Human resource processes and the role of the human resources function during mergers and acquisitions in the electricity industry

Mergers and acquisitions (M&A) have been a popular strategy for organizations to consolidate and grow for more than a century. However, research in this field indicates that M&A are more likely to fail than succeed, with failure rates estimated to be as high as 75%. People‐related issues have been identified as important causes for the high failure rate, but these issues are largely neglected until after the deal is closed. One explanation for this neglect is the low involvement of human resource (HR) professionals and the HR function during the M&A process. The strategic HR management literature suggests that a larger role for HR professionals in the M&A process would enable organizations to identify potential problems early and devise appropriate solutions. However, empirical research from an HR perspective has been scarce in this area. This dissertation examines the role of the HR function and the HR processes followed in organizations during M&A. Employing a case‐study research design, this study examines M&A undertaken by two large organizations in the electricity industry through the lens of a “process” perspective. Based on converging evidence, the case studies address three sets of related issues: (1) how do organizations undertake and manage M&A; (2) what is the extent of HR involvement in M&A and what role does it play in the M&A process; and (3) what factors explain HR involvement in the M&A process and, more generally, in the formulation of corporate goals and strategies. Results reveal the complexity of issues faced by organizations in undertaking M&A, the variety of roles played by HR professionals, and the importance of several key contextual factors – internal and external to the organization – that influence HR involvement in the M&A process. Further, several implications for practice and future research are explored. Copyright 2008 by Dass, Ted K. All rights reserved. ACKNOWLEDGEMENTS It is not easy to pull off a six‐year long endeavor all by oneself. I am humbled by and deeply indebted to the scores of people who have contributed in bringing to fruition not only this dissertation but also my doctoral degree. I owe a debt of great gratitude to my doctoral and dissertation committee, without whose encouragement, support, feedback, and patience, over the past six years, this would have remained a dream: Dr. Ralph Katerberg, committee chair, and Dr. Philip Way, former committee chair, for their unwavering encouragement and support, wise counsel, and steady guidance through all stages of development and completion of my doctoral program; Dr. Paula Dubeck, for her thoughtful feedback during the research process and in strengthening this dissertation; Dr. Gail Fairhurst, for her steadfast support and encouragement in helping me pursue a more qualitative research agenda; Dr. Joseph Gallo, for his constant support, insightful feedback, and encouragement to consider alternative perspectives; and Dr. Suzanne Masterson, for her meticulous and thought‐provoking feedback, and for ensuring that I stay on track with my research questions. This dissertation would not have been possible without access to organizations where I could conduct my research. My heartfelt thanks go to Mr. Jim O’Connor, vice president, labor relations, for making such access possible at Duke Energy Corporation. He not only opened doors and connected me to several of the key players at the organization, but also was always willing to accommodate my numerous requests for information. I am also grateful to Ms. Becky Brunner, HR consultant at Duke Energy, and Ms Janet Sizemore, executive assistant to Mr. O’Connor, for coordinating and facilitating all the interviews and field visits. I thank Mr. Ajay Sahoo, then senior manager (HR) at NTPC’s corporate center, for his help in securing permission to allow me to conduct my research at NTPC Limited in India. His steadfast support throughout the data collection process at NTPC is greatly appreciated. I am thankful to all the heads of HR, and their teams of HR executives at all the research locations, for their help and support as well as their warm hospitality. The portion of research conducted in India, in the summer of 2007, would not have been possible without help from my good friend and former colleague at NTPC, Saurabh Sharma. I am deeply appreciative of the warm hospitality and generosity shown by his family in hosting me at his home and for his help in managing the logistics of my travel to all the research sites in India. My sincere thanks go to all the employees at Duke Energy and NTPC who so generously gave their time, shared their experiences and knowledge, and helped me learn a little more about how organizations manage mergers and acquisitions. I am thankful to the encouragement and support I’ve received from my colleagues at the Center for Organizational Leadership: Dr. Stacie Furst, for always being willing to read and provide detailed feedback on my, mostly poorly developed, drafts; Dr. Hal McCullough, for always making time to listen to me and for reassuring me that the end was in sight; and Dr. Donna Chrobot‐Mason, for being flexible with my work responsibilities and allowing me time to work on my dissertation. Many thanks to my wonderful circle of friends for not letting me forget that there are several other facets to life besides working on one’s doctorate. I am grateful to and deeply appreciative of Jeff Suess’ for reading and editing this dissertation. However, the blame for mistakes in this document rests squarely on me. All this is made more meaningful because of my family – mom, dad, and my brother, Bob – and their abundant love, support, and an almost irrational belief that I would amount to something, someday. Thank you. Finally, to all those whose names I’ve missed, but without whom this dissertation would not have happened: Thank you! Ted K. Dass November 20, 2008 Table of