Business Initiative: Merger or Acquisition

Mergers and acquisitions (M&A) often raise a host of staffing issues. At the very least, there will be two (or more) workforces that need to be assimilated. Often, this integration creates surplus staff that must be redeployed or reduced. Workforce planning is an ideal tool for managing the integration of multiple workforces and reducing/redeploying surplus staff.

Overall Approach

Think of workforce planning as a tool for managing the transition from two separate workforces to a single integrated workforce. In general, you will want to create a model in which the “supply now” scenario identifies the staff that are available in the two organizations separately and the final “demand then” scenario captures what you think the staffing requirements of the fully combined/integrated organization will be. Use the internal movement component of your model to capture the movement of employees “from” the two separate organizations “to” the new combined one. For example, a group of employees might move from Engineer Level 1 in an old organization to Engineer Level 1 in the new organization. Employees that do not move from an old organization to the new organization will be identified as surplus. Staffing strategies to eliminate these surpluses can then be developed (e.g., movement to other positions, redeployment to some other function with accelerated development, layoffs).

Likely Staffing Issues/Implications

M&A activity typically raises such staffing issues as:

• Workforce integration and assimilation issues (e.g., how best to fill opportunities in the new organization using the two pools of employees)

• Identifying surplus staff (especially those that may result from synergy opportunities)

• Potential staffing redundancies

• Capabilities gaps and development issues regarding the product(s) being acquired and their markets (e.g., when the company being acquired has expertise or market presence that the acquiring company does not have)

• Organization structure changes (resulting from the M&A activity), such as new products, new customers, or new geographies

Staffing Model Parameters

At first, given the “macro” nature of a merger or acquisition, it might seem like a good idea to create an organization-wide model that includes all positions. In fact, this approach is unwieldy at best and impossible to implement at worst. Avoid this “one giant model” syndrome by adopting one or both of these approaches:

• Focus your analysis on critical positions. Not every job in the new organization will be critical; not all will need the strategic perspective (nor merit the work involved) that workforce planning demands. Limit your analysis (at least at first) to those positions that really require the power of workforce planning. If necessary, create new models to address less critical issues once you have completed models for the most critical issues. As examples, your models might include:

  • Positions critical to the success of the combined venture

  • Positions needed to maintain the success or integrity of the acquired products or services

  • Positions for which integration, synergy, or increased efficiency is desired or expected

  • Positions in which redundancies might occur

  • Positions in which surpluses might arise

• Segment your analyses. If the number of critical positions is large, don’t create one model that includes them all. Instead, create a series of separate models, each of which addresses a “stand-alone” group of critical positions. Include in each group positions among which staff movement is required or desired (e.g., a model for a given function or engineering discipline). Do not include in the same model positions among which movement is not wanted or is unrealistic (e.g., where large capability differences, strong organization boundaries, or great geographic distances really prohibit staff transitions). As an example, engineering and marketing positions might both be critical, but they should be combined in a single model only if significant staff movement (i.e., large numbers of staff, not just one or two isolated instances) between those two functions is expected and desired. Given the great capabilities differences between the two categories, such movement is unrealistic, and thus separate models should be created.

Now, for the models you deem necessary, define the three planning parameters:

• Population. Identify those critical jobs that will be included in each model. Remember to include possible “sources” of needed talent and possible “uses” of surplus talent.

• Time frame/planning horizon. For the “how long” parameter, use the time frame for completing the M&A. It is sometimes helpful to look one period beyond the stated target date so that you can begin to plan for staffing needs in the more stable period that will follow the completion of the merger or assimilation of the acquisition. For the “how often” component, divide the “how long” period into practical milestones (usually quarters or years).

• Staffing model structure. Columns should be differentiated to reflect the job groups you decided to focus on. This is usually job family, function, and/or organization unit. Rows (as usual) should reflect an increasing hierarchy of skill or capability (e.g., Production Worker, Senior Production Worker, Production Supervisor, Manager of Production).

Your “supply now” matrix needs to include available staff from each of the M&A partners. Usually, it is helpful to use separate columns to capture the data for each company and a single set of rows that can be used across companies. Your ultimate “demand then” matrix (e.g., for planning period 5) should capture the staffing requirements (both skills and staffing levels) that support the final growth objectives. An interim “demand then” matrix will be needed for each milestone that you chose (e.g., the ends of periods 1 through 4).

Staffing Strategies

When integrating/assimilating an M&A partner, the following staffing strategies might be considered:

• Staff transition strategies, moving employees from the separate partners to the combined entity

• Capability-based assessments to compare staff from the partner companies in a more objective way and identify development needs

• Internal movement, with recruiting to fill positions where transitions are not possible (or cannot be completed within the required time frame)

• Training and orientation efforts coupled with development to accelerate movement to new positions in the combined organization

• Redeployments (with or without development) to reduce surpluses

• Staffing reductions (especially where attrition is insufficient)