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While attending a course on competency management, I came to realize how utterly irrelevant some our education streams have become. Especially the engineering streams that have produced an undifferentiated talent pool that call for a distinction based on marks procured.

What we produce in our country are just graduates, not engineers or physics graduates or mathematics graduates. Except for a few handful of cases where some good institutes produce some good talent, the rest of them are just one big employable bunch who can, irrespective of their specialization, be trained in a months time to unlearn some old and learn some new concepts and can then be put to work.

The graduates from different streams end up in cubicles next to each other, doing the same work and making the same career. Competency inventories administered in a class of 30 would-be HR managers throw up 2 who are suited for the profession. Most of them are making a career out of what they have got and are aspiring within the bounds of the plausible, and not based on competencies thrown up by an inventory.

Such being the case, when companies decide to match the competencies of an induvidual with that of a job while hiring, what tends to happen is that these supposed misfits get either caught out with utter disregard to  what might have been potential that has been sacrificed at the altar of a competency model, or in some cases the they slip through only to lead a vegetable existence in organizations that have learnt to live with mediocrity.

The fallacy of the educational system is that competencies are considered at a much much later stage than appropriate. This situation has lead to the country loosing its multi faceted talent to a corporate world that is in turn stuck with an average workforce that wants to go home at 5 pm.

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THE UNION CONUNDRUM

For the management of any multinational company that is trying to operate in India, the union could be either an asset or a thorn in the feet that threatens to poses hurdles in the path to progress. The management would be right to assume that it would be better off without a union to deal with, at the same time it makes prudent decision making to be prepared for the occurrence of a union in its situation assessment frame. The IR policy of the organization in this regard should be one that either tries to avoid the advent of a union, or in the case were the advent in inevitable, the rolling out of initiatives that renders the union causeless in the near future.

International unions (of the MNC) seek to mobilize their Indian counterparts for the following reasons

  1. Workers’ Rights and Organizing, like – freedom of association and ILO core conventions, gender equality, youth development, organizing informal economy and atypical workers, industrial relations and multinational companies, migrant workers
  2. Decent Work and Social Protection like – working conditions, employment protection, occupational health and safety, environmental protection for sustainable development, elimination of child labor

The management must then preempt the issues mentioned above to dis-incentivize the forming of unions.

The Rationale that the International Unions may be trying to sell – “Workers in Indian plants of the company must enjoy similar kind of treatment that the workers in France or Germany are enjoying – with liberal working hours and increased pay”

The Rationale that the management must try to sell – While the growth rate in European countries is languishing between 0.5% and 3.5%, the revenues in India are projected to grow at thrice that rate. Thus the concept of ‘right’ being sold by the Unions in Europe can be bought off with the concept of ‘opportunity’ in the Indian context.

Strategy – “The phenomenon of collectivization must be countered by creating an atmosphere of individualization”

Case 1: The way to deter unionization

This case already presents the management with the ideal profile of workforce that can be easily and smoothly inducted in to a non-union way of life. This can be achieved systematically by ensuring that further recruitment is done on the lines of what is mentioned in the next case. There must be special onsite lessons for the employees that would advise them on how to prudently invest their earning so that they are secured for the future. There must also be other recreational facilities that must be extended to the families of workers to reel them into a life that is relatively more comfortable – perhaps sports lessons for the children, or outings for the families etc. Once the employee is committed into a investment plan, and his family has bought into the organization, he becomes more individual, and hence his tendency to collectivize reduces.

Case 2: The advent of unions is inevitable, but must be rendered causeless

In areas where the incentive to operate is the low costs, it does not make sense to completely give in to the union demands, instead the management must realize the fact that most of the young workforce are acquainted to each other (possibly, they are locals from local ITIs) and would easily collectivize. Hence the management must introduce programs that would enable the youth to upgrade their education. This maybe done in partnership with an educational institute, and the workers may be incentivized to pursue this path by promise of promotions and pay hikes. By making the workforce educated the management is creating an informed individualized manpower that would refrain from collectivizing.

