Mergers and acquisitions (M&A) are large programs that have many projects within, that require intense planning, preparation, and execution. The human capital management projects a company must complete are key to a successful implementation of an M&A program. This paper focuses on adopting a project management perspective on mergers and acquisitions through focusing on the human capital management projects that need to be successfully implemented to achieve project success. Specifically, it highlights project management best practices around integrating cultures, organizational structures, and total rewards within mergers and acquisitions.
Organizations select portfolios, programs, and projects based on their strategic relevance and feasibility. Mergers and acquisitions (M&A) are large programs that companies invest in to improve their business position and market strategy. They require intensive planning and preparation and require many projects to be executed simultaneously to achieve total project success. One of the biggest reasons for the failure of a merger and acquisition is that organizations overlook the importance of integrating the human capital between both entities (Forbes). The project managers of the human capital M&A projects are responsible for items such as change management, communication management, restructuring decisions, culture integration, benefits integration, and developing a new organizational structure (Dixit, 2016).
Total project success is not achieved due to issues within these areas such as culture discordancy, mismatched management, and turnover of key employees and talented workgroups (SHRM, 2016). Therefore, the project managers are faced with challenges, they can overcome these challenges through mastering the twelve core knowledge domains of project management; integration, stakeholder, scope, schedule, resources, cost, communication, risk, quality, supply-chain, conflict, and governance management (Wu, 2020). This paper will highlight best practices project managers can utilize to master executing seven of these knowledge domains when managing the human capital projects within a merger and acquisition program.
Mergers and acquisitions require two entities to combine their resources, processes, and procedures into one. In addition, every M&A requires individuals to approve project proposals, work structure breakdowns, budgets, costs, and change requests (Nead, 2018). A best practice is for the core team of both organizations to establish the processes for decision making, escalations, changes requests, approvals, and determine the project hierarchy (Nead 2018). Identifying the key processes and layers within the governance process in the project initiation phase will allow the project team to take quick action from day one when issues arise, preventing schedule constraints (Balton, 2002).
Identifying and engaging stakeholders for projects in any organization can be hard, however, mergers and acquisitions present another challenge because they double the number of stakeholders the entities must identify and engage. As a result, a best practice to ensure proper stakeholder management is for the core team to create a Stakeholder Evaluation Matrix and Stakeholder Engagement Plan. The Stakeholder Evaluation Matrix will allow the core team to identify who the stakeholders are, their expectations, and impact (Wu, 2020). The Stakeholder Engagement Plan will allow the core team to develop a guide for how to properly monitor the top stakeholders that were identified in the evaluation matrix. As a result of developing these two documents, the project team can improve communication and reduce risk and increase the likelihood of total project success (Wu, 2020).
Resource and Communication Management
The project managers must identify what needs to be altered in each of the entity’s organizational structures to combine the two organizations in a way that best supports the strategy and goals of the project. This requires them to identify what human capital resources will be needed to support the M&A and evolution of the partnership. Therefore, they must identify any redundant positions, create new roles and teams, alter existing job descriptions, or eliminate sections of the businesses completely (Symes, 2020). To ensure resources are identified to support the strategy of the M&A, a best practice for the project team is to create a resource management plan that assesses the KSA’ (Knowledge, skills, and abilities) of each individual and department to determine who will remain with the organization and who will be terminated. This analysis is important to the long-term success of the project post-implementation. If poor resource decisions are made, the new entity will see decreased benefits from the M&A (SHRM, 2016).
Employees fear layoffs when restructuring occurs. Project managers play a vital role in communicating and easing concerns regarding these changes to reduce the turnover of key talents who are essential in making the new organization successful. A best practice project manager can utilize to prevent turnover and increase retention, is to create a communication plan in the initiation phase that notifies “Star Performers” that the M&A is occurring (SHRM, 2016). Developing this plan to inform the top performers is critical because they must know they are essential or they may be inclined to look for a new job. It can be detrimental for the project team if these individuals were to leave. It would require more project budget and resource investments to replace them, and it could lead to schedule management challenges if the individuals that left were critical to the execution of the project (SHRM, 2016). Moreover, the two best practices above illustrate the critical nature of proper resource and communication management because if the human capital of the new entity does not support the goals of the M&A, it can lead to the failure of the program.
