0910 0118-0904-0501-0101058,ijaridea

Avinash Kumar Singh et al., International Journal of Advanced Research in Innovative Discoveries in Engineering and Applications[IJARIDEA]
Vol.1, Issue 1,27 October 2016, pg. 1-6
1
© 2016, IJARIDEA All Rights Reserved
Challenges Faced by Organizations Post-Merger
in IT Industry: An HR Perspective
Avinash Kumar Singh1
, Aman Sagar2
, Jaya Chitranshi3
, Pramod Sanjay4
¹Student, Symbiosis International University, India
² Student, Symbiosis International University, India
3
Faculty, Symbiosis International University, India
4
Student, Symbiosis International University, India
1
avinash.ksingh2017@sims.edu
Abstract— The IT industry is considered to be dynamic in nature where strategies are changing faster than policies.
Organizations inherently view merger as a key to business change, especially when they want to make a union play. The
relentless pace of technology change and the constant union of different business models across the industry prompt a “buy
vs. build” decision to generally result in “buy”. Mergers are said to be successful only if they lead to an increment in
shareholder value, but latest study conducted by KPMG in 2013 indicates that 83% of merger deals did not boost
shareholder returns. And one of the most noticeable reasons of failure was lack of HR integration between two companies
undergoing the transition. It is evident from the research done across the globe that there has been negligible attention
shown towards IT industry. The mergers have been increasing in this sector ever since a few decades where the IT industry
has grown manifolds, however not many research studies have been able to capture the essence of the matter. The HR
function in IT industry which deals with high volume of employees who have a significant impact on the performance and
results is often undermined by the Top management. Considering the criticality of mergers as a strategic tool, it has been
reviewed that the study conducted by firms as well as researchers have found that the major challenges faced by HR post-
merger would be change in organization, fusion of culture, managerial challenges, transparency in communication and
employee stress. The limitation of this research paper is that the HR challenges faced by organizations post-merger are
confined to IT industry. According to our extensive research and understanding, recommendations are given which exhibit a
holistic viewpoint on the different practices and imperatives that organizations must embrace in order to create a successful
HR integration post-merger in the sector.
Keywords—Employee Stress, Fusion of Culture, HR integration, Post-Merger, Strategic tool
I. INTRODUCTION
In recent years Information Technology (IT) industry has witnessed significant development and innovation and has resulted in
expanding India’s footprint on the world map. Human resource managers have been triggered to play a more vital part in their
companies, particularly in making strategic decisions and experiencing radical managerial changes, for example, merging
process (Bjorkman9
and Soderberg9
, 2003). These days this condition is even much more critical and intense because of the fact
that last decade has been specified by huge proliferation in mergers. Majority of the studies of HRM in merger field were
centered on the conceptual framework and has a consultative nature in managing one aspect of the merger procedure which is
the pre implementation phase of merger.
Mergers are considered as strategic moves focused on expanding the total assets of both the purchasing and the offering
companies. This is not a recent situation, and the world has already noticed rampant "surge" of mergers. The past study on
mergers predominant emphasized on finance related and key issues, though, recent researches concentrate on the human
resource (HR) aspect. These days, it is generally acknowledged that the way in which different HR issues are taken care of is
critical to the success and failure of any merger. Additionally, a large number of failures in merger can be followed to poor
reinforce of staff issues and activities. According to the studies, it has been assumed that common factors behind merger failures
are culture conflicts, incompatibility and gaps, loss of niche talent and many more. Merging organizations are accountable for
incorporating the workforce and cultures of various companies, keeping in the mind the desired stature of the resultant company.
An unsuccessful merger integration operation may have huge inimical impacts on an organization, including loss of high
potential talents, a fall in work efficiency, reduced job engagement and satisfaction, disintegration in communication and
resistance to change to strategies and methods (Cartwright19
and Cooper19
, 1993). It has been found that plenty of consideration

2
is paid to the legal, monetary, and operational components of mergers. But, managers who have been through the merger
business now perceive that in today's economy, the management of the human side of change is the substantial key to
maximizing the estimation of a deal (Gunther13
and Kay13
,2001). Mergers are said to be quite unsuccessful with a probability of
about twenty five to fifty percent at maximum. Post-merger integration is most often blamed as the prime factor why merger
deals are not much successful than it should be (Krummer5
, 2009). It is in the process of post-merger integration when the
Human Resource aspects surface. If in this stage, the different HR issues are tactfully attenuated, nothing can resist the merger
from being a successful integration.
