPCL) - a petrochemicals company in India. It was established on March 22, 1969,to promote and encourage the use of plastics in India. Its business consists of polymers, solvents, surfactants, industrial chemicals, catalysts, adsorbents, and polyesters.

In June 2002, the Government of India divested 26% of IPCL equity shares in favour of Reliance Petro investments Limited, Reliance Group Company. RPIL acquired an additional 20% equity shares through a cash offer in terms of SEBI.

MERGER AND ACQUISITION

7

Merger

Acquisition

THE HR ISSUES DURING THE MERGER AND ACQUISITION:

6

Retention of key employees

Compliance with applicable laws

Alignment with compensation and benefits

Cultural fit

Communication

Motivation

ROLE OF HUMAN RESOURCE DEPARTMENT

ORIENTATION:

Orientation means providing new employees with basic information about the employer. It integrates the new employee into your organization and helps in motivation and retention .An excellent orientation will enable a new employee to be successful by reducing the nervousness of the employee. Sharing important organizational information and starting a process of learning about the organization’s mission and work.

SOCIALIZATION:

This is broadly defined as "a process in which an individual receives the attitudes, behaviors needed to successfully involve you as an organizational member."

The socialization process includes three phases:

1. Anticipatory socialization:

Through interacting with representatives of the company the new hires develop expectations about the company and the job proceeding to organizational entry.

2. Encounter:

When new employees start a new work, they begin to learn about job tasks undertaken there and receive training. Managers put their influence by helping new employees understand their key roles and duties and obligations. Also, by accepting the stresses and issues that newcomers knowledge, managers can help develop a high-quality work relationship with new joiners.

3. Settling in:

The new hires begin to feel relaxed with their job demanding and new social relationships. They pay attention in the company’s assessment of their performance and in learning about latent career opportunities within the company.

TRAINING:

Human Resource representatives are in charge of organization development, the management of policies and procedures, the hiring of qualified employees and this includes the training and development of the workforce. Planning with upper-level managers within an organization, a HR representative evaluates the need for staff training. Following the initial assessment, a training plan is developed. This may include individual or group training sessions.

CULTURE:

The culture of the organization will be impacted, and this may affect negatively the self-confidence of your employees. The ambiguity can lead good employees to look for employment with different competitors. Either situation can lead to disturbance in the workforce.

The majority of people are naturally opposed to having their normal routines disrupted. Here is where HR practitioners can and should play an essential role in the process of organizational change. In too many unfortunate cases, senior management does not always have an accurate "feel" of their own organization and employees, but HR practitioners do.

They are the ones that have ears on the ground and fingers on the pulse of the organization, they are aware of the undercurrents rumbling through the office grapevine. HR is usually the first to hear about complaints against particular policies or managers, as well as all sorts of information via exit interviews and employee assessments.HR practitioners who are in touch with their employees are therefore in the best position to advise senior management about potential problems or employee resistance in the face of impending change.

By the same token, HR can also serve as a bridge between senior management and employees, establishing a clear and open channel of communication between both sides, and actively championing a culture of continuous employee engagement is key in dealing with the feelings of negativity, and ensuring that everyone in the company is engaged and on the same page during times of organizational change.

STRESS MANAGEMENT:

It is a lawful requirement for the Human resource managers to "detect, treat and rehabilitate" the employees who experience the stress at workplace. Usually different departments are responsible towards managing the stress at workplace, but a Human Resource manager plays a key role in handling stress.

This department makes sure that the procedures and policies are formulated and implemented precisely to manage work related stress. The vital roles and responsibilities of a Human Resource manager in stress management include:

To understand what work related stress is, what are the causes that leads to it and how this can be managed and prevented.

To communicate and connect with the employees working there regarding this issue and raising awareness in the way of functioning with trade unions or other related aspects.

To take on effective Management Standards or other viewpoint towards identifying the stress level in the organization and what solutions can be implemented to improve from the current situation.

To work with the other departments which are there in the organization, including Health and Safety, in formulating and implementing solutions that have been recognized by the employees.

To evaluate and monitor stress management solutions along with procedures and policies.

To work with other departments and support line managers to avoid and handle employees experiencing stress and to help them come back to work.

To identify and widen other initiatives and policies that can endorse well being of the employees.

COMMUNICATION:

Human resources departments provide or support announcements to employees regarding restructuring. Human resources staff is typically present when employees are informed of layoffs or permanent downsizing related to restructuring. Changes in employment policies, organizational structure, workforce, location and job descriptions are announced to employees by human resources and management.

