Why Consolidating HR Systems Is Critical In M&As: Four Tips For Success
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During a merger or acquisition, migrating and consolidating the systems that matter most — those that maintain human resources information for the employees who power your company — is often treated as ancillary to the more visible aspects of the unification process. However, a lack of attention to HR data and process integration can be costly and disruptive.
For example, many managers may want to cut bottom-line costs, grow new revenue and realize multipliers from the new entity. But they’ll also need to answer employees’ questions about their roles, pay, benefits and job prospects. And in today’s hot job market, managers must put an emphasis on retaining talent.
Any negative impact on accessing HR information — be it confusion, difficulty with or disruption to processes or practices or outright failure — will directly affect the perception of the merger, the prospects of the new entity and, potentially, the new bottom line.
Leaders who choose to consolidate human resource information systems (HRIS) and ensure efficient operations moving forward will want to consider the following. (For more on the broader topic of IT consolidation during M&As, check out my previous article.)
1. Ensure your most valuable assets are retained.
Most business leaders understand that people are your company’s most valuable asset. But merging two (or more) organizations can make it challenging to understand the actual cost of your workforce. You’ll need more than a spreadsheet to establish your operating expense budget as you analyze your human capital and whether you have the right people in the right roles. You’ll also want to determine if there are role redundancies and what new or vacant positions need to be filled.
To better understand the costs and options, it pays to carefully evaluate each organization’s HR infrastructure before consolidating systems, including their applicant-tracking and compensation systems. You’ll also want to consider integrating them with your finance or accounting systems to make reporting easier to establish an HR system of record that is optimal for your company — both now and in the future. Your HR systems will enable you to forecast compensation expenses (which is the largest expense in most companies) and normalize titles and pay to retain your newly acquired talent.
2. Ensure that your systems allow for future growth.
Following a merger or acquisition, it may be hard to look down the road toward growth, but it is essential to do so. Otherwise, you may find that you’ve invested in people and technology that won’t scale to meet your future needs.
Approach your system consolidation and integration with the future in mind. Key questions to ask are:
Can the systems scale to handle expected growth? It’s important to avoid “conqueror’s syndrome,” which is the perception that an acquirer’s HR processes are inherently better and should prevail. The acquired company may have superior technology that can benefit the new enterprise, so take a close look at it before making assumptions.
Should both organizations’ systems be scrapped in favor of a new third-party solution? If so, consider whether you want an à la carte array of best-of-breed solutions or a suite of HR capabilities provided by a single vendor.
Should you call on an experienced consultant who can provide objective guidance — and act as referee, mediator and peacemaker — in harmonizing the HR ecosystems? A managed service provider (MSP) or systems integrator versed in specialized HRIS may be able to help you determine which solution will be best and help you roll it out.
3. Ensure your data is accurate.
Once you’ve decided to merge or migrate your HR systems, you may find you possess a massive amount of employee data. To make the most of it, you need to establish how this data will help inform company decision makers moving forward. You’ll also want to determine if there is data that you can eliminate. Resist the urge to keep everything and sanitize your data. Ensure the HR data that powers your new systems is relevant, accurate, consistent and properly formatted. It will save time and money in the future.
Of course, there will probably be some data that you’re required by law to retain or that you want for historical and archival purposes. However, unless this information is accessed regularly, you can store it apart from the data used for everyday operations. Just make sure it’s secure.
Some employee information is required in other systems to represent their identities. Once your data has been scrubbed, think about synchronizing a subset of the data from your HRIS to other systems to ensure data consistency. This could include your payroll system, Microsoft Azure Active Directory and more.
4. Ensure you’re in compliance.
When evaluating MSPs and software tools, it’s essential to understand how they will handle your data before, during and after the migration. If you are migrating organizational data across jurisdictions, pay close attention to data sovereignty. Data governance rules and regulations are evolving and can vary from region to region. Before beginning a migration, your company should answer these key questions:
Where is the data now? And where will it be going?
What data needs to move?
How sensitive is your data and how will you protect it?
What will happen to the data while it’s in transit? How must it be treated?
What places and hands will it go through to reach the destination?
How will the old infrastructure be decommissioned? Will copies of old data be destroyed?
Can the migration process be automated to eliminate human error or nefarious actions?
Optimized HR systems enable a more efficient organization.
As you plan and design your new organization’s HR systems, consider the many ways they touch your employees’ work and lives. Creating an optimized HR ecosystem offers cost savings by eliminating redundant technology and licenses while streamlining and consolidating your processes. It also contributes directly to the bottom line through greater efficiency, effectiveness and improved decision-making as you move through the merger and into your new organizational structure.
Reposted from Forbes