THE CULTURE CONUNDRUM

THE CONDITION

A very significant cause of M&A failure is the culture clash that comes to the fore long after all the other M&A related issues have been dealt with. Research (as shown below) ranks culture incompatibility among the top 5 reasons for M&A failures.
graph

THE REASONS

Mergers and acquisitions almost always involve some level of transformational change and disruption. Successful post-merger integration demands significant change on the part of both the acquiring and the acquired organization. The acquirer creates ‘boundary disruptions’ — changes in stated goals, strategies, ways of doing things and customs. The acquirer also deploys control mechanisms to manage the change and achieve the strategic goals that were the reason behind the M&A in the first place. For its part, the acquired organization may have to deal with any anxieties about being “absorbed” and learn to integrate itself into new corporate procedures and values.

In short, a process of mutual adjustments and acculturation must take place for post-merger integration to succeed. Shared beliefs lead to more delegation, less monitoring, higher satisfaction, higher motivation, less information hoarding, less experimentation, faster coordination, less influence activities (politics), and less biased communication. Intuitive rationale for why a homogeneous culture throughout the organization is such a pervasive force is that

  • agency problems arise from differences in objectives and
  • Shared beliefs and values reduce or eliminate such differences in objectives, thus eliminating the agency issues (and their negative and positive consequences) at the root.

THE INTERGRATION STRATEGY

1)       The HR team that is in charge of the culture integration must start by building a clear view of the context of change and the rationale behind the M&A. It must ensure that all parties have a full and comprehensive understanding of the context of the deal and the outcomes that need to be achieved.

2)       Next they need to determine the degree of integration in two parts. First, translate the understanding of the deal in terms of the target operational integration. Second, determine the extent of cultural integration required to achieve that operational integration.

3)       Then clarify the specific behaviors required to run the combined business and include a behavioral assessment of each organization and an assessment of their combined future state. Follow this by proposing the culture change hypothesis – specifically, what changes in behaviors must take place to successfully run the post-deal business.

4)       Next identify the drivers needed to influence those behaviors, design the drivers (initiatives) and then implement those drivers through an effective change management process. Finally set up an appropriate measurement system and reinforce the cultural changes.

REFERENCES

  • Strategic Employee Recognition by DerekIrvine at hr.toolbox.com
  • Culture Clash: The Costs and Benefits of Homogeneity, by Eric Van den Steen, Working Paper, 10-003, Harvard Business School
  • The impact of culture on M&A- Doing something about it, by Bob Bundy  and Elisa Hukins, Mercer Consulting
  • The Importance of Leadership and Culture to M&A Success, by Richard M. Able, Human Capital Institute
  • Mergers and Acquisitions Due Diligence: The 360-Degree View, by John O. Nigh and Marco Boschetti
  • HR’s Role Crucial in M&A, by Rupa Jha, at jansamachar.net

According to a recent Mercer Transatlantic Study, 75 percent of executives surveyed said that communicating with employees and harmonizing corporate culture were the most important factors for post-merger integration. Business leaders recognize that they often fall short in this area. A study conducted by the International Association of Business Communicators (IABC) and Mercer asked CEOs after a merger what changes they would make if they had it to do over again. Their top response: the way they communicated with employees.

–   Mercer Human Resource Consulting

Mergers and acquisitions are usually evaluated in terms of potential growth, improved cost structure and higher returns to the shareholders. Scarcely the management gives importance to the issues like low morale, decreased productivity among the employees, loss of key personnel resulting from a merger or an acquisition. But more often than not, these are one of the major causes of failures in M&A. In this era of globalization and competitiveness, management often uses M&A to reduce costs. Therefore, the term M&A is understood by the staff as a possible indication of restructuring and layoffs. If the management does not touch upon these issues quickly these feelings may prevail in the employees: anxiety, insecurity, fear, betrayal, anger and uncertainty. This would lead to a decrease in productivity and customer service. Also, if the management decides to go ahead with the restructuring without taking into account the workers considerations it creates an environment of distrust amongst the remaining employees. This is where HR needs to step in as the communications vehicle within the organization.