The study has been conducted by Rita salame7
(2006) indicates that sixty to eighty percent of all mergers are financial failures
while many studies are pointing to the negligence towards HR issues as main reason for merger failures. The outcome of this
study was that senior executives realize the importance of HR issues in the success or failure of mergers as they were not
focusing enough to encourage the association of HR teams and staffs in merger process. In most of the IT organizations,
financial remunerations are considered to be a crucial element of merger process. Organizations & managers should take
substantial steps to enhance commitment of employee and retention of it by giving supplementary support (Eilen8
and John8
,
2004).
HR managers can play a vital role during the due diligence process required in a merger. Above their conventional
responsibility as a facilitator in the assessment, integration and evaluation of staff benefit schemes, they can likewise assist in
the mapping and planning of workforce needs in terms of quantities of staffs and job functions, and in the assessment and
administration of legal liabilities, for example, discrimination, harassment and leave law claims. The due diligence schedule for
HR mangers can help their group in this process and in organizing, planning and comprehension of the issues to be addressed to
in a merger. Deliberate planning and early inclusion of HR managers in the merger process can go a long way towards
augmentation of the potential for success (Linda16
, 2000).
TABLEI
TABLE INDICATING MERGER ACTIVITIES OF IT COMPANIES IN INDIA IN THE LAST DECADE
Company Year Acquired IT Companies Profile of the Acquired IT Companies
TCS
2013 Alti Sa Integration Of Sap Solutions
2008 Citigroup Global Services Business Process Outsourcing
2006 Tata Infotech India ITES
2005
Financial Network Services Provider Of Core Banking Technology
Comicrom Business Process Outsourcing
Infosys
2015
Skava Provider Of Digital Experience Solutions
Panaya,Inc Enterprise Software Management
2012
Lodestone Management Consults Management Consulting Firm
Portlant Group Strategic Sourcing Services
2009 Mccamish Systems Business Process Outsourcing
Wipro
2013 Opus CMC Financial Services Consulting Firm
2012 Promax Applications Group Trade Promotion Planning
2011 Saic Global Oil & Gas Vertical
2007 Infocrossing Inc Infrastructure Management Services
2006 Cmango Inc Business Service Management Solutions
HCL Technologies
2015 Concept To Silicon Systems Engg. Services Provider
2009 UCS Group's Enterprise Solutions Sap Practice
2008
Axon Group Pic Business Transformation Consultancy
Control Point Solution Voice, Data and Wireless Services provider
Satyam Infoway Ltd. was acquired by Tech Mahindra in 2009 wherein the entire process was unpleasant for the Satyam
employees. Satyam underwent a complete change to synchronize itself with Tech Mahindra for the ease of integration. Also,
they had to involve in unbridled downsizing and rightsizing efforts , as a result which left several positions redundant in both
the companies and brought in a lot of ambiguity and uncertainty in the minds of the employees undergoing that change.

3
The Human resource function faced a lot of issues and challenges such as resistance to change, retention of employees,
retention of existing clients, restoration of faith of employees in the company etc. It can be ascertained from the fact that as the
company merged with Satyam, a high rate of attrition was seen in Tech Mahindra associates too. The already existing attrition
rate in IT sector was 25 percent during the crisis phase of 2009-11 which was both voluntary as well as involuntary where the
employee strength of Tech Mahindra reduced from 45000 in FY09 to 27000 FY10 giving sleepless nights to HRs of the
company.
Taking another example of TCS and Tata InfoTech Merger in the year 2005, the major issues which were faced by the HR were
legal, policy and promotion, induction & integration, project allocation and many more. However the merger was successful
and the process was executed smoothly through considering prior experience of both the entities, apt modification of pay grades
and scales in order to conform with Salary structure of TCS, fixing right date of joining, providing the necessary training based
on their prior company experience and their competencies and many more. Thus from the above examples we see that there are
numerous challenges faced by HR in mergers and thus they are rightly referred to as the Gluing Agent. Here are some of the
challenges faced by HR post-merger are explained below.