Human resources departments also calculate changes in compensation and benefits resulting from reorganization. Organizations rely on human resources to provide a smooth transition during reorganization, while retaining desired employees and integrating new employees into the new organizational plan.

RETENTION:

The Human Resource team plays a vital role in employee retention. Their roles are:

Whenever an employee resigns from his present assignments, it is the responsibility of the Human Resource to interfere instantly to find out the reasons which provoked the employee to resign. The human resource team must investigate into it.

There can be thousands of reasons when an employee leaves his current job. The important one being difference with the superiors, less salary, lack of growth, so on.

It is the responsibility of the HR manager to sit with the employee and talk about the various issues face to face. Understand his troubles faced. Keep in mind the Human Resource should not focus on exit interviews, rather more importance should be on retaining the employees.

Hiring is a monotonous process and it is really very hard to recruit the right applicant and train him once again.

It is really necessary for the organization to retain the key employees who are really vital for the organization. If they leave the organization and join the competitors; the organization would face a great loss. If the employee is discontented with his team leader, try to move him to a new team. If the employee feels his income is not right, try to provide him a hike but make you don’t end up upsetting others.

The human resource department must conduct motivational actions at the workplace. Organize various internal and external trainings which educate the employees to learn a little additional apart from their routine work. Make them take part in extracurricular activities important for their on the whole development. Encourage them to cooperate with each other so that the ease level increases.

The Human Resource must initiate various encouragement programs for the top performers to motivate them. In this way the employees feel valuable for the organization. The employees showing good performance should be awarded with cash prizes, perks and certificates and awards to make the individual stand apart from the crowd. Send a mail wishing the employees on their birthdays or congratulating them when they perform exceptionally well is a good motivation.

One should arrange a small bouquet for them as a gift from the organization’s side. In this way the employees feel emotionally involved to the organization and are unwilling to look for a change. A friendly atmosphere is vital for the employees to feel safe and protected. Make them take part in various management decisions making.

MOTIVATION:

Be sure to set to the side time for employees if they wish to talk about issues with the new merger, open deliberations usually prevent confusion about the roles and responsibilities. Recognize and reward the employees for their roles in managing and accepting change. Rewards need not bonuses, but can be small gifts, or recognition amongst peers.

Mergers can also be accompanied by layoffs. Employees should be informed of layoffs as soon as possible. Employees leaving the company should be treated with respect and given generous separation packages when possible. Surviving employees should be guaranteed of their value to the company. Managers should work with employed employees to set up clear development plans within the framework of the company's mission statement after the merger.

Communication

KEY ROLES

Socializing with the present culture

Acting as a change agent

Motivating employees

Overcoming the problems related to communication gap.

MERGER N ACQUISITION PROCESS

Following are the main phases in the M&A process:

Pre Deal

Due Diligence

Integration Planning

Implement Merger

Evaluate Merger

Pre Deal

The role of H.R during pre-deal phase is:

Spotting problems that may be unnoticed by other members of the management team

Assessing the people, organization and cultural fit

Educating executives about possible risks

Due Diligence

Following are the Human Resource responsibilities during the process:

The bottom line of the issues such as benefits and employee pay

Looking at the impact of learning and development

Advising on organization design and development and

Recruitment and retention in the integration process

Integration Process

Following are the H.R Responsibilities during the phase:

The employment relationship

Determining the compensation and benefits strategy

Determining the culture/vision of the new company

Contracts of employment

Performance management issues

Looking at talent ,commitment and leadership

Confirming people's expectations by retention, cost and cultural fit

Implementation

Following are the Human Resource Responsibilities during this phase:

Arrangement of HR policies and practices

Advising senior management on people issues

Reward schemes

Education and Training

Recruitment

Effective Communication

Stress management.

STAGES

The Pre-Merger Stage

1. Strategic Planning for an Organization:

Here the acquiring firm which plans to acquire a firm develops its mission and determines the type of merger or acquisition that can be undertaken and how it will achieve corporate strategies.

2. Team:

In the next stage the firm is mainly concerned with organization—creating a precise team to manage the M&A activity.

3. Searching:

In the third stage, searching for dormant companies to acquire and thoroughly investigating the merits of each .According to the results of Schweiger, the one of the most important factors in evaluating likely acquisitions were the aptitude and management values of the acquired top personnel and the talent of the acquired middle personnel.

4. Analysis and Offer:

Analysis and offer is the fourth stage, in which a main objective is to assess the ‘fit’ of the two firms. McCann and Gilkey (1988) identity three types of fit like financial, business, and the organizational fit that must all be present to make the merger or acquisition successful. For the purposes of this study, organizational fit, which includes people and two organizational cultures, is of primary importance, since it helps to decide how well the two firms can be incorporated.

