Democracy in South Africa presaged the transformation agenda essential to the building of a just and equitable post-apartheid state, and it is safe to say that the concept of transformation has become the central reference point that provides the momentum for the rebuilding of the South African state from its apartheid ruins (Jammine, 2009). To this end the South African government had passed various laws to stimulate the diversification of the labour force (Commission for Employment Equity Report, 2010). Likewise, the South African labour market has increasingly integrated previously disadvantaged groups at all levels of the organisation. From what Düweke (2004) calls “new racism” the process of recruiting and retaining a diverse workforce is arduous as a result of this historical competition between the diverse groups (Kerr-Phillips & Thomas, 2009).
The transformation agenda of South Africa coincided with increasing globalisation that also counts up to the challenge of diversity management. For instance, due to the increase in trade between South Africans and Chinese, it has become essential for South African organisations to understand Chinese business negotiation styles and behaviours as well as determinants of cross-cultural negotiations (Horwitz, Hemmant, & Rademeyer, 2008). South African companies do not only have to contend with the many cultures across national boundaries but also within their organisations (Nkosi, 2007 & Nyama, 2009) mainly as a strategy to gain a competitive advantage (Farrer, 2004). For mergers and acquisition (M&A) this necessitates the importance of retaining a diverse and competent workforce (Horwitz, et al, 2008; & Palmer & Varner, 2007).
Integrating the previously disadvantaged groups at all levels of the company and managing South Africa’s highly diverse workforce is not always easy. Zulu and Parumasur (2009) observes that more and more black talent is job-hopping as a direct result of culture clash, stifling corporate cultures and hostile working environments. To be successful the human resources strategy to recruit and retain a diverse and competent workforce must carefully address these factors. Marginalising the majority from key sectors of the economy, organisational and management control is both unjust and unsustainable. For instance, women account for 52% of the population, yet only 7% of South African directors are female, 3% of chairpersons of boards are female, and 2% of CEOs are female (Commission for Employment Equity Report, 2010). Monolithic companies are losing out from the business and organisational qualities and the innovation of these women and other marginalised groups (Zulu & Parumasur, 2009; Davidson, 2009). Levin and Matis (2007:60) building a business case for the inclusion of women list the following reasons: women constitute the largest segment of the increasingly diverse US labour pool; Women are a highly educated group from which corporate America will need to recruit and develop future leadership; women have had a leading edge role in transforming the American workplace; the lessons companies learn from managing gender diversity will serve them well in developing initiatives to manage other forms of diversity; and women continue to be the primary buyers of consumer products. Moreover, a more diverse workforce is likely to take advantage of the fact that there seems to be significant differences in how different racial groups perceive product and service value and quality (Terblanche & Boshoff, 2010:6). Despite more and more South African companies beginning to see the value of gender equality and social justice 16 years into the country’s democracy has done nothing to change the status quo. White men still monopolise top management positions, and “are recruited, trained and promoted more” than any other group (Employment Equality Commission Report, 2010). Mergers and acquisitions are in a good position to transform into a more diverse workplace (Kilfoil & Groenewald, 2005).
To democratise the workplace the South African government came with legislation such as the Labour Relations Act 66 of 1995, the Employment Equity Act 55 of 1998 and the Promotion of Equality, Preferential Procurement Policy Framework Act 5 of 2000 and Prevention of Unfair Discrimination Act 4 of 2000 (Employment Equity Report, 2001). Though these laws are clear in their intentions to encourage diversity in the workplace, business is still lagging behind in diversity management, and employees do not believe that their companies have done enough to employ and promote previously disadvantaged groups as envisaged in labour legislation indicating a serious need for managers to walk the talk (Zulu & Parumasur, 2009). Duweke (2004) believes the implementation of employment equity is the key to turn this situation around. The views of white and black emigrants on the implementation of employment equity are dichotomous. For blacks the process is too slow while for whites it is hurried (Kerr-Phillips & Thomas, 2009).
There seems to be no clear understanding of the process of retaining a diverse and competent workforce before and during an M&A.
The main objective of the study is to unpack the nature of retaining a competent and diverse workforce before and during and M&A. Retaining a competent workforce encompasses the whole human resources strategy. The focus will be on recruitment, selection, development, talent management and employer branding as a strategy to retain a diverse yet competent workforce. To accomplish this, a model will be suggested to outline the process for the retention of the diverse yet skilled personnel.
