Can HR support organic growth, expansion or M&As?

This it the first in a series of articles looking at how Cloud computing is driving HR transformation, giving HR teams in leading companies a key role in delivering business growth..content_box.content_go_deeper.reset_list_style.customized_content_box img {width: 220px;}

Struggling to integrate employees

As the global economy returns to growth, companies are looking for new markets - or a bigger share of existing ones. Some take an organic approach to growth, opening offices in new locations or developing new products. For others, a merger or acquisition (M&A) makes more sense, providing access to new customers and markets, while potentially reducing costs. So it’s not surprising that mergers are booming, with Bloomberg recently that global M&A activity in the first half of 2014 had grown at its fastest pace in 14 years. Yet research puts the failure rate for M&As at anything between 40 and 80 per cent.

Re-shaping HR

A recent book [1] identifies lack of planning and negotiation mistakes among the reasons why so many M&As fail. But cultural and other people-related issues are also to blame, with many newly-merged businesses struggling to integrate employees into a single workforce and to harmonise HR policies and processes. Some even lack clearly visible data on their global headcount - let alone on employee engagement.

Companies that take an organic approach to growth often experience similar difficulties as they rapidly increase the size of their workforce or expand internationally. In both cases, integration problems add costs that can soon cancel out the gains that the merger or accelerated organic growth were supposed to deliver.


HR transformation supports expansion

HR has a critical role to play both in preventing post-merger disasters and supporting business growth more generally. Unfortunately, most HR teams are just not up to the job. HR leaders recognise this, with less than eight per cent of those surveyed by Deloitte[2]confident that their teams have the skills to meet the challenges of today’s global environment.

Is your HR providing impact?

HR teams can support business expansion only if they have gone through a major transformation. That means re-shaping their operations by putting the right people and processes in place and using the right HR technology.

According to Dirk Russell, EMEA HRIS Director at Covidien, which has gone through this process, a successful HR transformation facilitates a company’s expansion into new markets. ‘At its simplest, we can simply add the parameters of a new country and plug it into the system,’he says. ‘There is obviously some additional lead-time involved with setting up other HR services, but the plug-in-and-play approach is pretty well tested.”

Cloud solutions driving the HR revolution

Over the last 20 years, many HR functions have set out on a transformation journey, often creating shared-service centers, centers of expertise and new HR business partner roles. According to research by Bersin & Associates[3], ‘high-impact HR organisations’–those that have succeeded in transforming themselves –are concerned not only with providing low-cost service. They also focus on activities that strengthen business performance, such as encouraging collaboration and employee empowerment and engagement. At Best Buy, the value of a 0.1% increase in employee engagement at a store is valued at more than $100,000 in the store’s annual operating income[4].

However, transformation programmes typically take months or years to produce results - and some never manage to add real value. A 2013 study by HR management consultancy Orion Partners found that while 89 per cent of HR departments had been restructured over the previous three years, just 22 per cent had been successfully transformed.

But there is a way to fast-track HR transformation – and it sits in the Cloud.


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