Merger and Acquisition activity presents a set of challenge and is a stressful thing for the human resource managers in both acquired and acquiring organizations. The Merger and Acquisition activity is found to have rigorous force on the act of the employees. The Merger and Acquisition leads to stress on the employee, who is caused by the differences in HR practices, ambiguity in the environment, differences in organizational structure and cultural differences, changes in the administrative styles.

The organizational culture plays a vital role as because the managerial styles organizational practices and structures to a great extent are determined by the organizational culture. Every organization has a different set of beliefs, norms and value systems, which may collide due to the M&A. The exposure to a new culture due to the M&A hence leads to a psychological state which is called culture shock.

The employees have to accept an entirely new culture. This challenges the old organizational value system & practices leading to stressful conditions among the employees. A Research conducted has found that unlike cultures can produce feeling of unfriendliness and significant discomfort which can reduce the commitment, satisfaction and assistance on the part of the personnel. In case of cultural clash, the dominant culture may get first choice in the organization causing frustration, dissatisfaction and feelings of loss for the other employees. The employees of non-dominating culture get feelings of loss of identity linked with the acquired firm.

In definite cases like acquisition of a less profitable organization by the profitable one, it can direct to feelings of dominance difficult amongst the employees of the acquiring organization. But in case of unfriendliness in the culture the employees of two organizations may develop "we" vs. "them" attitude which may be harmful for the organizational growth.

The Merger and Acquisition activity turn away the focus of the employees from productive work to issues like, changes in designation, job security, working in new departments, career path and fear of working with newly made teams. The M&A activity conducted leads to the surplus manpower at times which needs to be downsized hence the first fear that occurs in the minds of employees are mainly related to security of their jobs.

The Merger and Acquisition activity also changes well defined career paths of the employees and future opportunities in the firm. Several employees when have to be relocated, assigned new tasks and assigned new activities; hence the personnel find themselves with changes in job profiles, designations and work teams. This puts an impact on the performance and efficiency of the employees.

The human resource systems differ across organizations due to the differences in the organizational culture, cultural differences. For illustration if the compensation provided in the acquired firm is smaller than the acquiring firm, the acquisition will raise the employee expectations of a possible increase in compensation which may not be practical. If the compensation level provided for employees in acquiring firm is lesser the employees may press to have an equal compensation. This difference in pay can de-motivate the employees.

The Post-Merger Stage

The last two stages are -transition and integration. These are the most complex and are surrounded by ambiguity. The transition stage is not managed properly, and as a result it is the stage most failures occur.

A Delicate Balance

Management of the transition stage requires a fragile balance between on condition that a stabilizing the influence and creating a climate for change. Uncertainty and anxiety, anger, frustration, psychological withdrawal and family disruptions are persistent during M&A activity. Those who voluntarily leave their company show that ambiguity leads the employees, early in the acquisition process.

Lack of confidence and Anxiety

Negative employee feelings and behavior are typical responses to threatening situations. For example, if employees are not aware of how they will be evaluated for the withholding decision, feelings of powerlessness will be high. Since information is generally scarce in the transition stage, the employee’s perceptions will be influenced predominately by rumor and speculation.

Jick and Greenhalgh found a positive correlation between job insecurity & resistance to the change Individuals faced with a threatening situation show strong attachment to beforehand learned behaviors, even if they are inappropriate.

Unanticipated Turnover

The predominance of negative attitudes caused by ambiguity often leads personnel to act on the worst situation and begin updating the resumes. The most valuable employee are those that the post-merger corporation cans least afford to lose—tend to be the earliest to leave the organization.

HR Interventions

Several authors have suggested how to decrease the incidence of counterproductive behaviors Preliminary interventions target emotional support, and may begin while negotiations are still happening. In this phase activities are focused on providing stability.

Other techniques are intended to create and maintain a positive environment for change by lessening the level of ambiguity and fostering realistic expectations for the future. Feelings of powerlessness among employees are reduced by educating them about how the risk to job security can be counteracted.

RESEARCH METHODOLOGY

1

METHODOLOGY:

A exploratory design was used to conduct this study.

The questionnaire which was given to employees included both close and open ended questions. This study covered only employees of organization.

RESEARCH OBJECTIVE:

To study the HR’s role in merger and acquisition at RIL ltd.

To study the impact of merger and acquisition on employees satisfaction level.

To study the impact of the culture towards the success of the organization.

Data Collection and Sampling:-

Sources of Data Collection

I) Primary Data Collection:

The primary data are those which are collected afresh and for the first time. Such data are original in character. The primary was collected by Questionnaire method.

