Mergers and acquisitions in the past often did not consider their human impact. This led to layoffs, loss of talent, and damage to employee morale. However, some companies like Cisco are adept at integration. Cisco requires CEO approval for any layoffs and focuses on cultural fit to successfully manage human aspects of mergers.
Mergers and acquisitions in the past often did not consider their human impact. This led to layoffs, loss of talent, and damage to employee morale. However, some companies like Cisco are adept at integration. Cisco requires CEO approval for any layoffs and focuses on cultural fit to successfully manage human aspects of mergers.
Mergers and acquisitions in the past often did not consider their human impact. This led to layoffs, loss of talent, and damage to employee morale. However, some companies like Cisco are adept at integration. Cisco requires CEO approval for any layoffs and focuses on cultural fit to successfully manage human aspects of mergers.
Mergers and acquisitions in the past often did not consider their human impact. This led to layoffs, loss of talent, and damage to employee morale. However, some companies like Cisco are adept at integration. Cisco requires CEO approval for any layoffs and focuses on cultural fit to successfully manage human aspects of mergers.
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Case Study 1
The Human Side of 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 criteria, and operational criteria. 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 mergers 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, particularly 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 are 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
From such “love and marriage” tactics in truly collaborative mergers to much more hostile “rape and pillage” strategies in raids and financial takeovers. Yet, as a cursory scan of virtually any newspaper or popular business magazine readily reveals, the simple fact is that the latter are 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. 3 Nonetheless, such adverse consequences are not inevitable. A few companies, such as Cisco Systems, which has made over 50 acquisitions, are very adept in 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 acquired.
QUESTIONS 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 acquisitions successful?
2. If human resources are a major 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?
3. Interview someone who has been through a merger or acquisition. Find
out how they felt as 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.
