April 2024 Issue No. 21

Merging Cultures in Vietnam:
Overcoming HR Challenges inCross-Border M&A

The recent surge in foreign acquisitions of Vietnamese companies,
particularly from Japan, China, Korea, and Singapore, presents a
unique challenge: merging HR systems. Long-established practices
in Vietnamese companies often clash with the values andapproaches of foreign acquirers. This paper will explore a few ofthese differences in HR systems, focusing on Japanese acquisitionsof Vietnamese companies and identifying effective strategies forpost-merger integration.

Copyright 2024. PERSOLKELLY Consulting. All rights reserved.

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The Current State of Cross-Border M&As in Vietnam
While globalisation fuels cross-bordermergers and acquisitions (M&As)
worldwide, Vietnam is attracting significantinterest. In 2023, South Korea, China,Singapore, Taiwan, and Japan led theM&A activity. Japan and Singapore
topped the charts in investment value (seefigures below), according to Vietnam's
Foreign Investment Agency (FIA).

Acquiring companies enjoy faster market
entry and access to the target company'sexpertise and infrastructure. However, thiscan be a double-edged sword. Local
companies often face significant HR
system changes, which can disrupt
employees and the overall business.

The number and value of capital contributions and share purchases in Vietnam in 2023:

Number of capital contributions and share purchases
Value of capital contributions and share purchases (in USD millions)

2,942

3000

2500

2,201
2000

1500

1000

500

0961
400

South Korea

412

160

China

349
Singapore

286
235
Taiwan230
JapanTình hình thu hút đầu tư nước ngoài tại Việt Nam năm 2023, © BỘ KẾ HOẠCH VÀ ĐẦU TƯ CỤC ĐẦU TƯ NƯỚC NGOÀI.

2Copyright 2024. PERSOLKELLY Consulting. All rights reserved.

Merging Cultures: HR Challenges After M&A
While differences exist between foreign
and local companies, cross-border M&As
accelerate these discrepancies due to theimmediate need to merge HR systems.
Here's how these differences create
challenges:
Evaluation Systems:
Japanese Companies: Focus on MBO(Management by Objectives) whereemployees set goals and develop
competencies for long-term growth.
Vietnamese Companies: Emphasise
KPIs (Key Performance Indicators) andtask completion, reflecting the need for
immediate results in a high turnoverenvironment.
Compensation Systems:
Japanese Companies: Offer smaller pay
gaps between high and low performers,reflecting a seniority-based system.
Vietnamese Companies: Often havesignificant salary differences based on
performance, aligning with a more
performance-driven culture.
Labor Practices:Japanese Companies: Maintain stricter
compliance standards and avoid variable
pay structures.
Vietnamese Companies: May minimise
fixed salaries subject to social insurance
and use variable pay to reduce costs.
These contrasting systems create
challenges during M&A integration,requiring careful planning and negotiation
to bridge the gap and minimise employee
disruption.

Copyright 2024. PERSOLKELLY Consulting. All rights reserved.

3Bridging the Gap: Effective Strategies for HR System
Integration
Here are some key approaches tonavigate the complexities of merging HRsystems:
1. Align or Adapt: Decide Early On
Determining a clear direction forimprovement is crucial. Should the newsystem align with the practices of foreign
or local companies? The PCG project
exemplifies the challenges – headquarters
in Japan, Japanese members in Vietnam,and local Vietnamese employees all havedifferent perspectives. Open
communication and pre-defined decisionmaking processes will help navigate thesedifferences.
2. Communication Beyond Language:
Valuing Local Input
Involving local team members is vital, but
language barriers can hinder
communication with foreign counterparts.
Interpreters can bridge the gap, but
deeper cultural understanding takes time.
Since local members will operate thesystem long-term, their perspectives arecrucial.
3. Continuous Improvement: A LongTerm View
There's no one-size-fits-all solution for HRsystems. Regular reviews promote
ongoing improvement. Merging systems
fundamentally requires sensitivity to local
concerns and confusion. Schedule
periodic reviews (every few years) toensure the system remains effective foreveryone.
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Conclusion
Mergers and acquisitions (M&A) often
require HR system changes, which candisrupt employees and the overallbusiness. This concern is particularly
amplified in cross-border M&A when thesystem shifts to a foreign model.
To address this anxiety, three key
steps are crucial:
1. Active Listening: Gather employee
feedback from all levels to understandtheir concerns and perspectives on theintegrated HR system.
2. Shared Vision: Clearly communicate
the vision for the ideal HR system,
outlining its benefits for employees andthe company as a whole.
3. Phased Implementation: Implement
the changes progressively, allowing time
for adjustment and feedback loops toaddress any issues.
Companies can ensure a smoothertransition to the new integrated HRsystem by taking these steps.

By
Kohei Nojiri
Senior HR Consultant
PERSOLKELLY Consulting

Copyright 2024. PERSOLKELLY Consulting. All rights reserved.

5About UsPERSOLKELLY Consulting is a leading
global human resource consulting andprofessional services company which
proudly spans across the Asia-Pacificregion. We are a subsidiary formed by thejoint venture of PERSOL Group and Kelly
Services Inc., now one of the largest
recruitment companies in APAC. Formerly
branded as BTI Consultants in Asia andIntelligence SMC in Hong Kong,PERSOLKELLY Consulting is built upon arich legacy of expert talent development,
HR management advisory, organisational
effectiveness, and insights-driven HRsolutions. With our single focus on fulfilling
our client's needs, we use innovative
practices to empower both individuals andenterprises to achieve their full potential. AtPERSOLKELLY Consulting, we believe inshaping a future workforce that is able to"Work and Smile".

Learn More:PERSOLKELLY Consulting Group
www.PERSOLKELLYCONSULTING.com

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Copyright 2024. PERSOLKELLY Consulting. All rights reserved.