By Toby Kim

The success of any merger or acquisition (M&A), be it large or small, depends as much on effectively managing people and the organizational environment as it does managing the timing and financial aspects.

More M&A deals are failing because of unresolved cultural issues rather than fundamental problems with the transaction. The reality is that performance is driven largely by an organization’s people ― specifically, their competencies and contributions ― therefore, their ability to stay engaged during difficult transition periods is critical. And that’s where HR (human resources) plays a pivotal role.

According to our research, along with my first-hand client experience, it is clear that more deals can be successful when organizations address people and culture issues early on, strategically, and with discipline.

In a Towers Watson global survey of more than 400 business and HR executives, respondents rating their company’s deal as successful in regards to meeting primary objectives were those that recognized the importance of people issues and involved HR in the deal early.

These companies emphasize critical skills, measure leadership behavior and actions, nurture critical skills, communicate broadly, retain key talent and build cultures that are aligned with and support strategic goals.

HR plays a critical role in all phases of an M&A transaction, from target evaluation and due diligence, through to integration planning, implementation and ongoing growth, as well as each of the seven areas of critical value.

A company’s ultimate goal in regards to a successful M&A is realizing the strategic business objectives of the modified organization and maximizing long-term shareholder returns. Often, these goals include a combination of cost savings, business growth, and entry into new markets and services.

The seven areas of critical value ― compensation, benefits, talent, communication, culture, leadership and HR service delivery ― help companies achieve these goals. To a greater or lesser degree, all seven areas are in play during each stage of an M&A deal. Focusing on these areas of critical value helps ensure a company can sustain and improve employee engagement, something essential to the long-term success of any deal.

Rather than simply execute a checklist of processes, we help organizations fully appreciate the extensive people changes that accompany most M&As. We help companies identify, understand, and act upon, unique people issues ― what employees do, how they are motivated, how they are rewarded, and how HR services are delivered to them ― to create people strategies that best support broader business goals.

Using this approach, there are specific steps that HR can undertake to prepare for its role in M&A or other corporate transactions.

Firstly, pre-deal preparations need to be carried out to ensure that essential resources are already in place if and when the opportunity for an acquisition appears. The structure and resource commitment of the HR M&A team must be identified next.

For example, HR must evaluate the likely deal size and scope, anticipate overall deal coordination, and areas that HR will be involved in, as well as create a project management office and identify geographic and functional resources.

Next, an M&A blueprint needs to be established, which will serve as a guide for what needs to occur during each phase of the transaction and who needs to be involved. The blueprint must also highlight the most critical areas of the transaction, as well as the complexity and interdependencies of each work stream within HR and across the different functions.

Once the process of people M&A begins, HR needs to play a critical role in supporting future transactions. Training should focus on understanding the business case and learning the different types of transactions and best practices used.

Finally, an M&A playbook should be developed in order to enhance HR’s ability to partner with other functions. The development of a playbook greatly enhances the capability, credibility and consistency of HR’s support during M&A. It is crucial that the playbook be customized based on the unique circumstances of the deal.

Mergers, acquisitions and other types of transactions present exciting opportunities and challenges to organizations. For HR, it’s an opportunity to truly help shape the workforce of merged entities. By keeping people issues front and center, understanding HR’s role in each of the critical phases of the deal’s lifecycle and working from a deliberate plan, HR can effectively support the business and help achieve solid results from the transaction.

Toby Kim is a director of Talent & Rewards at Towers Watson Korea.