Healthcare HR's Role in Mergers and Acquisitions
Mergers and acquisitions are increasingly common in the healthcare industry. PwC recently reported that U.S. deal volume for health services in the second quarter of this year increased by about 8 percent compared with the first quarter, and was up 16 percent year-over-year. Mergers and acquisitions are stressful and messy, and they offer a perfect opportunity for HR to shine.
“A merger is a crucible that puts pressure on the classic challenges HR is already facing,” says James Rice, Managing Director and Practice Lead of Governance and Leadership at Integrated Healthcare Strategies, which provides business consulting services for healthcare organizations.
Experts agree that the most important thing HR can do to prepare for mergers and acquisitions is to see itself as a strategic part of the organization. “I urge HR directors to insist that they have a role in the due diligence and pre-acquisition period,” says Rob Fuller, a lawyer at Nelson Hardiman healthcare attorneys. “The CEO isn’t thinking about merging workforces, but from a practical standpoint, it’s the most difficult, wide-ranging issue two merging organizations have.”
Here’s how to play a strategic role in mergers and acquisitions.
Understand the Business Needs Behind the Merger
Different mergers will require different approaches, experts say, so understanding how the merger will be structured is important. So-called horizontal mergers involve one hospital or system buying another, Fuller says, and the two organizations are likely to be similar enough that the main HR issue will consist of assimilating the new workforce: combining job requirements and descriptions, personnel files and so on.
The vertical merger is becoming more common, and brings more issues, Fuller says. These involve a hospital purchasing something like a home health agency. “When you have different businesses then you have an additional burden on the acquiring HR organization,” he says. Regulations, pay structures, employee expectations and nomenclature may be vastly different.
No matter the structure, you’ll need to immediately take stock of the scope and nature of the employee pool of both organizations, Rice says. Identify gaps, opportunities, career tracks and other employee issues, keeping in mind you may lose up to 15 percent of employees to retirement. The goal is to identify how your current pool will uphold the strategic imperatives of the merger, he says.
Assess Culture and Resources
Culture should be a big part of the merger’s due diligence process, and HR can take a leading role. It can be easy to get caught up in the administrative side of HR during a merger, but culture is where HR can be more strategic and prove its worth. “HR folks should stay up late doing reading about human stakeholders who need to be aligned and enthused about this merged entity,” Rice says.
Some organizations may be reluctant to complete the necessary due diligence related to people and culture because the finance side doesn’t think it’s worth it, says Gregory Pontrelli, President and CEO of Lausanne Business Solutions, a talent management consultancy. Counter this by working closely with finance to champion the importance of assessing and identifying culture, Pontrelli says.
Survey and Analyze Employees
As part of the cultural assessment, consider surveying employees from both entities to find out what they like about working where they do, Pontrelli says. Focus groups can provide insights into how the merger is going, and pulse surveys can provide real-time pictures that can help stop problems before they start.
Surveys can help identify cultural aspects the merging employee populations have in common, or concerns that they both have. “Learn about fears and anxieties, and how to break down the ‘we-they’ barriers,” Rice says. Speed is often key in these efforts, so HR can help head problems off before they arise.
Communicate Clearly and Consistently
Employees are going to have a lot of questions throughout the process, and you’re going to be the one they go to. “In the more successful mergers I’ve seen, HR has been straightforward with a lot of specific answers to the questions worried, recently acquired rank-and-file employees usually have,” Fuller says. “You need to be available and transparent; people need to be there to talk and go over things.”
At the same time, you’ll need to align your answers with the strategic message the C-suite has set, without misleading anyone. “You have to be selective in how you characterize and phrase things,” Fuller says.
Celebrate Quick Wins
Mergers and acquisitions are a lot of work, and they are stressful for everyone in the organization. Highlighting successes can help solidify a united culture and give people a sense of resolution.
“Immediately be a champion to celebrate people who are excited about the merger,” Rice says. “That will buy time, build momentum and get early wins for the fragile merger process. The chief HR officer needs to be the chief celebration officer during the tense times of a merger.”
If your organization is facing a merger or acquisition, it’s an outstanding opportunity for HR to prove its strategic worth. Keeping things running smoothly through merging and assimilation will be key to the deal’s success.