II) Secondary data collection :

The secondary data are those which have already been collected by someone else. Thus such data is not originally collected rather obtained from published or unpublished sources.

The collection of the secondary data was done through internet.

Data Collection:

The questionnaire was administered to the employees working at Reliance LTD.

Sample size: 30 employees

Population size: 70 employees

Sampling Methods : A Random Sampling method, convenience sampling is used.

DATA ANALYSIS

DEPARTMENTS:

Departments

No. of respondents

HUMAN RESOURCES

7

FINANCE

9

OPERATIONS

6

MARKETING

8

TOTAL

30

ANALYSIS:

The pie chart depicts that more number of respondents are from the finance, marketing and the operation department.

1.To what extend the acquisition affected the H.R. activities of the company?

Categories

No. of respondents

Most

24

Somewhat

6

Least

0

Total

30

ANALYSIS:

The above pie chart shows that 80% of the respondents feel that the acquisition actually affected the HR activities.20% feel that it was not that much affected.

Due to the acquistion the HR’S role increased in the areas like blending the culture, motivating employees,etc.

2.Were the HR manger’s able to blend the employees of the acquired company with the new culture of a private company?

Categories

No. of respondents

Most

13

Somewhat

15

Least

2

Total

30

ANALYSIS:

The above pie chart shows that 50% respondents feel that the HR’s were able to blend the employees of the two companies but to some extend.

However 43% feel that the deparment was very much successful in blending the employees.though they were successful to some extent but dissatisfaction still prevailed among 7 % of the employees.

3.Were any Change programs conducted during the acquisition phase?

Categories

No. of respondents

Yes

24

No

6

Total

30

ANALYSIS:

The above pie chart shows that 80% respondents responded that change programs were conducted, to help the employess in easily adopting the changes.4.To what extend were the employees satisfied with the culture of present organization?

Categories

No. of respondents

Highly satisfied

2

Satisfied

6

Neutral

5

Dissatisfied

16

Highly Dissatisfied

1

Total

30

ANALYSIS:

The above pie chart shows that 53% of the respondents were dissatisfied with the culture of the organisation.As the public culture changed to the private culture,there was bound to be a change in culture.

5. According to you, which component of HR Policy was the most important to be worked on?

Components

Most Important

1

Important

2

Average

3

Less Important

4

Not

Important

5

Total

Compensation & Benefits

26

4

0

0

0

30

Hierarchy

0

0

15

12

3

30

Culture

19

8

3

0

0

30

Employee Retention

19

7

4

0

0

30

Employee Communication

6

17

7

0

0

30

ANALYSIS:

The above pie chart shows 87% of the respondents feel that the area compensation and benefits was most important to be worked upon as because compensation and benefits being the monetary incentive is the most imporatnt area.

ANALYSIS:

According to the responses it is drawn that hierarchy was not that important area.50% have rated its importance on the scale as average.

ANALYSIS:

63% respondents feel that culture was the most imporants area worked on duing the acquisition.This is because the blending the culture of a private and a public firm was the most challenging and imporatnt area,as it will lead to satisfaction of the employees. Only 10% feel that it is not that much imporatnt.

ANALYSIS:

The above pie chart shows 64% respondents think that employee retention was the most imporatnt area which was worked out,as the acquisition lead to increase in employee turnover and hence loss of key employees,which was possible to avoid only by working on the employee retension.

ANALYSIS:

The above pie chart shows only 57% respondents feel that employee communication was an imporatnt area to be worked on.This was because the more and more communication lead to more adjustment with the culture. Only 20% only have rated it as an important area

6.Were the HR manager’s successful in motivating the employees of the acquired firm?

Category

No.of respondents

Yes

19

No

11

Total

30

ANALYSIS:

The above pie chart depicts that 63%employees feel that they were motivated to work at Reliance.This motivation may be the result of good salary offered the ctc system or other programmes.

According to the survey the policies of thr motivation were the ctc salary structue, employee engagement ,training and the stress management programme.

7.During Acquisition, were any policies adopted related to Stress Management?

Category

No.of respondents

Yes

26

No

4

Total

30

ANALYSIS:

Above pie chart depicts that there were policies adopted related to stress management.These policies/programmes were like Meditation.The famous Doctor Mr Palan was apponited to educate about the stress management.

8.What methods company used to reduce the number of additional workforce?

Category

No. of respondents

Voluntary Retirement Services

24

Transfer

6

Lay off

0

Total

30

ANALYSIS:

The above pie chart shows that 80% respondents responded that VRS system was adopted to remove the additional staff.

20% responded that transfer method was adopted.