Often the management is reluctant to communicate with the employees on these issues in the pre-merger/acquisition stage. Such vague signals make the employees uncertain about their career and future role in the organization. They may rely on other information sources like rumors, and informal communications which would have a very negative impact on their performance. The only way out for the management is to open a clear channel of communication with the employees. Regular and honest information has a stabilizing effect on the employees. For the communication to be effective it should address the issues that are most relevant to the employees: compensation, layoffs, change in benefits and change in responsibilities. It is also important to communicate the rationale of layoffs.Communication Strategy During Change The above diagram spells out a simple way of implementing a clean and clear communication strategy during a M&A. It works on the premise that like all change processes M&As too need to have a buy in from the employees for it to be successful. The deal isn’t complete until the workforce has been convinced of its advantages, and that can only happen if the employee feels secure in the decision. To achieve that, the communication strategy of HR must focus on the big picture, identify key messages that can be sold to the employees and then implement them not unlike a marketing plan. And like all initiatives HR must make sure that the effectiveness of this drive is tracked, measured and the feedback must be used to improve the strategy. Ultimately HR needs to be aware that although capital can be perfectly replicated, human talent cannot, and unlike capital, the human talent is susceptible to miscommunication.

We inhale oxygen and give out carbon di oxide, the plants use carbon di oxide and give out oxygen – we both exist in some sort of synergy that is in a way beautiful.

Synergy is something that has come to be increasingly appreciated in the world of business these days. Take for instance a manufacturing plant that takes in a few raw materials and produces a specific product, there are bound to be by-products of this process that can be tapped and used in other plants,  locally or remotely located. Such synergy is not all ways feasible, but smart businessmen find ways to make these happen and reduce the overall cost of raw materials and resources consumed.

Coming to the way departments function in an organization, where there is continuous interaction among entities and continuous give and take, it becomes all the more important that there is synergy in the relationship. If for instance, finance and HR departments have no pipe connecting them, then it is hard to channelize the performance of individual departments towards a specific goal. Herein the role of a performance management system becomes very important, a smartly designed PMS, run efficiently and sincerely can succeed more often than not in creating synergy.

For example lets take the case of a major business house in India that has successfully channelized the performance of its departments by using very prudently its performance management system.

Each department has two different performance aspects

  1. The functional aspect
  2. The synergy aspect

Under the functional aspect – which gets the maximum weight-age, the department is expected to achieve certain targets for the year in terms of performance. These targets are meant to be exhaustive and complete in every manner.

The synergy aspect – has a smaller weight age, here each department gets a few targets from the other departments. For instance finance would ask HR to cut its cost by 5% and this would become a synergy aspect target for HR. Similarly HR may ask other departments to provide availability for certain number of man-days for training purposes. This way departments outsource some of their functional aspect targets to the synergy aspect of other departments.

At the individual level, the targets are again functional, synergy related and in addition there is certain weight-age given for extra projects undertaken. Every individual carries out the functional aspect as it is his/her basic duty. The synergy aspect is driven by the department heads as they owe it to their counterparts, and so it is the extra projects undertaken that distinguishes the achievers from the bare performers.

Instead of having interacting departments rate each other at the end of the year (which only leads to bad blood) the above manner of setting goals for each other in the beginning of the year is a more constructive proposition. It is also very healthy since it is a part of functional aspect that gets outsourced as synergy aspect to other departments, the goals are credible, feasible and very pertinently directed.

The first time I saw him was in a 360 degree feedback workshop being conducted for the top brass in the organization. he stood out from the rest of them with that tall persona of his, the confident air about him, and the cordial manner in which he greeted his peers and his subordinates alike. I later learnt that he was one of the smartest and most liked people in the top management. The session was a follow up on a previously conducted workshop, so it began with the entire lot giving a short summary of the suggestions and feedback they received from the 360 feedback that was carried out on them last time round.

In an organization where most of the top rung got poor scores from subordinates but managed decent scores with peers and bosses, our man stood out with excellent scores from all directions. In fact his scores were so good that the facilitator told him to elaborate on how he goes about his work. When he spoke, there was sophistication in his language, and there seemed a clarity in his thoughts that others seemed to lack. Watching him go about his task that day was almost inspiring.

When my project actually began, and I realized I needed top management input to take it forward and better understand how HR can contribute to business. My first thought was to get in touch with Mr. Perfect. I fixed up an appointment through my manager, and went on time to meet him. He greeted me well, treated me nicely and listened to what I have to say. He appreciated the concept that I was working with and gave me a lot of inputs on how he’d like the HR to help the business. The more and more the conversation went on, the more he seemed to have ideas for HR, so much so that by the end of it, I had 10-15 pages of just suggestions to HR.