II. CHALLENGES FACED BY HUMAN RESOURCES POST-MERGER
A. Change in Organization
It refers to how the change is overseen by the two companies, and how the change is viably taken care of by the resultant
(merged) company. It manages with all the activities, procedures, people involved, factors that assume a part in dealing with
this change procedure. A change, since, is never desired and always feared, is the last thing the HR of an company
would anticipate. The staffs would thus not welcome the change readily and therefore need to be made well informed of the
reasons, purpose, consequence and the post-consequence of the organizational change. Ensuring that efficacious change
management happens is the accountability of both the involved organizations.
B. Fusion of Organization Culture
Organizations involved in the merger process have different culture and It is crucial for the both entities to manage their culture
which leads to either success of the merger or the failure of the merger. A firm’s culture is constituted of shared convictions and
values that enable the people of the firm to get the meaning and allocate them with the guidelines for the way they behave in
their firm (Davis18
, 1994). The value of culture is not by and large perceived inside the organizations, because keys assumptions
and preferences guiding thought and action tend to operate at a primitive level. Nevertheless, this primitive level influences
various areas inside the organization including cooperation, communication, perception, performance, decision making, control
and justification of behaviour.
C. Managerial Challenges
Most of the researchers have been stated that no matter how efficacious the merger process might have been, its victory lies
with the management i.e. the way the management executes and supports the transformed state of affairs (Fischer6 and Rush6
,
2008). The management of both the organizations need to be fully aware of the requirements of its staffs and should be
well equipped with the necessary skills and knowledge to ensure a smooth transition from the current to the expected
state of affairs.
D. Transparency in Communication
During the process of mergers, staffs are usually kept oblivious about the buy or sale of the enterprise. They often get the
information about merger and acquisition on a less than timely basis, through the corporate grapevine or through the media
communication. This can lead to a misrepresented or distorted picture of the merger's repercussions and to counterproductive
exercises by staffs, which might be on edge about possible employment losses. Therefore, wherever possible, companies should
aim to notify all staffs in the meantime and talk about their concerns and positive emotions likewise minimize the anxiety. This
thing can built the cooperation and mutual trust among staffs furthermore gives them confidence that the new management is
prepared to listen their concerns and feelings (Mike14
, 2001).
E. Employee Stress
It has been observed that even the best orchestrated mergers can be intimidating, unsettling, and traumatic for few employees in
the organizations (Schweiger20
, 2002). Researchers have found during the process of mergers, managers had considerably
higher psychological stress than the other staffs and a higher percentage of the acquired organization’s managers had scores
equivalent [to] or higher than psychoneurotic outpatients (Cartwright17
and cooper17
, 2003). Some of the reasons for
conventional merger stressors include the uncertainty, insecurity, and fears about job responsibility changes, job loss, transfers,

4
change in compensation and status, power and esteem changes. These factors can lead, in turn, to results in the organization
such as low or unsatisfactory performance, absenteeism and increased rate of staff turnover.
III. STRATEGIES TO FACE THE HR CHALLENGES POST MERGERS
The recommendations mentioned below for seamless integration during mergers should not be considered as comprehensive or
obligatory. In IT industry every merger is distinct. These suggestions must be effectuated on a proactive rather than on a
reactive basis. Once the deliberations on the process of merger is successfully finished, strategies including the suggestions
should be devised to make sure that the human facet will not impede, but will assist in, prosperous integration of both the firms.
A. Conduct a Cultural Scrutiny
The firms which are getting into the process or merger or acquisition should orchestrate a cultural analysis to anticipate not only
its own culture but also that of the firm being acquired or merged. This analysis will help firms in revealing the variations in
values, beliefs, norms, practices, and type of procedures. This analysis will allow the firms involved to evaluate the ‘goodness
of fit’ and to foresee potential limitations to the acquisition (Vazirani1
, 2013). This will also allow the firms involved to decide
what factors in the cultures involved are worth preserving.