9. To what extend were you satisfied with the HR activities which contributed in the success of the Organization?

Categories

No. of respondents

Highly satisfied

2

Satisfied

9

Neutral

3

Dissatisfied

14

Highly Dissatisfied

2

Total

30

ANALYSIS:

The above pie chart shows that 46% of the respondents were dissatisfied with the HR activities. The dissatisfaction was due the issues of culture, employee communication and retention issues. However still 30% respondents were quite satisfied with the HR activities.

10.Did you face any problems related to communication gap during the acquisition phase?

Category

No.of respondents

Yes

21

No

9

Total

30

ANALYSIS:

The above pie chart shows that 70% respondents faced problem relating to the communication gap,may be because it was complete makeover of the organization and its internal culture.

CHI SQUARE TEST

Ho: Organisational success and organisational culture are dependent on each other.

H1: Organisational success and organisational culture are independent on each other.

Q-4

Q-10

Fo

Fo

Total

2

2

4

6

2

8

5

5

10

16

19

35

1

2

3

30

30

60

Fo

Fe

(fo-fe)²/fe

2

2

0

6

4

1

5

5

0

16

17.5

0.128

1

1.5

0.166

2

2

0

2

4

1

5

5

0

19

17.5

0.128

2

1.5

0.166

Calculated Value

χ²=2.5886

Df=(r-1)(c-1)=4

α = 0.05

Tabulated Value=9.4877

2.5886 < 9.4877(fail to reject)

As calculated value is less than the tabulated value, the hypothesis is failed to reject.

Hence, organisation success and the organisation culture is dependant of each other.

FINDINGS

As the acquisition was between the private and the public company, there were vast cultural difference between the two organisations, also the benefits and the compensation packages were very different, which was a great challenge for the HR’s to work upon. In spite, of their great efforts still the IPCL employees were quite dissatisfied with the acquisition.

50% respondents felt that the HR’s were able to blend the employees of the two companies but to some extend.

Most of the respondents were dissatisfied with the culture of the organisation because there is lot of cultural difference between a private and a public sector organisation.

Most of the respondents felt that the area compensation and benefits and then culture were the most important components to be worked upon.

To retain the key employees of IPCL the management offered huge package to them.

Most of the employees responded that,there were policies adopted related to stress management.The stress mgnt program was handled by a renouned doctor Dr.Palan.

VRS system was adopted to remove the additional staff and the rest were transferred.

63% of the respondents were dissatisfied with the HR activities which actually contributed in the success of the organisation, showing that they were not that much satisfied with the HR initiatives.

The change programe conducted were the stress management programms,trainings,Orientation.A committee was formed to initiate the change,this committee comprised of the managers of different departments.

The training was imparted to the employees of IPCL which included:

International exposure

Self development module

Sap training

Video conferencing

Few more reason for the dissatisfaction were the benefits taken away from the IPCL employees like Free transport, Petrol allowances, Free medical, Reduction in retirement age n etc.

This research shows that the success of the organzation is dependent on the culture of the organization.

SUGGESTIONS

The benefits given to IPCL employees like free medical, transportation, discounted electricity etc sholud be continued even after the acqusition.This step would have less impact on the demotivation factor of the employees.

The Saturday’s and Sunday’s off should have been continued,as it was one of the factor for the dissatisfaction among the employess.

Reliance reduced the retirement age from 60 to 58, if this was to be introduced then it should have been done with the discussion and consent of the employees to some extend.

In case the company again goes for the merger and acquisition then the company should put more of the stress on the culture.

Orientation programmes should be held.

Anonymous feedback helpline for the employess should be there.

It should be seen by the HR’s that the policies of the acquired firm sholud be implemented by the acquring company.

LIMITATION OF THE STUDY

The research was planned by students not by proffesionals so there are chances of errors.

It was quite impossible to interact with all employess as they were busy in their works.

The responses may be baised as employess ay fear to give correct resonses.

The baised responses might have lead to some ambiguity in the analysis.

CONCLUSION

The study on the role of the H.R.’s during Mergers and Acquisition has helped us to better learn the role played by the HR’s and its importance in the success of the acquisition. The secondary information gathered from websites helped us to learn how an organization must act before, during and after the Mergers and Acquisition activity.

The primary research helped us understand the views of the employees and the problems faced by them during the acquisition.

HR department and the HR’s role should be of importance during the merger and acquisition activities, because if not given then it may lead to failure of the activity.

To conclude we would like to add, that the role of H.R during Mergers & Acquisitions is not only well-known in theory, but very much in practice too and the research confirms that a merger and acquisition that overlooks the H.R aspect is leap to fail over time.