One of the reasons for this failure can be viewed as the lack of the engagement and Involvement of human resource management (HRM) in the early stages of the merger. Throughout the initial phases and stages of the merger & acquisition (M&A), HRM had a minor role. Poor communication between people at all levels of the organization, and between the two organizations that are merging, is one of the principal reasons why mergers fail. (Aguilera & Dencker, 2004).
As human resources (HR) continued to play an insignificant part throughout the Daimler- Chrysler M&A process, negotiations were dominated by legal and financial aspects. As such, HR Directors were not informed or involved. (Dowling, Festing & Engle, Sr., 2009) Often times, if legal and financial experts are driving the strategic work behind the integration, then a number of important considerations critical for the financial success of the merger, such as the productivity of the new employees, may be overlooked unless human resources and corporate communications staff members provide their input. (Aguilera & Dencker, 2004).
Cross-border M&As are one of the poorly understood phenomena in business world (Schneider, 2001). The internal turbulences of two merged companies increase significantly in the case of a merger between two automakers (Schneider, 2001) as exhibited by DaimlerChrysler. Corporate culture clash between the two companies with different business management and production philosophies were not managed properly.
Daimler-Benz and Chrysler operations and management could not properly integrate because of the different approach of Germans and Americans to work particularly administrative issues such as pay scales and travel expenses. Ultimately, a large numbers of key Chrysler executives and engineers resigned and Daimler-Benz employees were dissatisfied with Chrysler division performance. In essence, it was a failure of fit. (Aguilera & Dencker, 2004).
The Daimler-Chrysler M&A was a classic example of two cultures that never did merge. The more formal style of the Daimler culture and the more free-flowing style of Chrysler made an integration almost impossible. Had HR been engaged at the onset, they would have been able to take the lead at bringing in resources early in the integration to keep the two cultures from becoming rigid and inflexible. It is during the integration process that these dysfunctional behaviors become evident at all levels.
Additionally, information dissemination during the merger process is a critical element, and HR should be at least partly involved in the roll out of information. This ties into the level of trust in the merging of groups as it is linked to the level of transparency people witness during the various phases. HR takes on many roles from advisor to top management, to designing communication processes and being a sounding board for feedback.
As we can see, HRM has an important role to play in any merger and acquisition, right from the beginning of the process, especially in the areas such as managing personnel conflict, reinforcing the new HRM system and corporate culture, and providing leadership and communication to reduce turnover.
Most companies have emphasized time again that their employees are their most valuable assets. Now they need to back up their words with appropriate actions, Including adopting measures that will protect and motivate their talented employees in the aftermath of a merger or acquisition. As evidenced by the Daimler-Chrysler M&A, including and involving human resources at the pre-phase and throughout each stage can only increase the chances of success.
Aguilera, R. V., & Dencker, J. C. (2004). The role of human resource management in cross-border mergers and acquisitions. The International Journal of Human Resource Management, 15(8), 1355-1370.
Dowling, P. J., Festing, M., & Engle, Sr., A. (2009). International human resource management. (Fifth ed., pp. 52-64). Mason, OH: South-Western CENGAGE Learning.
Schneider, P. (2001, August 12). Scenes from a Marriage. The New York Times .