Before delving into the model to retain a capable labour force within the M&A, the next section will review the essential literature to slowly build a business case for the model. The main focus of the study, the retention model will. The essay will then make recommendations. This will be followed by the conclusion suggesting that
An effective, competent and skilled workforce is pivotal for a company’s success especially before and during an M&A to retain the merger’s competitive advantage. Nowadays such a workforce must be as diverse as possible not only to capture different types of markets but also to boost innovation (Roberge & Van Dick, 2010).
According to Fouche, De Jager and Crafford (2004:7) diversity is “race, gender, age, language, physical characteristics, disability, sexual orientation, economic status, parental status, education, geographic origin, profession, lifestyle, religion, position in a company hierarchy, and any other differences
Typically the goal behind business strategy is to capture new technologies, increase market share, gain a competitive advantage, and ultimately optimise profits. Nyama (2009) reported that cultural diversity, as influenced by religion, race, gender, education, upbringing, and language, has a positive effect on the working relationship of various groups. Roberge and Van Dick (2010) note that the team members’ greater variety of perspectives improves creativity and innovation. Roberge and Van Dick (2010:300) further warn that diversity, if poorly managed, is likely to reduce intra-group cohesiveness leading to tensions and squabbles which, in turn, can lower employee satisfaction, citizenship behaviours and increase turnover. Che Rose, Kumar, Abdullah and Yeng Ling (2008:54) reveal that “companies that know how to develop their cultures in an effective way most probably have the benefit of advancement in productivity and the quality of work life among the employees”.
Global diversity in the workplace is a mix of people skills and cultures that enable a range of viewpoints to challenge traditional thinking (Palmer & Varner, 2007). Though the composition of corporate boards of multinational giants has not kept up with the increased focus on global operations in the USA, they are beginning to value diversity (Palmer & Varner, 2007).
Diversity Management ensures that on the job processes and functions serve all the groups of employees effectively (Pitts, 2009). Pitts further argued that managing for diversity is managing for all differences, and regarding the M&A Pitts (2009) suggests the effective management of the following seven aspects: Ensuring management accountability; examining organizational structure, culture and management systems; paying attention to representation; providing training; developing mentoring programmes; promoting internal advocacy groups; and emphasising shared values amongst employees. Multicultural understanding will be imperative for management to be able to deal with and oversee the work of the diverse employees from the merging companies. Discrimination must be avoided at all cost.
For organisations embarking on a change process such as an M&A, there is a need for a HR strategy that is aligned to the organisation’s business strategy with the intention of gaining a competitive advantage. To be effective the strategy must have measurable objectives that are specific, relevant, time bound and attainable (Henderson, 2008). According to Tsosa (2008) a business strategy is the “commercial logic of the organisation” defining the area of operational, rationale for such operations, the source of its competitive advantage and distinctive competences it is going to provide.
The strategy even before the merger begins is embedded in a good communication strategy (Kilfoil & Groenewald, 2005). Good communication (and lots of it) is the best way to prevent rumours, uncertainty and anxiety from becoming the most important source of information to employees. The time before the M&A is the crucial stage for taking a close look at the cultures of the merging organisations to check differences in basic management styles and values which could prove problematic in the long run. M&A’s usually bring together not only diverse individuals but also diverse skills bases and competences needed by the new company (Kilfoil & Groenewald, 2005). The HR strategy is an M&A must, first, before the merger, look at the extent that the strategy aid in retaining personnel with the skills that are commensurate to help the organisation develop distinctive competencies in the market place. For an M&A it is imperative to align the right kind of leadership and managers to emerging company’s various teams in building the new culture even before they begin job evaluations, analysing and grading. Leadership theory suggests a positive relation between transformational/transactional leadership and other constructs such as organisational commitment, job involvement, job satisfaction and organisational citizenship behaviour. For instance, teams of transformational leaders tend to accept change as compared to laissez-faire and transactional (Mester, Visser, Roodt, & Kellerman, 2003; Trott & Windsor, 1999).
The next step, during the M&A, is complex due to its attendant uncertainty and anxiety (Bosch, 2008; Kilfoil & Groenewald, 2005). However, in this stage of implementation the human resources department needs to develop a coherent HR development strategy that is aligned with the new company’s business strategy. The model (below) must outline learning interventions that will address employee developmental needs during a merger both within and outside the workplace.