B. Conducting a stress Audit for Merger
Schweiger20
and Ivancevich20
(1985) have advised that creating and applying an engagement survey to the all possible
employees for anticipating employee’s attitudes, opinion about the merger. This will help in identifying employees who are
facing difficulty in adjustment to new environment. The stress scrutiny should include areas such as pay and benefits, rewards
and recognition, job responsibilities and duties, job security, and co-workers. The information collected from the engagement
activity will allow the leadership to chalk out program or make tools to reduce the stress level and thus assist employees in
making the transition to the new culture.
C. Providing Constructive and Real Time Feedback
To remove the anxiety which the employees may have, the firm which intends to keep the talent , the necessary point is that the
business furnish them with reassurances by informing them whether they are executing their work admirably or, at not good, or
satisfactorily, given the challenges involved in the merger (Buono10
and Bowditch10
, 2003). This will help remove negative
feelings and will create a conducive work environment.
D. Conduct Pragmatic Merger Preview
A pragmatic merger inspection anticipating job expectations effected by the process of acquisition will definitely allow the
employees to adjust more effectively with modified job requirements (Schweiger12
, 2002). Thus the preview will especially be
fruitful for employees of the merger firm. This preview will also help employers in providing an improved understanding of the
acquiring corporation’s objectives, reporting systems, and culture, and it can help employees in understanding the logistics
behind any work redesign.
E. Provide Personal Guidance
Personal guidance on the areas related to adjustment and stress handling techniques can help the people to decode the
challenges which are associated with the stress involved in merger. The personal guidance would also help in recommendation,
demonstration and handling of merger stress techniques. It will also enhance the employee’s mastery (Moffat3
and McLean3
,
2010). Also, as described, a counsellor during the personal guidance can show new career crossways and job openings in the
acquired business, which provides some kind of incentives to employees for retaining.
IV.BENEFITS OF M&A TO ORGANIZATIONS
A. Synergy Between Two Organizations
According to the studies, when two organizations merge with each other, it is not only the integration of resources but also the
quality employees, additional skills, and other business intelligence which will lead to high productivity for both the firms
(Maria15
, 2001). For instance, an organization is having a good management, technical expertise and the other organization is
having efficient and modern machineries. Thus in this situation M&A will be beneficial for both the firms involved. If we
consider the acquisition of Satyam by Tech Mahindra we see that Tech Mahindra was a specialist provider of the IT services
and telecommunication services while the Satyam was globally recognized as consulting organization. Thus this amalgamation
helped the newly formed organization to reach a newer height.
B. Higher Creditworthiness

5
If we consider the financial benefits which an organization can obtain in the process of M&A, then the merged entity will have
a better creditworthiness when compared with the individual’s entity. It will help the organization in purchasing the goods on
credit. Also the organization can obtain the bank loan easily and it will be easy for the organization to raise capital in the market.
It can be noticed that M&A prove to be beneficial in an increase in market share (Gupta11
and Gerchak11
, 2002). When a
financially strong firm acquires a relatively weak one, the resultant company can experience a substantial growth in their market
share.
C. Economies of Scale
In the business world, it is always said that “bigger is always better”. Combining the resources of the two organizations will
definitely bring the economies of scale. By combining two companies, the volume of the operations can be increased and thus it
will automatically lead to economies of. scale. Considering the other side of merger and acquisition, it leads to the organic
growth of the existing business plan (Gubbi4
and Aulakh4
, 2010). Business in the same domain or location can combine
resources to reduce costs, eliminate duplicated facilities which result in increased revenue.
D. Becomes a Market Leader
With the entries of new players in the market the competition among the organizations is bound to increase. Thus M&A is a
strategy used by big organizations to avoid unhealthy competition a situation where too many players are catering to public
needs. M&A of the organizations will help the organizations to enhance the access to the market and thus reap the benefits for
their profitability (Gomes2
, Weber2
and Brown2
, 2011). It also leads to the diversification of the services, products and business
portfolio. A target customer and business may be able to offer quality products or services which an organization can sell
through their own distribution channels. For instance, Flipkart here we will understand how Flipkart earlier acquired Myntra
and later acquired Jabong and thus became a market leader in ecommerce segment giving competition to other players like
Amazon and Snapdeal.
