Guest Column

The reasons cited behind the failure of mergers are essentially lack of attention to cultural and communication issues. There are different ways of operating. When two organisations come together, what one organisation may consider an initiative, the other might consider aggression. Their ways of thinking may be very different. Companies often adopt very different ways of making decisions,different ways to involve and hire employees. All these cultures vary from organisation to organisation. If there is no common ground, trouble is bound to occur. Besides the cultural clashes, in most cases employees of the two companies that have merged begin to worry about the future. They start worrying about prospects as to who will win the battle. All this causes tensions, indecision and paralysis. So there has to be a whole strategy around how you integrate two companies.

Mergers happen for various reasons. One reason is to acquire talent.

Organisations often find it very difficult to get the kind of talent they are looking for. So the alternative is to buy it. The other reason is to set a global footprint 8212; we saw a lot of that happening last year and will continue to see such combinations across geographies in the next 12 to 18 months.

Financial reasons are also coming into play. Especially in the case of oil and auto companies and other highly capital-intensive businesses that are facingincreased cost pressures. There is overcapacity and a real need to drive down costs. Sometimes mergers also occur in order to bundle the product in such a way that it lowers costs to the consumer. Therefore, we have telecom companies combining with the Internet firms or cable companies with wire telecommunication companies. So mergers today are more strategic than ever before. India is a very different market. But our experience tells us that people issues are quite similar across the globe.

Out of the 20 largest mergers last year, our consulting firm was involved in 15 of them. Right from the initiation stage, we have chalked out a number of methodology the various stages, the things to focus on and the high leverage points. But at close it boils down to education and orientation to the other company. To understand why companies do the things they do. This is a simple intervention to make two different groups of people work together amiably.

In India, I believe, companies skip out a lot of steps. Thereis more of a financial integration. Indian companies too will soon realise the people aspects of a merger, acquisition or a divestiture. Human resource also has to play a crucial role in this. Globally, HR is consolidating a lot of its administrative activity and becoming much more operationally efficient 8212; rather than simply bothering about the pay rolls. Studies in North America and Europe show that 80 per cent of the HR activity is of that kind. With quality becoming the entry point for all companies in India as well, HR will have to play this strategic role.

The author is Global Practise Leader, Hewitt Associates LLC, USA.