Newsletter September 2005


M&A Fever

The buzz in the City is all about an expected boom in mergers and acquisitions. Bankers are describing the conditions as ready for the 'perfect storm' - the alignment of cash-heavy balance sheets, cheap international finance, some notable weak performances and, as ever, the benefits of global scale and reduced costs.

If the rumours are true, many of you in well known UK businesses will soon be honing your data room and due diligence skills again, perhaps on the wrong end of a hostile international bid. Historical studies of M&A's show they often fail to live up to expectations and usually it is the people issues that are not fully considered. In planning integrations and looking for synergies, culture is a critical factor and can literally make or break the success of a business in the months following a deal. A study by PA Consulting suggested that taking these issues into account adds more than 5% to the value created. The data may be 5 years old but it that was one of the busiest periods for M&A's we've seen, so the data was rich. Read it here.

And those of you in the City institutions that are financing and advising on all this activity will also be put to the test. As the deal-makers wring their hands with the prospect of their biggest Christmas bonus in years, will the schemes you've helped to put in place pass the commercial test? Or will it be money for old rope? And will you then hold on to your star performers, or get dragged into an equally expensive round of talent poaching? How many of you have learned to break this cycle?

One final thought. Our experience is that global owners increasingly expect a high-value commercial contribution from HR, but are sceptical about the extent that exists in the UK. Will you meet their expectations? Even if you do, of course, you may become a victim of the integration if your new owners already have HR arrangements they can scale up to manage the larger business. What commercial skills development will you have on your CV to offer the market?

Katrina - the Impact on HR in the US Gulf states

Most major UK businesses have plans for emergency situations, although those in the risk advisory business would always suggest you can improve. But how many of your plans assume that you will have people to manage and implement them? Will you know where they are, and be able to communicate with them? Could you cope with a disaster on the scale of Katrina?

This is the huge challenge that has been facing companies caught up in the hurricane that hit the southern gulf states last month, and the devastating floods that hit New Orleans. It has already been estimated that 400,000 jobs have been lost as a result of the disaster, with literally thousands of businesses still at risk if they can't recover and get back to work quickly.

Across industry sectors HR teams have gone into overdrive, first trying to find out where their employees are and then setting up communication channels with them. Some of the largest employers are assuring permanent full time employees that they will continue to be paid as usual, and they continue to benefit from health and other protection policies. There are help lines for those who have difficulties with finding family members, housing, transport or finances.

Full marks to SHRM (the US version of CIPD) for setting up a resource centre devoted to their stories. It makes remarkable reading, and is worth checking out just to compare how your plans would have held up. Click here to browse. However detailed the contingency plans are, there is no doubt that thinking 'outside the HR box' and in a commercial way are the greatest assets of all in developing effective solutions, once you're in the middle of the crisis.

Retail is detail... oh, and people too.

Retailing is undoubtedly one of our toughest sectors, and recently it has been torrid. News abounds of poor results and failing recovery plans at many major High Street stores, with writing on the wall for one CEO, threatened industrial action at acquired distribution centres and, of course, whether Marks & Spencer will get back in the black or eventually turn Green. If Philip Green eventually adds M&S to BhS, Top Shop, Dorothy Perkins, Burton, Wallis, Miss Selfridge, it will mark the end of a battle Green started in 2000 ...and the start of many more changes at M&S. Perhaps his biggest battle will then be to win over the employees and return the pride that made them the UK's favourite place to buy knickers &more. For a great review of Philip Green's career click here.

It may be too late for Sainsbury's to catch Tesco, but it is setting it's sights on ASDA. Even that will be tough, given the global muscle and know-how behind the former Yorkshire farmers co-op that streaked past Sainsbury's after the take over by WalMart. Sainsbury's already focuses a great deal of attention on training store staff, including their famous classes held by Jamie Oliver. Now the staff are again at the centre of their latest re-branding effort, 'Try something different today'. Staff are getting free produce to try out new recipes and ideas for themselves, so they can enthuse about them when making recommendations to customers. Full marks for the effective integration of HR with marketing and store management.

While we're on the topic of supermarkets, more of us are shopping for groceries on line these days but we can't avoid visiting the stores completely. Can anyone tell us whether checkout staff are judged on scanning speed? And if not, why not? Because that's about the only measure that's important to most of us in the queue. Well, maybe the customer service experience is also important - we'd like them to be knowledgeable, helpful and friendly. Perhaps supermarkets could adopt those smiley/sad faces used in motorway service toilets, so customers can give instant feedback on how well they've been served. Most checkout staff are on close to minimum wage, turnover is high and its tough to find enough new people these days. We wonder whether incentives around speed and customer feedback would improve customer loyalty, provide an earnings boost for the best employees and reduce turnover. It sounds like win-win-win to us at Commercial HR. If any supermarket wants help developing this solution, we'd love to be involved.

CIPD Conference, Harrogate

Those of you planning to visit Harrogate must hear Dave Ulrich's closing keynote session at 11.15 on the Friday, if you are serious about achieving a strategic agenda for HR. Book your space with CIPD here. If you don't believe us, you must read this article at the Harvard Business School's Working Knowledge site. Then buy the book at Amazon. Then talk to us about the skills you need to implement it.