V. CONCLUSION
Human resource is the most crucial asset to an organization which can essentially determine its success or failure. If the people
are in-line with the organizational goals and objectives and shared values, nothing would hold the firm back from achieving the
pinnacle of success. Mergers result in a significant change in the demographic structure of the resultant organization. The
sensitivity with which this transition is handled, closely monitored and effectively executed determines how fruitful its results
would eventually be.
After the merger, an organization can focus more on campus hiring and employee referral programs which will help them to
effectively propagate their culture, undertake benchmarked best practices which eventually would help in curbing the rampant
attrition. A study conducted by Aon Hewitt in 2014 on IT industry states that candidates hired via Campus and Referrals tend to
have better understanding of what is expected from them and have 21% greater retention rate when compared with other
external sources like Job Portals and Walk-ins. Infosys Ingenious, Mahindra War room are some of the well-known initiatives
where IT sector companies focus on quality Campus Hiring. Also career development and succession planning for employees
should be focused upon and some specialized positions must be created to help employees boost their morale. For instance,
after Satyam Infoway’s acquisition, the company initiated the Global Leadership Cadre program with an idea to build a
workforce which would lead the company in future. The human resource, though an asset, tends to offer significant challenges
during merger, leading to failure of majority of the process. However, if these challenges are mitigated cleverly and in time,
and the HR’s opinion in the process is proactively incorporated, before, during and after the transition period, mergers can offer
gigantic benefits to both the organizations.
VI.RECOMMENDATION
With the help of our thorough analysis after reviewing various research papers, we have found that most of the organizations
have not used any strategic model for merger and acquisition process. According to our meticulous understanding on this topic,
it is recommended that implementation of certain models which would enable organizations to expedite their integration process
such as Pathfinder model; FIDESS Model and Merger management model would be life saver for integration process. Merger
and Acquisitions, irrespective of its positives, poses numerous difficulties to organizations as far as Integration on different
levels and stages is concerned. A successful integration model comprises of implementation of decision making, restructuring
process, technical aspects and cultural aspects. There are with the usage of certain specific measures like the Pathfinder Model
concocted by General Electric which fractionates the process of merger in four stages through a set of leveraged actions,
starting from pre-preparation going on till assimilation, each stage focusing on best practices and pragmatic approach to be
taken by management. FIDESS model comprises of six pillars i.e. focus, innovation, discipline, excellence, speed and simplicity.
The execution processes for all above phases are discussed with top management.

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It is imperative that a great amount of R&D work is required by organizations in terms of analyzing the systems as a part of the
process and then coming up with Benchmarked Best practices and specific strategies on the areas of communication,
compensation, normalization in performance management, Talent retention, Redundancy rationalization etc. which bring in the
required stability in their jiggled state. Each M&A process has different degree of resource and people integration. There is no
universal model as such which may be applied for the smooth transitioning all types of M&A. But such models will be quite
useful to provide a checklist or roadmap for the management who would be undergoing through the process in the future.
REFERENCES
[1] Vazirani, N. (2013). An integrative role of HR in handling issues post mergers and acquisitions. SIES Journal of Management, 9(2), 82.
[2] Gomes, E., Weber, Y., Brown, C., & Tarba, S. Y. (2011). Mergers, acquisitions and strategic alliances: Understanding the process. Palgrave Macmillan.
[3] Moffat, A., & McLean, A. (2010). Merger as conversation. Leadership & Organization Development Journal, 31(6), 534-550
[4] Gubbi, S. R., Aulakh, P. S., Ray, S., Sarkar, M. B., & Chittoor, R. (2010). Do international acquisitions by emerging-economy firms create shareholder
value? The case of Indian firms. Journal of International Business Studies,41(3), 397-418.