As it is imperative to deal with uncertainty and anxiety during the “merging” stage (Bosch, 2008) and the fact that M&A’s inevitably lead to changes in a number of processes (Kilfoil & Groenewald, 2005) the development strategy must not only focus on competent staff but also ensure that all employees are accustomed to what the company stands for and understand the role they have to play in achieving the set business goals. To minimize the fear of the unknown including the concern of capacity and competence, a training plan must be in place. The plan will only be implemented once all the employees are in their new structure and roles. Employees will then be trained based on the skills audit identifying relevant skills gap to be filled.
Using the Psychological Career Resources Inventory and the Organisational Commitment Scale Ferreira, Basson and Coetzee report a strong link between the psychological career resources and organisational commitment making it important to have a model that looks at both the individual and organisational factors in retaining diverse and competent skills. More and more organisations are beginning to see the importance of organisational career-development support in quality human resource management (Baruch & Quick, 2007). In South Africa the retainment of competent skills is invariably influenced by many factors including the post-apartheid culture, multicultural and ethnic differences in workplaces dominated by Eurocentric and hierarchical conglomerates (Thomas & Jain, 2004, Walumbwa, 2004). Kerr-Phillips and Thomas (2009) report that job insecurity, competitive remuneration, organisational culture, uncertainty around transformation are mentioned as key factors in competent employees’ decision to leaving companies. These micro factors are, according to Kerr-Phillips and Thomas (2009), by the fact that not all groups in an organisation share a vision for the competitiveness that can be achieved from diversity and that knowledge sharing among diverse employees is difficult.
Organisational career-development support is increasingly being recognised as a critical aspect of quality human resource management (Baruch & Quick, 2007) but an investment in human resource practices is key in engendering a positive organisational commitment ( Terblanche, & Boshoff, 2010). Regarding what attracts employees Kerr-Phillips and Thomas (2009) mention four common themes: Quality and depth of company leadership development programmes, including personal growth and development opportunities High-performance workplace cultures that offer challenging and stimulating work opportunities Attractive company brand and a culture that actively promotes people development and is ethical in its business Approach Competitive remuneration packages. Many workers are now attracted to organisations that promises higher EVP manifested in loyalty (Terblanche, & Boshoff, 2010), job satisfaction, commitment and career satisfaction (Martin, 2007). This is essential in attracting and retaining competent and highly sought after skills.
For a model to retain competent and diverse workers, the process must be driven by an HR department well-versed on diversity, diversity related legislation and dealing with highly-skilled employees (Panaccio, 2010). They must also be sensitive to cultural differences and able to think strategically and within a people-centred framework (Shena, Chandaa, D’Nettob & Monga, 2009). Figure 1 Model for the retention of a diverse yet competent workforce Evident on the model is that Human Resources Management (HRM) is a set of unique performances, tasks and procedures that are aimed recruitment and selection, training and development as well as management and retention of an organisation’s human resources (Henderson, 2008).
Legislation, human rights and the competitive advantages organisations stand to gain from maintaining a workforce that reflects local communities necessitates recruitment processes that will capture the most diverse yet competent workforce (Palmer & Varner, 2007; Farrer, 2004). Shena and others (2009) note the importance of training the staff involved in the selection process on the diversity related legislation, human rights and the importance of workforce diversity. Panaccio (2010) advocates the formation of a representative diversity committee to drive the process. This mature awareness of the cultural differences and the best ways to handle those differences and the attendant stereotypes is crucial in ensuring that all groups feel comfortable with the selection process and their attraction to the organisation is augmented. Lamenting that some companies are either unwittingly reflecting an image of homogeneity or poorly perceived, Panaccio (2010) sees the role of the diversity committee as advertising in networks used by the minority and actively encouraging them to submit applications. Organisations must remodel both internal and external recruitment processes to appeal to minorities. Internally, the organisation can create an internal database/skills inventory to identify under-represented groups for promotion, ensure selection panels are representative, as well as redesigning the referral system to ensure it is not discriminatory; while the externally the organisation must analyze and improve the image of the company; adjust external advertising campaigns towards the targeted communities; and developing links with targeted communities (Panaccio, 2010:59).
It is crucial to integrate the diverse groups during the M&A (Kilfoil & Groenewald, 2005). An orientation strategy to familiarise workers to the ethos, values and mission of the new organisation must be developed. The programme should adopt a zero-tolerance to discriminatory tendencies and include company policies regarding diversity (Panaccio, 2010), effective diversity awareness training (Cavaleros, Van Vuuren and Visser, 2002) and the human rights of employees (Shen et al, 2009). Implementing a mentoring system that goes beyond the “glass ceiling” responsible for the discrimination of female employees (Shen et, al, 2009:241) is imperative to facilitate the integration and development of all groups (Panaccio, 2010).
