Making the most of HR transformation opportunities during an M&A

Posted by Tom Joseph, Matt Usdin, and Kyle Forrest on June 15, 2018.

In our previous post, we made a case for using a merger, acquisition, or divestiture (M&A) as a catalyst for HR transformation. Here we explore a number of the opportunities transformative integration offers to increase HR’s value to the business and achieve high-impact HR.

Transformation opportunity: HR service delivery

An initial focus area should be the overarching HR service delivery model—how HR serves its business customers. The service delivery model incorporates many of HR’s most critical (and costly) activities. An optimized model can not only improve HR’s support of the business, but it can also improve the effectiveness of both internal and external resources.

A Chief Human Resources Officer (CHRO), supported by his or her leadership team, may consider assessing the end-to-end processes within the HR function. This includes a functional self-assessment as well as candid conversations with customers. As HR service gaps are identified, the team can formulate a plan to address issues and better utilize HR resources. Oftentimes, leaders decide to either expand the existing service delivery model or engage in a full redesign of HR processes. High-impact HR service delivery transformation opportunities may include:

  • HR business partner (HRBP) optimization—How do HRBPs add strategic value to the business? Many organizations provide HRBP services reactively and do not strategically align them to the business. Integration offers the opportunity to review the HRBP talent pool, the level of service provided by each individual (and as a whole), and ways to more proactively and strategically partner with customers in the future.
  • Talent management—Do the talent strategies of the two entities align? Rather than force alignment to an existing strategy, integration is a good opportunity to review and improve performance management, career pathing, and leadership development—topics that are generally sensitive and often not strategically aligned to business outcomes in large organizations.
  • HR shared services efficiencies—How do shared services support the HR service delivery model? Even mature organizations can find ways to gain efficiencies through simplified and standardized processes and policies. Additionally, organizations can segment transactional HR activities into low-cost areas, realizing savings from labor arbitrage.
  • Technology—Do current HR information systems (HRIS) enable efficient HR services? Advancements in HRIS may help the HR function move beyond master data management and payroll processing into a new realm of employee and manager self-service. New systems may allow HR to achieve technology-enabled efficiencies, especially since organizations often are faced with both an expanded employee base and budget limitations.
  • Controls & accountability—Who really owns the HR function? By realigning budget ownership and reporting relationships, HR leaders may more effectively drive activity across global regions. Additionally, clearly-defined reporting relationships (both direct and indirect) can improve leadership’s line of sight across the function and verify that the global organization is operating in unison.

Transformation opportunity: HR process & data management

Typically, one of the most challenging post-Day 1 initiatives is integrating and consolidating business processes, systems, and data. These activities are integral to an organization’s ability to function as a single enterprise. One of the initial activities in any system consolidation is to define the effort—what does consolidating processes and data mean to the organization? How will it impact existing or planned initiatives? Once leaders define the consolidation effort, they should identify and align key stakeholders and set expectations for the scope of consolidation activities to support Day 1 and beyond.

Process, system, and data consolidation challenges typically center on project size, complexity, and scope. Making service delivery model and technology selection decisions early will drive other consolidation decisions, such as business process and system design. Some activities critical to the success of process, system, and data consolidation are:

  • Data cleanup—Thorough cleanup efforts can increase data accuracy prior to system consolidation. As part of the HR functional transformation, there may also be opportunities to improve existing data tracking and reporting processes.
  • Data standardization—HR data should be business-driven, standardized, and aligned with other aspects of the budgeting process, financial planning, and position management.
  • Single source of truth—Building a solid foundation of consolidated company data will be important to sustain the new organization and its future initiatives. Storing data in one system may reduce the amount of required future maintenance and enable better data management, reporting, and business performance monitoring.
  • Business process design—The new organization’s business processes will have a direct impact on forms, workflow, and security, and should be prioritized and aligned with the scope of the system consolidation.

Transformation opportunity: HR technology

Consolidating and integrating HR technology with other operational systems during an M&A transaction is a large and complex process. By considering technology consolidations in tandem with service delivery, an HR organization may better achieve anticipated deal-related efficiencies and synergies.

Executives should select technology that aligns with and supports strategic objectives such as talent strategies and other business-driven requirements. Another key consideration is the time and cost to deploy a consolidated, integrated HR system. The longer an organization takes to consolidate, the higher the cost will be to support multiple systems and business processes. Common questions during a technology assessment include:

  • Can an existing investment be leveraged for the new organization? Or does the organization need to go through a vendor selection process for a new technology investment—one that can support the consolidated entity’s size and complexity, including possible expansion into new regions or rapidly-changing markets?
  • Do the skill sets and experience needed to implement a system consolidation reside in house? How about long-term operational support?
  • Does the technology have global coverage and scale to support current and future business requirements?
  • Is the technology flexible enough to support legal, union, or regulatory requirements if the delivered functionality cannot accommodate them? Will the consolidated entity be able to support ongoing compliance and regulatory updates?

Getting senior executives to acknowledge and support the need for an HR transformation can be challenging, given the other issues and priorities associated with M&A-driven integration. While the HR team may recognize the importance of investing in post-close HR transformation, other organizational initiatives may also require funding. Presenting a business case that outlines the ways high-impact HR can better serve business needs and employee needs, along with the opportunities an M&A presents to achieve high-impact transformation, can help secure the leadership and financial commitment necessary for transformative, value-driving change.

Tom Joseph is a principal in Deloitte Consulting LLP and has more than 15 years of M&A consulting experience. He works closely to plan integration strategies, plan for an issue-free “Day 1,” manage enterprise-wide organization readiness, and design the cross-functional integration program.

 

Matt Usdin is a principal in Deloitte Consulting LLP’s M&A Practice and leads our US and Global Human Capital M&A practice. Matt has nearly 20 years of experience advising corporate and private equity clients on achieving M&A value in integration and divestiture transactions.

Kyle Forrest is a manager in Deloitte Consulting LLP and has 10 years of HR and M&A consulting experience. He works across the M&A deal life-cycle, partnering with clients on integration/divestiture strategy and execution and how to infuse digital behaviors and technologies within the HR organization

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