HRs ROLE IN A STRATEGIC ACQUISITION

Gemma is the HR manager for Wordsmiths, a retail bookseller with 32 stores in New South
Wales, Victoria, Queensland, the ACT and South Australia. The company has recently acquired
Mainly Books, a smaller book retail chain with 18 stores nationwide, including stores in Western
Australia, Tasmania and the Northern Territory. Mainly Books had been struggling in the very
competitive book market and had been trading at a loss for the last three years. Wordsmith was
able to buy it for an excellent price. Strategically, the acquisition was seen as an opportunity to
enhance the company's market presence and to become truly national in its market penetration,
like its major competitor.
In the two years that she has been with the company, Gemma has tried hard to raise the status of
HR from being a purely administrative function to being a strategic function, though, like many
HR Managers, she has found that she and her small team are often overwhelmed with day-to-day
issues like payroll administration, recruitment and keeping track of employee entitlements. She
sees the Mainly Books acquisition as an opportunity to demonstrate HR's capacity to contribute
to the company at a strategic level.
Today is an important day -her meeting with the CEO. Her phone rings and she jumps -she's a
little nervous. It's Alan, the CEO. 'Ready when you are, Gemma', he says cheerfully. 'On my
way!' replies Gemma in her most enthusiastic voice. She gets her papers together, takes a deep
breath, gathers her thoughts and marches purposefully towards Alan's office.
Over the past couple of weeks, Gemma has been familiarising herself with the details of the
acquisition as well as the company's plans for the coming year. Wordsmiths' business plan
includes rebadging all Mainly Books stores as Wordsmiths stores; establishing an online store
and website based in Sydney; and developing a self-publishing service, whereby Wordsmiths
provide editing and design services and produce books on a fee-for-service basis with exclusive
distribution deals across its network of outlets.
Currently, Wordsmiths employs more than 600 people in its stores, about half of whom are fulltime. The rest are part-time and casual. Mainly Books currently has 225 employees, mostly fulltime. Analysis of Mainly Books' operations and costs has revealed that most of the stores are
overstaffed, and the balance of full-time and contingent workers is not right. This has been part
of the reason for its poor financial performance over the last three years
Mainly Books does not have a separate HR function. Employment matters are handled by store
managers and the payroll function has been outsourced. This got Gemma thinking about the way
her HR department operates. Taking on payroll and recruitment functions for the additional
Mainly Books stores would add to its already heavy workload. Maybe it would be better to adopt
the Mainly Books model of devolving day- to-day functions like recruiting to store managers and
outsourcing payroll so that she could focus HR's efforts more on strategic issues.

Mainly Books also has no HR information management system. In fact, there is almost no
workforce data available. Fortunately, Wordsmiths has a very good system that is capable of
generating a wide range of reports about workforce characteristics and trends. Incorporating data
from the Mainly Books workforce should be possible, although there wouldn't be much historical
data for the Mainly Books outlets.
It is clear to Gemma that a certain amount of downsizing in the Mainly Books outlets will be
necessary. It will also be necessary to reduce the dependency on full-time employees. Staffing
levels in Wordsmiths stores is based on revenue and input from store managers about local
conditions and seasonal fluctuations. Based on the revenue figures, Gemma has calculated that
probably about 80 full-time positions at Mainly Books will need to either be abolished or made
part-time or casual.
Gemma also thought about the company's planned new ventures -the online store and the
publishing service. There are staffing implications there too -new roles to define, new people to
recruit. Alan is expected to appoint someone to oversee these important new aspects of the
business very soon, and she can see that she will need to work closely with that person.
Despite her efforts to raise the profile of the HR function, Gemma also suspected that, unless she
took the initiative, HR would probably not be part of the decision-making processes concerning
the acquisition and the development of the new ventures. So, she put together a discussion paper
for Alan, outlining the various HR issues as she saw them, and highlighting the decisions that
needed to be made. She submitted the paper to Alan a week ago, and their meeting today is to
discuss it. The discussion paper included the following issues:
the downsizing process for the Mainly Books stores
the need to incorporate the Mainly Books workforce into the existing HRIMS
the need to plan for the staffing of the new ventures as well as for the enlarged network of retail
outlets
the differences in the way that Wordsmiths and Mainly Books manage their HR issues and
processes.
As Gemma enters Alan's office, he rises from behind his desk and ushers her to the upholstered
chairs and coffee table that lie to the left of the office. He is smiling. 'Well Gemma', he begins,
'you've certainly given me a lot to think about! must admit I've been focused more on the
financial side of the acquisition and the new ventures and hadn't even thought about the
workforce issues, Thanks for reminding me! He goes on to say that he agrees that the issues
Gemma has raised are important, and integral to the business plan, He then assigns her a number
of tasks.

In relation to the downsizing of the Mainly Books stores, he asks Gemma to determine exactly
how many full-time positions should be abolished or converted to part-time or casual positions,
and to recommend a process for identifying which employees would be made redundant. He tells
her that he favours targeting employees who are closer to retirement age, both because being
made redundant would be less painful for people who are probably already thinking about
retiring and because he wants to create a youthful, energetic culture.
He also instructs Gemma to ensure that employee and workforce data for the existing Mainly
Books employees are uploaded to the existing HRIMS as soon as possible and to configure the
system to provide data that will help the company to develop a staffing plan -something It has
never done before He also wants to be able to track workforce trends and identify potential
problems before they become too large. He charges Gemma with responsibility for coordinating
the HR planning process.
Finally , he expresses interest in the possibility of restructuring HR, though he isn't entirely sure
which model would be better He concedes, however, that given the company's acquisition and
growth plans, it seems somewhat wasteful to have HR totally focused on administration when
there were clearly higher level roles it could be performing. He asks Gemma to explore the
options in more detail and to provide him with a further paper outlining the advantages and
disadvantages of devolving day-to-day HR functions such as recruiting to store managers and
outsourcing the payroll function entirely.
At the end of their conversation, Alan shakes Gemma's hand and thanks her for her foresight and
initiative. Gemma can barely keep the smile from her face as she leaves Alan's office and returns
to her desk. Surely, this is what being a 'strategic partner' is all about, she thinks. Now the work
really starts!
QUESTIONS
1. Discuss the statement In the past two years.., Gemma has tried hard to raise the status of HR
from being a purely administrative function to being a strategic function...
2. What legal issues does Gemma need to take into account in designing a redundancy process?
Is Alan's suggestion of targeting people closer to retirement age a feasible approach?
3. What kind of HR planning process would be appropriate at this point in the company's
development? Would a qualitative or quantitative approach be more effective? Why?
4. Discuss the advantages and disadvantages of the company devolving or outsourcing
operational and administrative HR functions? What should Gemma recommend and why?
5. Write a report on the feasibility and implications of alternative work arrangements such as part
time, casual and temporary workers on the organization as suggested by Geema and Alan. What
implications do such strategies have on employees?
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