The role of HR in organic business growth and M&As

The greatest source of failure in mergers and acquisitions comes from human capital, so strengthening and investing in HR is key.
By: | June 14, 2019
About the Author
Nick Jonsson is the Managing Director of EGN Networks, Singapore

HR is the backbone of any business. It is the one appendage of a company that is connected to every single department. Strangely, it is often overlooked as a key component of organic business growth.

HR is a department that is often dissected and outsourced, which ultimately becomes counterproductive to aspirational targets and objectives.

The role of HR has drastically evolved over time – it is more than just personnel management. HR now encompasses talent acquisition, performance management, and workforce planning.

HR is directly responsible for the acquisition of innovative talent, which is the key to driving organic business growth. Human capital paired with creative thinking is said to be the most valuable asset to a company in 2019.

But stunning talent alone will not build a thriving business flushed with organic growth. This is where HR plays a crucial role – the HR professionals must know where to place talent to optimise their success, and must deliver a keen analysis on how they will maximise their capabilities to other relevant departments.

HR also functions as a gatekeeper of sorts – ensuring that each person in the business is able to succeed to their highest abilities, while not impeding the success of others.

In an ever diverse workplace where different values, mindsets, and attitudes are being acquired – it is imperative that there is an arm of a company that regulates the exchange of ideas between them. Superb talent does not drive growth if they are not able to cooperate or communicate efficiently.

There is a disconnect between employees and employers in Singapore. Willis Towers Watson conducted a survey that found over 60% of employees in various companies throughout Singapore (some MNC and SMEs) felt they were experiencing inordinate levels of stress.

The overall consensus was that employees did not feel their health and well being was cared for. Some 84% of businesses said, in response, that their top internal priority was to increase their investment in HR to address these issues.

The importance of HR is even greater when a merger or acquisition is involved. 83% of M&As report not achieving their goals within the first year of business.

A 2006 study by the Corporate Leadership Council concluded that the largest origin of failure in these scenarios was poor integration.

Given that the greatest source of failure in a M&A situation comes from human capital, it is obvious that strengthening and investing in HR is a key factor to ensuring organic business growth within a new venture.

The Asia-Pacific region has a particularly low retention rate of employees in businesses after a merger or acquisition. According to Willis Towers Watsonm, most acquirers globally retain about 80% of their workforce, but in Singapore that number is lower at 70%.

In this same study of employees that left their businesses upon a merger or acquisition, 44% reported that it was due to a “new or challenging workforce.”

How, then, can HR professionals meet the ever growing need to improve this vital component of business, particularly during M&As? HR should be involved in the decision making processes of a merger.

They must be given access to the prospective businesses data – so they can analyze work culture and implement integration techniques that will encourage key talent to stay rather than leave.

Job descriptions should be clear and concise, and there should be institutional support for the changing environment, offering transparency about reporting relationships, benefit programs, and relocation where and when they can.

It is imperative that HR workers are able to access well-researched and developed information about the issues and challenges that their sector of work encounters.

Luckily, there are several online initiatives spearheaded by industry leaders that seek to amplify the importance of well executed HR work.

Workforce tackles the intersection of strategy and personnel management, HR magazine provides profiles of working executives and their successes and challenges, and HRM Asia provides an Asia-Pacific tailored approach to discussing all things HR – proving itself as a rich resource for professionals seeking to learn by experience, and understand more innately the vitality of their work.