4. EXERCISE: HUMAN RESOURCE CHALLENGES DURING MERGERS
I. OBJECTIVES:
1. To sensitize students to the actual and potential human resource challenges facing
organizations contemplating or implementing a merger.
2. To familiarize students with various human resource strategies and tactics for
managing a successful merger process.
II. OUT-OF-CLASS PREPARATION TIME: 30 minutes
III. IN-CLASS TIME SUGGESTED: 50 minutes
IV. INSTRUCTIONS:
In groups of 3-5 students, read the “Situation” in the Exercise as well as the merger challenges
listed on Form 1.2.
Each group will be assigned one or more of the merger challenges listed on Form 1.2. Search
various web sites to identify one or more human resource strategies and tactics to address each of your
assigned merger challenges.
One person from each group will present the strategies and tactics developed to address their
assigned merger challenges.
V. POSSIBLE SOLUTION/DISCUSSION
Possible solutions for each of the eleven challenges are shown on Form 1.2.
FORM 1.2
Potential Human Resources Challenges Facing the Merged Organization
Potential Challenges/Problem Appropriate Strategies/Tactics
1. Rumors, misinformation and inadequate
information.
Develop a merger communication strategy
Small group meetings with employees
Brie=ngs for managers and supervisors
2. Con>icting corporate cultures Creating merger project teams
Conducting team-building activities
Use training to merger two cultures
3. Existing state government civil services rules and
union contracts.
Careful negotiation of new policies
Renegotiate union contracts
Modify civil service rules
4. Neither organization fully aware of the skills,
knowledge, and abilities of the others’
management or staf
Communicate how human resources can enhance new
corporate objectives
Maintain and study current management team and
corporate structure initially.
5. Likely staf recon=guration, reassignments, and
layofs
Develop retention criteria
Involve employees on task forces
Negotiate terms and conditions of personnel changes
6. Determination of which human resources
practices to retain
Eliminate low-value work
Evaluate existing practices
Evaluate job performance of all position incumbents
7. Management of staf morale and stress levels Focus on potential merger benefit
Small group meetings with employees
8. Turnover of valued employees Commit to retention of key employees
Communicate a positive vision of those employees’ roles
in the new organization
9. Unclear job assignments and reporting
relationships
Address in merger project work teams
Redo job descriptions as needed
10. Lack of understanding of new policies and
procedures
Implement a merger communication strategy
Small group meetings with employees
11. Overall strategy to market her Department’s
role and potential value to the C.E.O.
Quantify potential benefit of HR to merged organization
Propose HR policies to alleviate merger problems
Indicate Higher Priority Concerns: 1. Rumors, misinformation, and inadequate information; 2. Con>icting
corporate cultures; 3. Likely staf recon=gurations, etc.
5. EXERCISE: SCANNING THE CONTEMPORARY WORK ENVIRONMENT:
SHIFTING DEMOGRAPHICS
I. OBJECTIVES:
The purpose of this exercise is to help students understand the potential in>uence of trends and
changes in the external environment on the design and implementation of human resource
management practices.
II. OUT-OF-CLASS PREPARATION TIME: None
III. IN-CLASS TIME SUGGESTED: 20 – 30 minutes
IV. PROCEDURES: See Text
V. SOLUTION:
This exercise provides an excellent format for discussing how changes in the external
environment afect personnel/human resource management practices. It is also a helpful tool for
discussing the changing demographics of the labor force. An excellent source for updating labor force
projections is an U. S. Department of Labor, Bureau of Labor Statistics. See especially the Monthly Labor
Review. The Society for Human Resource Management has excellent on-line white papers and reports
focusing on workforce demographics and trends.
In general, total employment is projected to increase by 15.3 million, or 10.1 percent, during
the 2008-18 period, the U.S. Bureau of Labor Statistics reported today. The projections show an aging
and more racially and ethnically diverse labor force.
The answers given here are only suggestions:
1. Aging of the labor force
This trend is a direct result of the baby boom generation growing older. The median age of the
labor force was 37.8 by 1995 compared to 35 in 1982. According to the Bureau of Labor Statistics, the
number of persons age 55 years and older in the labor force is expected to increase by 12.0 million, or
43.0 percent, during the 2008-18 period. Persons in the 55 years and older age group are projected to
make up nearly one-quarter of the labor force in 2018. The US Department of Health and Human
Services Administration on Aging estimates that by 2030, there will be about 71.5 million older persons
2. Increase in knowledge workers
It is important in discussing this trend to make sure students understand what is meant by a
knowledge worker. Knowledge workers are defined as “those whose responsibilities extend beyond the
physical execution of work to including planning, decision-making, and problem solving (Bohlander &
Snell, 2006).1 One of the major human resource challenges in managing knowledge workers is retention.