My other meetings went on similar lines and it was a mess, because the more I tried to find out what HR could do for business, the more I realized that the business was incapable of giving me that answer. They did not know what HR could do for them. They had loads of suggestions – “Recruitment needs to be streamlined”, “PMS needs to be transperent”, “Employer branding must be given a thought”.

Finally I decided enough was enough, I am not going ask them how we can help, instead i am going to ask them what they plan to do. It was apparent that the best folk to decide which HR activity will compliment a given Business strategy, are the HR folk themselves. So by understanding what they plan to do, and what they plan to achieve,I would be able to shortlist metrics that they think are relevant to their business. Once that is clear, all HR has to do is to figure how their initiatives (current or future) are going to affect those metrics, and by doing so HR would be helping business.

So this time I started by meeting someone from the managing director’s office and learnt the latest objectives and strategies of the business. Next, I decided to speak with the Mr Perfect, because it made sense to get inputs from the best person in the league, and would certainly help in making the others feel comfortable enough to cooperate. To my surprise, this time the conversation was not friendly at all. First he was agitated that I was there asking not ‘what i can do for him’ but was actually asking him ‘What he plans to do’. To add to this, I have his objectives in front of me. Even after repeated assurances that I am there for completely academic reasons and my motives are only to better help the organization, I was politely told to leave without being given any inputs.

Now, How can HR help business, when business wouldn’t tell HR what it plans to do? Business usually has a lot of things to say about HR, but rarely has anything to say to HR. When the best of the top brass of an organization treats HR like a needless consequence of corporate formality, then things are bleak indeed. Surprisingly, one of the quietest people in top management, who received okay-ish scores in the  feedback workshop, was the most cooperative of the lot and spent a great deal of time giving me invaluable insight into how business works.

Lessons I take back

  • Making a quick first impression can be a mistake hard to recover from
  • Never ask Business people what they want from HR, Instead ask them what they do, and figure out the rest for yourselves.

He walks in dressed up professionally, or so he thinks, – with a tie that would put modern art to shame and a shirt that refused to speak softly – he is all ready to try out for ‘India’s got talent’. He has a huge bag that houses his laptop and his laptop’s best buddies. He enters the room where his prospective clients are seated to hear him out. He is constantly wiping the sweat off his brow. He belongs to one of the many growing small time consultant companies that provide a neat solution to the every day HR activities. In this case he has come here to convince us that their organization is best suited to take care of our everyday training needs.

They call themselves consultants, because they provide solutions.

He then spends a good 5-10 mins setting up his laptop and plugging in the power supply – He had for some reason decided not to charge up his laptop before a client meeting, surely the reason must have been a sound one. Next he gives us an account of what his company is all about and what they have done and which big companies are already their clients.

Then, as if he was incapable of carrying on a conversation with two other people in the room, he decides it is time to open up that PPT and give us a recap on T&D activities. He elaborates on each slide, he tells us what T&D does, and what are the steps involved etc. Finally he gets to what they have to offer. By now he has put the only 2 people in the room to sleep. I am seriously in doubt of the firm’s caliber, but his firm has almost gotten the account from us.

After he has left, I reflect on what exactly happened. There was this man, in his 30s, part of the struggling stream of HR professionals who are caught up in small time solution providing firms. He goes around the country, traveling 20 days a month, trying to get companies to sign on to their services. He is poorly equipped in terms of convincing skills. He fails to make a first impression. Yet he can boast of one the biggest FMCGs in India using their services, “We have 20 professionals placed full time in their Mumbai corporate office” he claims.

Increasingly the companies are growing comfortable about sourcing out their day to day activities to small time nobody firm, perhaps encouraged by the fact that maintaining documents, data and rigging up schedules does not need high levels of competencies. These semi back offices have created a huge market for themselves. They have begun doing the dirty work of HR, while allowing HR to work on more strategic items. Invariably, the first companies to have taken up their services are the trend setters in terms of HR practices and strategic HR initiatives.

The PPT consultant does not really have to make that coveted first impression. He does not have to dress up to impress. His PPT templates can be remnants of the office 2003 era. He can even afford to ignore grammar. If he has the people and systems that can clear the mountains of day to day debris that lands on the corporate HR’s table, well, then he has gotten himself a client.