[5] Krummer, C. (2009). Overcoming the Challenges and Issues of Post-Merger Integration: Putting PMI in the Driver’s Seat in the M&A Process. Mergers
and Acquisitions: Issues and Perspectives from the Asia-Pacific Region. pp. 133-146
[6] Fischer, K., Rush, T., (2008). Staffing after Mergers and Acquisitions: A Human Resource Management Study. Journal of Business Case Studies, Vol. 4,
No.12
[7] Rita S., (2006), Why do mergers fail? What can be done to improve their chances of success, UK
[8] Eilen F. ,John F.. (2004), “Leading through transition: Perspectives on the people side of M&A”,USA
[9] Bjorkman. I., Soderbeg. M., (2003). An Analysis of the Roles Played by the HR Function during the Post Merger Process'. Merging Across Borders:
People, Cultures and Politics. Copenhagen: Copenhagen Business School Press
[10] Buono, F., & Bowditch, L., (2003). The Human Side of Mergers and Acquisitions: Managing Collisions between People, Cultures, and Organizations.
Washington, D.C.: Beard Books
[11] Gupta, D. & Gerchak, Y. (2002). Quantifying Operational Synergies in a Merger and Acquisition. Management Science 48(4), 517-533.
[12] Schweiger, D., (2002). M & A integration: A framework for executives and managers.USA: McGraw Hill
[13] Gunther, M. (2001). Understanding AOL’s grand unified theory of the media cosmos. Fortune, January 8, pp. 72–82
[14] Mike Harrison, “HR has a major role to play in mergers”, Personnel Today, September 25,2001
[15] Maria Kouli (2001), “Why do mergers and acquisitions fail to create synergy?” , The Executive Issue, Issue 12,2001
[16] Linda S. (2000). The Human Resource Perspective in Mergers and Acquisitions: Non Benefits Issues
[17] Cartwright, S., Cooper, C., (2003). HR Know-how in Mergers and Acquisitions. London: Institute of Personnel and Development.
[18] Davis, Stanley M. 1994. Managing corporate culture. Cambridge, MA: Ballinger
[19] Cartwright, S. & Cooper, C.L. (1993). The Role of Culture Compatibility in a Successful Organizational Marriage. Academy of Management
Executive, 7: 57-70.
[20] Schweiger, David L., and John M. Ivancevich. 1985. Human resources: The forgotten factor in mergers and acquisitions. Personnel Administrator
30(November):47-61.
BIOGRAPHY OF AUTHORS
Avinash Kumar Singh (M, 25yrs) was born in Patna, India, in 1991. He received the B.E. degree in electronics
and communication engineering from Gujarat Technological University, Gandhinagar, India, in 2012, and
pursuing MBA in Human Resource from Symbiosis International University, Pune, India. In 2012, he joined a
private HR consultancy firm and worked there as a Team Lead-Recruitment for around two years.
During his work tenure, he has worked on the assignments like strategic source of recruitment, MIS reporting,
Recruitment automated software (ATS) etc. His current research interests include employee retention strategies, Merger and
acquisition, Employee empowerment, recruitment process benchmarking across various sector etc.
Aman Sagar was born in Lucknow, India on October 19, 1991. He is a Hotel Management Graduate from
Oberoi Centre of Learning & development, Delhi and received a degree in Tourism Management from Indira
Gandhi National Open University in 2012. He is currently an MBA student in Human from Symbiosis
International University, Pune. He has over 4 years of experience working in Hospitality and IT industry. His
research interests include SHRM, Industrial Relations, Employer branding and Organization development.
Jaya Chitranshi received her Masters and Ph.D. degree in Organizational Psychology with an MBA in Human
Resource Management from the University of Lucknow, Lucknow (India). She was a UGC-Fellow and received
the prestigious Kali Prasad Memorial Award for her doctoral work in the year 2005.
Presently she is working as an Associate Professor in the area of Human Resource Management and
Organizational Behaviour, in Symbiosis Institute of Management Studies; Pune (a constituent of Symbiosis International
University).Her research interests include organizational empowerment, mentorship, and new generations of organizational
workforce.
Pramod Sanjay (M, 24) was born in Hindan, Uttar Pradesh on 17th February 1992. He has completed his
B.Tech (Mechanical Engineering) from Punjab Technical University, Punjab in 2013. He is currently pursuing
MBA from Symbiosis International University, Pune. His area of interests includes Recruitment, Industrial
Relations and Employer Branding.

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