Michele Harmon
One of the first departments to go with mergers or acquisitions is the human resource (HR) department. With that departure, the acquiring firm, or the more powerful merged firm, loses institutional knowledge when the HR staff departs.
Instead of getting rid of the acquired HR staff, keep them.
The HR staff departs for several reasons. The new firm thinks it can run HR out of its existing department, even if that department is in Houston. Then, other staff generally depart over the uncertainty of their future. Employees need a sense of where they will fit into the new organization.
Mergers and acquisitions often fail their employees because those employees need a cohesive, transparent, and well-organized workforce transition. Usually, the new firm needs to remember where the future of their success lies: in the people, not just in the finances.
To keep some or most of the existing staff, the Society of Human Resource Management (SHRM) recommends that the acquiring firm:
- Establish multiple routes of communication (e.g., one-on-one meetings, group sessions, newsletters, intranet updates).
- Focus on the themes of change and progress by highlighting projects going well and action items being delivered on time.
- Repeat the common themes of the merger and acquisition to increase employee understanding of the rationale behind the transaction.
- Provide opportunities for employee involvement and feedback.
- Ensure that employees understand there will be challenges but commit that the challenges will be identified and addressed as early as possible.
The acquiring firm needs to take the time to get to know the company’s culture, and the HR staff is an excellent place to start if they are still employed and have yet to depart.
SHRM lists some common pitfalls the acquiring group needs to avoid if they wish to retain staff. The longer the uncertainty lasts, the more attractive alternative employment becomes. The best and brightest managers are immediately targeted by recruiters attempting to lure them to other organizations. The loss of key employees can seriously erode the potential value of the new firm. It is also damaging and costly, as are those who stay on the payroll but emotionally “check out” and do not perform at their previous productivity levels. If the process is not managed well, a company may end up with the employees who had the fewest alternatives. In other words, the acquiring company gets the leftovers.
The acquiring company must first recognize the superstars and require HR to help. If the acquired firm has excellent performance appraisals, that is 80 percent of the battle. However, we know that is often different. You will need HR to help you out.
Ensure due diligence was done before the acquisition, not just with the finances, but with the people management. If there has been no HR structure (you know the type), then the newly acquired company may be one step away from a Department of Labor complaint. If so, clean them up fast.
As previously stated, it is essential to get to know the culture of the acquired firm. To develop the culture of the newly merged organization, the acquiring firm must establish and communicate to employees a coherent people-related strategy. How will new policies, rules, and guidelines to govern employee behavior and related workplace expectations occur? If the acquired firm was like the Wild West, then the new firm and the HR staff of both companies have their work cut out for them. If the two HR groups do not meet eye-to-eye regarding legal compliance, then it is time to retrain HR staff or let them go.
In the Permian, retaining your staff is critical because training and replacing everyone is difficult.
When Oxy bought Anadarko in 2019, many of my HR friends returned to Houston, some with jobs and others without. When Conoco Phillips purchased Concho in 2020, many of my HR colleagues left, only for some to return later. Many great Concho staff joined other local firms to lead HR or started consulting companies.
Again, in 2020, Chevron acquired Noble Energy; in 2021, Pioneer acquired an old friend, Parsley, who had moved their headquarters to Austin pre-pandemic.
In 2022, Permian Resources was created from a merger between Colgate Energy and Centennial Resources.
In 2023, acquisitions in the billions of dollars occurred in no particular order. Henry Petroleum sold to Vital Energy, and now Exxon is attempting to purchase Pioneer. To my surprise, Endeavor may be on the block. CrownRock is being acquired by Occidental. Chevron acquired Hess Corp.
What will 2024 bring? Your HR staff should not be the first to go but the last. Do not let that historical knowledge go out the door.
For the past year or so, I have encouraged my HR friends to get a job with Endeavor, Pro Petro, and Diamondback, hoping these companies would remain primarily operated out of the Permian. Now what? If Endeavor is sold, will the acquiring company keep the HR staff with the long memories of who is a good employee?
Following my thought, won’t the new firm now owning or managing the acquired firms know the great employees versus the weak ones? Remember those performance evaluations?
How many of you reading this article mandate performance evaluations? If so, are they tied to the job descriptions and the organization’s and department’s or division’s goals?
Ultimately, I hope more than a few local firms are left. Our community needs more Diamondbacks and Pro Petros, not fewer, headquartered in the Permian.
Hot Topic: Insurance Costs
Not too long ago, Cigna and Humana planned a merger. I hate to sound tacky, but would it have reduced insurance costs?
What about the weight loss drug craze? Will that reduce your overall insurance costs if your employees weigh less and maybe drink less? The Centers for Disease Control says that 6 out of 10 adults have one of these chronic diseases:
- Heart disease
- Stroke
- Cancer
- Diabetes
- Chronic kidney disease
- Chronic obstructive pulmonary disease (COPD)
“Your employees are the heart of your organization.” Dr. Michele Harmon is a Human Resource professional, supporting clients in Texas and New Mexico that range in size from five to more than 3,000 employees. Email: micheleharmon1@gmail.com