HR DUE DILIGENCE: RESCUE M&A PROJECTS WITH PEOPLE ANALYTICS

Most mergers & acquisitions (M&A) projects fail. One reason for this is often inadequate analysis of the workforce and the consequent loss of the most important company resource: talent. However, this does not have to be the case. Because tools in the area of ​​people analytics make a potentially important contribution to the evaluation of human capital.

Love Match or Hostile Takeover?

Even if there are various reasons for the merger or acquisition of companies, most projects can be assigned to the two stereotypes "love marriage" or "hostile takeover". Despite a drop in M&A deals due to Covid-19 in 2020, around 20.000 deals were still signed worldwide. This is accompanied by a transaction value of around 3 billion US dollars.

According to reports and empirical values, 30 to 50 percent of these projects will not achieve their financial or strategic goals; M&A critics even put the failure rate at 70 to 90 percent. The causes include, among other things, an insufficient assessment of the cultural and human side of the acquired company.

Human capital: The most important resource for companies in the 21st century

With the increasing importance of the technology and information sector in the course of digitization, there is also a shift in assets. While in the last century a large part of the value-adding capital was in plants and machines, today it is human capital, especially in the IT and high-tech sector, i.e. the employees with their knowledge and skills, that decisively determine the success of the company.

In the context of M&A projects, there are a large number of studies and evaluation models for a wide variety of business processes: from compliance to company valuations and communication strategies to the spiritual paths of successful company integration. However, the search for a holistically convincing model for the valuation of human capital remains unsuccessful. In addition, the personnel factors are limited to key figures that are very "asset"-lasting, but often disregard the personnel processes and workforce capabilities of the company

Blumberg's People Analytics Chain as a holistic analytics approach

Based on Blumberg's People Analytics Chain (see Figure 1), the HR Tech Consulting team developed a model and tool for evaluating human capital. With the help of the People Analytics approach, an indicator model was developed that shows causal relationships based on relevant human capital factors and allows an evaluation of human capital and the associated processes and capabilities. This model therefore makes it possible to not only view people processes in isolation, but to analyze them in a holistic business context and to recognize the chains of effects for the business results and to derive future effects based on risk factors.

Accordingly, cause-effect relationships and correlations between people/HR processes, employee skills, performance drivers and business results become transparent. The individual parts can be rated and added to an overall rating. Risk factors are recognized and open up scope for action and decision-making.

An example to illustrate: A high proportion of “future skills” (metrics & KPIs) in a company is an indicator of good competence management (people process). Good competency management in turn has a positive effect on the competency level of the company (workforce capability), which leads to higher productivity (performance driver) and finally to increased sales growth (business outcome).

Adv Analytics Chain

People Analytics Key Benchmark Profiles

The example shown is one possible path that the Analytics Chain enables. The model contains over 350 such unique paths that were developed on the basis of studies, expert interviews and our own project experience. It forms the basis for the new tool "People Analytics Key Benchmark Profile", which can be used in the analysis of human capital in companies.

For this purpose, the corresponding metrics of the company are imported into the tool for such an analysis. Using a benchmark database, scores are determined that contribute to the individual dimensions of the analytics chain. Analyzes of specific questions (e.g. regarding employee competencies/skills), risk factor analyzes or a 360° HR audit are possible. With the analysis, concrete problem areas or processes can be identified and a basis for further data-supported decisions can be created.

With people analytics into a more successful future

People analytics as a discipline is still in its infancy in many companies, especially in Germany. With this model, people analytics should be made more prominent as a value-adding element for companies and the success rate for future M&A projects should be steered into a (more) successful future through the more targeted evaluation of human capital.

About the authors:

Claudia Solomon is the founder and CEO of HR Tech Consulting GmbH. She began her professional career more than 20 years ago in the telecommunications industry. Since then she has gained experience as a consultant in in-house consulting at Telekom and Detecon International GmbH and has found her place in the HR department over the past ten years. As part of the senior management team in the human resources department at T-Systems International GmbH, she was responsible for HR business partners, among other things, and was ultimately responsible for setting up the HR analytics department in cooperation with HR controlling. Since 2021 she has been a Managing Director and consultant at HR Tech Consulting to drive people analytics and the digital transformation of the HR function.

Ken Knipphals is HR project manager and data analyst at HR Tech Consulting GmbH and focuses on topics related to HR controlling, analytics and reporting. He discovered his affinity for numbers and interest in statistics while studying sociology and education. He gained experience in the field of project management and HR during his work as a research assistant, internships as an HR business partner and as a consultant for companies in the technology and IT service sector.

Similar articles

Go to Article
Download