HR Issues in Mergers and People Management at E-Commerce Firms
Mark Oshima and his colleague, Sharad Vishvanath speak on HR issues during mergers and people management in e-commerce firms
Companies need to “treat employees as customers” and communicate with them effectively, said Mark Oshima, Managing Partner at Human Resources (HR) Consultant Aon. Oshima and his colleague, Sharad Vishvanath, Asia Pacific M&A Leader at the firm, spoke in an interview about HR issues during mergers, people management in e-commerce firms and how companies across the globe are shifting people to growth businesses.
Q. You help in talent management during mergers and acquisitions. What are the three or four top people ideas that help during M&As?
A.Oshima: It is important to identify and communicate the strategic intent of the deal to the people, why did we do this... why is it important for the business, etc.
The point they (companies) forget is the employee side. How does it affect an employee, a breadwinner for a family, how will it affect the career? Will I have a job? How will my job look like after this? Identify when the security issues will arise. Address the security issues or when they will arise. Will my job change? Will my boss change? These are an employee’s immediate concerns which should be addressed.
The next concern is with whom I’m going to work with... next would be how will this affect my long-term prospects of growth, how will this organization change the prospects of my career?
You need to communicate these things to your employees. Ambiguity is an enemy to a successful merger. You need to control the message, only then can your employees understand what the future will look like. From an integration perspective, it leads to success of keeping your best people in the organization and ensuring they are engaged.
Q. In the Indian context, the union government has approved the merger of State Bank of India’s (SBI’s) associates with the parent. There are murmurs about thousands of people losing jobs. How should an entity like SBI handle people issues?
A. Vishvanath: I won’t go into the SBI merger in specific, but when you have such large-scale integrations and mergers, one should look at what the drivers of such mergers are. Is it due to synergies of growth? How do you go to the market, how do you structure yourselves? What they need to communicate is, is it to drive growth further... enter areas they have not explored before, geographically? Are you going to consolidate areas?
In a market like India, where the growth potential is huge, workforce optimization is not a challenge, but resource allocation to the right areas is. If reduction of workforce is a possibility — there are ways to ensure it. You help employees manage it better by giving better severance packages. Help some in terms of outreach… let’s say talk to a placement agency and ensure that these people are placed in some other companies.
Q. Automation is considered a threat to jobs. Do you see, in emerging economies like India, that a lot of people are going to sit at home because of automation?
A.Oshima: Automation will change the nature of work... and create demand for the right people with skill sets, who can drive and manage automation. It will not lead to not having any work to do, but different things have to be done differently. There will always be jobs and always be a demand-supply mismatch. The issue is, does the supply have the right skill, adaptability and other issues like behavior, cross-cultural aspects, etc., as HR becomes globally integrated.
Q. Of late, e-commerce firms in India are facing people issues. How do you deal with such issues at startups and e-commerce firms?
A.Vishvanath: You need to hire people who can provide differentiated customer satisfaction. A huge amount of funding came in, so a lot of hiring happened. In hindsight, it was too much of growth too fast… The data analytics are key for productivity in HR here. The biggest challenge is how you hire and its attachment to the goal of differentiated customer satisfaction. Another aspect is how to manage expectations… to help employees understand their career growth. You have to tell people that this is a five or six-year journey of career growth (rather) than a one-year sprint.
Oshima: For e-commerce firms, growth has to move with profitability. In general, companies must treat employees as customers that are buying things and have expectations. That’s how you can build great companies and drive value better.
Q. In India, hiring and firing is considered as an enabler of business but you are saying human resource is prime. What’s your take on the Indian scenario?
A.Vishvanath: You cannot pick up what the US does or the UK does because there are other environmental and regulatory factors at play. The economy is different. There is no dispute that labor laws in India are relatively archaic — hence, reform is a requirement. On the other side, you cannot be completely market-driven like the US. France has more stringent labor laws than many, yet their companies are productive and creating value for investors.
In a market like India where growth opportunity is large, the key is how do you ensure that your workforce is productive. Productivity in some sectors is a legacy issue and that can be solved jointly by the industry, government and a particular company.
We feel bullish on manufacturing — in the face of ‘Make in India’, ‘Digital India’ and ‘Skill India’. Demand and supply need to be balanced. The risk is, if we don’t create adequate demand… you have a skilled workforce and you don’t know where to deploy. The solution is promotion of small and medium businesses and entrepreneurship.
In the US, 75% of businesses are SME (Small and Medium Enterprise) related. You need to have a more composite structure on this.
Q. Recently, you surveyed some of the top companies in the world including those active in India. As an HR consultant, what are the common people strategies you observed?
A.Oshima: First was collective ambition. The second area that was common is what we call customer centricity. The third area is “intentional alignment.”
This is where the HR aspect comes in. These organizations found a way to be able to drive collaboration among their people, across functions, across geographies that enable them to grow.
They made choices... to deploy their capital and their people to the area of highest return. Sometimes, they made difficult choices of taking people out of their core businesses and putting them into their growth businesses to drive high returns, and sometimes even cannibalize their existing businesses for the benefit of growth.
Q. So, you are saying companies are shifting people from core business to growth business. So the growth is not happening in the core?
A.Oshima: It’s not a matter of ignoring the core... but they understand, when the market for the core is flattening and they understand how to emphasize the areas of growth.
Vishvanath: Where the growth is the key, the core business may have to give up some force in terms of right talent. When we look at significant growth strategy in India, you will pick up the best people in core to go take the initiative on the new trend.
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