A company’s payroll and benefits are typically their biggest cost. As a result, the labor expense of M&A’s can be a significant part of the project budget. Therefore, when estimating project costs to create a more accurate project budget, the project managers must review the total rewards offered by both entities when estimating the budget. Total rewards are a combination of the benefits programs, compensation packages, and paid time off company’s use to engage and incentivize employees (Dixit, 2016). The project managers should estimate this cost at the beginning of the project to prevent the common budget issue of inadequate planning from preventing them from creating a more accurate budget. Another best practice is for the two organizations to combine and restructure their total rewards structures to a compatible standard (Dixit, 2016). This will help ensure individuals from both entities are satisfied, prevent turnover, and reduce resource, budget, and schedule challenges from that occur from high turnover.
Culture is critical in the implementation of an M&A project. This is because each of the organizations business cultures are unique, not one company has the same shared values, beliefs, behaviors, and implicit work rules. Since culture is the unspoken way of communicating and behaving in a company, it is critical that the project team ensures they are sensitive to the broader business culture of both organizations (Phillips, 2020). Studies have found that 30% of M&A’s fail due to conflicts that arise from integrating two cultures, employees struggle to replace their underlying beliefs from the previous entity with the new entity’s values and beliefs imposed on them (Deloitte, 2009). A best practice to overcome this is for the sponsors, executives, and project managers to evaluate the culture compatibility of the two organizations in the initiation and preparation phases of the project. This would allow the project team to identify risk points and areas of conflict that could arise during the project life cycle and post-implementation of the project. As a result of establishing this plan, the entities will be better prepared to handle cultural conflict, which will increase the likelihood of successful integration.
The goal of risk management is to maximize the gains from opportunities and minimize the impact of threats. A best practice to plan for risk in M&A projects is to create a Risk Breakdown Structure (RBS). RBS structures categorize risk based on levels of associated risk such as business, technical, data, management, and adoption (Wu, 2020). Project managers should identify the human capital risk levels and the opportunities and threats within each relevant risk level. This breakdown should be included in the Risk Management Plan to document and create a baseline of risks. This baseline can be used by project managers to tackle strategically the risks in a structured capacity (Wu, 2020).
Project management is key to the success of portfolios, programs, and projects. According to the Harvard Business Review, the failure rate for mergers and acquisitions is between 70 to 90 percent (Lakelet Capital, 2019). This paper clearly illustrates that one of the biggest reasons for the failure of a merger and acquisition is project teams overlooking the importance of the human capital management projects within the M&A program. Therefore, to prevent the challenges in the knowledge domains of governance, stakeholder, communication, resource, cost, conflict, and risk management, project managers should follow these best practices:
- Establish the processes for decision making, escalations, changes requests, approvals, and determine the project hierarchy in the project initiation phase.
- Develop a Stakeholder Evaluation Matrix and Engagement Plan.
- Create a Resource Management Plan that assesses the KSA’ (Knowledge, skills, and abilities) of each individual and department.
- Create a communication plan to notify the “Star Performers” in the initiation phase that the M&A is occurring.
- Estimate the costs of the total rewards package that will be offered by the new entity and make it compatible with the current packages offered by both organizations.
- Evaluate the cultural compatibility of the two organizations in the initiation and preparation phases of the project.
- Create and document a Risk Breakdown Structure (RBS).
Implementing the best practices above can assist project managers greatly in ensuring the human capital projects are successful, which is critical to the successful integration of the M&A program.
Cara Housel, Graduate Student at Montclair State University & Talent Development Professional.
Brooks, George. “How HR Is Key to Successful Mergers and Acquisitions.” Forbes. 2019.
Blanton, Jeffrey. “Mergers and Acquisitions Successful Integration with Project Management.
“Project Management Institute, PM Network. 2002. Retrieved: https://www.pmi.org/learning/library/mergers-acquisitions-successful-integration-pm-3052
Deloitte, “Cultural Issues in Mergers and Acquisitions.” 2009. Retrieved from
Dixit, R and Jain, TK. “HR’s Role in Mergers & Acquisitions.” Research Gate. 2014
Lakelet Capital. “Reasons Why Mergers & Acquisitions Fail and Succeed. 2019.
Nead, Nate. “Project Management Best Practices for Mergers & Acquisitions.” Roi. 2018.
Phillips, J. M. (2020). HRM Core Concepts, Chicago Business Press.
SHRM. “Managing Human Resources in Mergers and Acquisitions.” SHRM Toolkits. 2016.
Symes, Steven. “The Role of Human Resources in mergers & Acquisitions.” CHRON. 2020.
Wu, T. (2020). Optimizing Project Management. CRC Press, Taylor & Francis Group. 2020