Not only is there local competition for the best knowledge workers but greater global competition for
the highest skilled knowledge worker is increasing. Research suggests that professional knowledge
workers are extremely mobile and are willing to relocate to ensure continued job challenge and
remuneration benefit. Research shows that participating in high-visibility projects and receiving
3. Increase in outsourcing, ofshoring and employee leasing
Ofshoring is one way businesses are responding to skills shortages and the use of ofshoring
continues to grow according to the Society for Human Resource Management. This trend is occurring in
BRIC countries (Brazil, Russia, India and China) and other parts of Eastern Europe, South America and
4. Increasing diversity of the USA labor force (e.g.number of women and minority
workers in the labor force
1 Bohlander, G. & Snell, S. (2007). Managing human resources. Mason, OH: Thomson Publishing.
According to the Bureau of Labor Statistics, the labor force in 2018 will be more diverse. As a
result of higher population growth among minorities–due to higher birth rates and increased
immigration, along with higher labor force participation rates by Hispanics and Asians–the share of the
labor force held by minorities is projected to increase signiticantly. Whites will remain the largest race
group in the labor force in 2018 (79.4 percent) despite growing by just 5.5 percent between 2008 and
2018. The Asian group is projected to increase by 29.8 percent and the number of blacks by 14.1
Almost sixty percent of women are in the labor force. Women represent 47.8 percent of the
workforce and this will reach 50 percent by 2020. This trend is expected to continue into the next
decade. Approximately 80 percent of women with school-age children are employed in some capacity.
This trend will afect the bene=t area the most. The educational aQainment of women is also increasing
In sum, the workforce of the future will be more diverse — ethnic background, gender, lifestyles,
and age. Human resource management programs and practices will need to be designed to beQer
5. Multigenerational workforce
The workforce makeup will be increasingly comprised of what is known as a multigenerational
workforce. Persons in the 55 years and older age group are projected to make up nearly one-quarter of
Typically, the diferent generations are described as (see :
Generation Name Assets in the Workplace
Ages 63-86
Ages 44-62
Generation X
Source: SHRM Research Quarterly (First Quarter, 2009). The Multigenerational Workforce: Opportunity for
Competitive Success. Washington, DC.
The instructor may wish to discuss how researchers describe the aStudes and expectations of
the diferent generations. The HR implications are that companies will have to increasingly be sensitive
6. Increasing use of social networks
The popularity of social networks such as Facebook, LinkedIn has skyrocketed in the last few
years. It is estimated that Facebook has 500 million active users. According to a recent survey from the
Forrester Research group, more than four in =ve U.S. online adults use social media at least once a
month. It is estimated that almost 80 percent of job recruiters and hiring managers in the United States
7. Increasing number of foreign born workers
Immigration has been a major source of ethnic diversity in the labor force. There are two major
sources of immigrant employees. Some foreign born employees are highly skilled immigrants from less
developed economies with large numbers of educated individuals of working age; while others are low
skilled immigrants who oLen enter the U.S. illegally. Since the September 11 aQacks on the United
States, homeland security objectives has led to aStudinal and policy changes towards foreigners
entering the U. S. However, U. S. businesses are increasing relying on these two groups of labor. In the
former case, many of these are highly desirable given current shortages faced by many companies for
professional staf with technical and engineering skills. The issue for this group is dealing with
immigration laws and the complexity of gaining visas and work permits for such employees. It has
8. Global warming and growing environmental awareness
This issue has become pervasive in the last few years because of a number of global declarations
and agreements. See SHRM’s 2008 Executive Roundtable Symposium on Sustainability and Human
Resource Management Strategy. The report ofered a number of implications of these issues for HRM.
Sustainability of the planet has become a huge issue in the recruitment and engagement of employees.
People are concerned about the future of planet and want their companies to also be concerned. More
and more employees want to work for firm that have a greening strategy to protect the environment,
9. Rapid globalization
The world is more interconnected than ever before and this trend will not abate given continuing
improvements in communications technology. This creates a number of issues that HR should be aware:
global talent management, political unrest in diferent regions of the world, spread of communicable
10. Stagnant economic growth
With the recession that hit the USA in 2009, this issue has been at the top of the list of all
companies. The recovery has not yet manifested and some economists foresee a slow recovery and a
period of slow economic growth for the USA and the world. The high cost of health care is an issue many
HR professionals are particularly concerned with as well as high unemployment. They also bring up the
NOTE: The instructor may also wish to lead a general discussion on environmental scanning as a
planning tool. Students should also be made aware of the diRculty of projecting the impact of
I. OBJECTIVES:
1. To provide students with practice in analyzing data and drawing conclusions
regarding managerial implications.