Performance appraisal is crucial in salary increases in a lot of companies, and the trend is to take diversity issues into account when dealing with assessments (Shen et, al, 2009). Panaccio (2010) observes that the biases that may influence yearly performance assessments are the same as those at work during the selection interviews, and must be attended as such.
In South Africa payment discrepancies among races elicit strong emotions (Zulu & Parumasur, 2009) and it is a main cause of job dissatisfaction and poor performance (Pitts, 2009). Management must be aware of this HR hot potato as it may reverse the gains made in retaining a competent and diverse workforce. The merger must address equity and fairness when determining employee payment systems. Caruth and Handloglen (2001:2007) explain that effective compensation programmes utilize direct and indirect financial rewards as well as psychological rewards to attract, retain and motivate employees. Determination of rewards for employees of the merger will be perceived as fair if training programmes are perceived by employees as designed to boost their growth. Taiwo (2007) mentioned on the job training that equips staff with relevant skills, induction training enabling employees to meet the desired expectations, as well as an alignment of off the job training and on the job training. Linking this to rewards means management can use the reward system to recognise the efforts of individuals and ensure recognition is given consistently and transparently.
Have developed clear and specific objectives that are measurable and time bound, management must establish a comprehensive model through HRM to retain diversity without compromising competency. The framework must nurture multiculturalism and inclusivity. According to Shen and others (2009) the structure must be aligned to the relevant laws and policies over and above monitoring progress. The model (see figure 2) suggests that the framework should encompass the HR strategy from recruitment to the payment of workers. Attraction and retention factors of competent employees include effective management of performance and diversity, learning pathways, management style, stretch assignments, work/ life balance, recognition, non-monetary rewards, high job involvement, job security and stability, physical working conditions, flexible pay and employment practices, autonomy, personal development, award schemes, and a caring workplace (Düweke, 2004; Palmer & Varner, 2007; Farrer, 2004). These findings are in line with Kerr-Phillips and Thomas (2009) report that job insecurity, competitive remuneration, organisational culture, uncertainty around transformation mentioned as key factors in employees’ decision to leaving.
Every plan will be a stillborn unless there is a clear implementation strategy (Henderson, 2008). To translate all the wonderful ethos, policies and diversity objectives into action the organisation must put together a budget and human resources to carry out these plans. Kilfoil and Groenewald (2005) also ropes in an implementation strategy steeped in dealing with resistance, anxiety and uncertainty through adequate communication. M&A’s are likely to arouse such feelings that will have a negative impact on performance in the short and long term which is a dynamic turmoil that calls for strong leadership.
Before and during the integration process the merger must ensure a good communication strategy is in place to support the merger process. The key messages regarding recruitment, training, rewards and performance management systems must be clear to all involved and deal with perceived increased burden, loss of benefits and deal with resistance. The HR managers must ensure communication deals with the uncertainty, anxiety and resistance that ensue as a result of some employees feeling sidelined. As suggested by Kilfoil and Gronewald (2005) the communication strategy must, inter alia: Answer the question: What’s in it for me? Anticipate and address conflicts openly, flexibly and promptly. Focus less on things and more on processes. Avoid creating ‘losers’ from the change; work for win-win. Offer choices wherever possible to combat anxiety. Mergers inevitably lead to change in the type of work and skills demanded to perform certain tasks (Kilfoil and Groenewald, 2005). There will be additional workload to some workers and this will affect the way they perceive rewards. HR managers, through internal communications, must design messages that are sensitive to cultural diversity and recognise the extra effort put in by individuals to individual support for the change.
A merger has direct impact on performance in a short and medium term therefore can be considered both a phenomenological and significant life changing event for both the organisation and its employees. Thus how people will cope with and respond to merger has direct impact on the institutional performance in a short and medium term. Monitoring and evaluation measures must be in place to ensure all involved work for the common organizational goals. Goldman (2007) asserts that the role of leadership in monitoring and evaluating the change process during merger is critical. The leadership must be sensitive to the personnel critics of deficiencies in leadership as appose to the efficiencies. Goldman further states that the transformation period affects the organisational identity and architecture, operating procedures and processes, individual behaviour and interaction as well as personal beliefs and attitudes. This will have an influence on performance management as well as motivation and must be monitored.
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