HR has to develop its skills on mergers and acquisitions if it is to have the respect of the board when restructuring activities are in the offing
HR directors don't have the commercial expertise or business knowledge to support their companies effectively through merger or acquisition activity.
You might think a comment like this would have most HR directors frothing at the mouth in anger - but the truth is that nearly half of FTSE 250 HR directors interviewed in a recent survey admit to it.
And with a similar proportion of finance directors sharing the same opinion, is it any wonder HR issues take a back seat during most corporate transactions, thus contributing significantly to their failure to deliver against expectations.
The survey by the Human Resource Consulting practice of PricewaterhouseCoopers supports the previously-held belief that CEOs, finance directors and transaction directors do not consult their HR colleagues early enough in a merger or acquisition situation. HR directors showed refreshing honesty, revealing that even if called in earlier to help smooth the way for M&A activity, their own HR functions lack the necessary capabilities to be effective.
In an ideal world, with the right skills and support, HR directors can make an enormous contribution to the success of corporate transactions. However, they cannot possibly earn the opportunity to prove this when they themselves acknowledge their limitations. Company executives should know by now that mismanaging or ignoring employee issues at times of major change will lead to a significant downturn in business performance arising from a loss of key people, depressed morale, poor customer service and low productivity.
Failure to tackle critical people issues, such as retaining top talent and communicating effectively with the workforce, is a key reason why 70 per cent of all deals fail to meet expectations. And while there is no doubt that today's companies are far more aware than they were a decade ago about the critical importance of successfully addressing the people challenges in such transactions, it is equally true that management, including HR, often neglect to tackle the critical people challenges early enough.
Although the survey found 87 per cent of respondents (finance and HR directors) recognise that effective employee communication is a critical component of any successful deal, there ar