2. To make students aware of the potential costs of controllable dysfunctional turnover
and its impact on net income and profit.
3. To make students aware of the potential benefit of human resources management
activities to an organization’s “boQom line.”
II. OUT-OF-CLASS PREPARATION TIME: 2 hours
III. IN-CLASS TIME SUGGESTED: 45 minutes
IV. PROCEDURES: See text
V. SOLUTION:
A solution to the problem requires that the “extra” costs above those existing in base year one
be calculated. As a result of adding the “extra” costs incurred in years 2, 3, and 4, and then adding them,
the total “extra” costs over the three-year period are $680,000 (see Exhibit 1.6). Then the annual
Table 1 shows the reduction in turnover from year one in terms of the number of persons
rounded-of to the nearest whole numbers. Table 2 shows the reduction in turnover costs relative to
year one, both the total savings and the savings excluding the reduced productivity during the learning
Table 4 shows the same calculation excluding the savings associated with reduced productivity
during the learning period. This calculation shows diferent results. When the productivity factor is
Answers to the questions are as follows:
1. The calculated benefit of reduced turnover are suRcient to justify the $680,000 in increased
costs associated with the expansion of the Human Resources Management Department only if
2. Other areas of potential economic bene=t from having a Human Resources Department might
include higher productivity, higher levels of commitment to the organization, improved morale,
more positive employee aStudes, and lower absenteeism. In each case, the calculations would
Exhibit 1.6
Human Resource Management Department Budget for Years One Through Four
Department Budget per Year
Budget Cost One Two Three Four
Salaries and benefit $110,000 63% $233,000 70% $288,000 70% $324,000 70%
Equipment and Supplies $24,000 14% $39,000 12% $48,000 12% $57,000 12%
Communications $41,000 23% $62,000 19% $73,000 18% $81,000 18%
Totals $175,000 $334,000 $409,000 $462,000
Extra Cost Above Base
Year One
$159,000 $234,000 $287,000
“Extra” HR Costs Yr 2 $159,000
“Extra” HR Costs Yr 3 $234,000
“Extra” HR Costs Yr 4 $287,000
Total “Extra” HR Costs $680,000
Exhibit 1.7
Annual Turnover Rate by Category for Years One Through Four
Percent Turnover per Year
Personnel Categories One Two Three Four
Executive 12.8 11.5 9.2 8.3
Physician 18.1 17.6 17.9 15.6
Other Professional 22.6 22.1 18.3 15.6
Non-Professional 29 26.3 27.1 24.3
Weighted Average Totals 23.8 22.3 21.3 18.8
Exhibit 1.8
Average Costs of Turnover per Individual over the Four-Year Period
Personnel Category
All Other Non-
Turnover Costs Categories Executive Physician Professional Professional
Separation Costs:
Exit Interviews 50.73 62.50 73.00 51.00 38.50
Administrative Costs 119.27 127.00 132.50 116.00 114.50
Separation Pay 348.01 2,254.00 1,034.00 0.00 0.00
518.01 2,443.50 1,239.50 167.00 153.00
Replacement Costs:
Job Advertisements 1,346.49 1,805.00 2,416.50 1,127.50 953.00
Pre-Employment Admin 353.28 405.00 416.50 386.50 291.00
Entrance Interviews 324.86 486.00 724.50 284.00 148.00
Assessment Testing 271.69 382.50 695.00 214.50 105.00
Staf Time 249.00 417.50 522.00 212.00 126.00
Travel/Moving Expenses 293.68 1,215.50 1,110.50 0.00 0.00
Processing New Employees 87.50 87.50 87.50 87.50 87.50
Medical Examinations 175.00 175.00 175.00 175.00 175.00
3,101.50 4,974.00 6,147.50 2,487.00 1,885.50
Training Costs:
Informational Literature 80.00 80.00 80.00 80.00 80.00
Formal Training 147.53 340.00 516.50 35.00 35.00
On-the-Job Training 68.15 0.00 0.00 212.00 159.50
295.68 420.00 596.50 327.00 274.50
Reduced Productivity 3,133.37 4,000.00 6,500.00 3,452.00 1,215.50
Total $7,048.56 $11,837.50 $14,483.50 $6,433.00 $3,528.50
Tot. Excluding Prod. Svng. $3,915.19 $7,837.50 $7,983.50 $2,981.00 $2,313.00