EFFECTS OF BANKS MERGERS AND ACQUISITIONS ON HUMAN RESOURCES

SYED ALAMDAR ALI
Apr 20 - 26, 2009

It is argued that recent trends in the financial services, including mergers and acquisitions, have had a varying impact on different aspects of banking. Research, for example, shows branch closures and the loss of many other backroom functions as a result of proliferation of information and communication technology that has ultimately led to significant job losses. While job losses were in evidence prior to the current merger wave, in the majority of cases, a merger accelerates branch closure programmes and the transfer of backroom functions. As a result, the level of physical, local service provision is reduced, requiring consumers to travel greater distances to receive a personal service. While a significant number of consumers welcome the ability to conduct their financial business at any time of day through, for example a call centre or an Internet service, others regret the loss of more personal, local, face-to-face interaction. Such consumers argue that recent developments have lowered the quality of financial service provision by bringing a degradation of the relationship with the financial services provider.

As mentioned above, the process of automation often advanced by the merger process has led to the disappearance of a number of low-skilled administrative functions. This is in many cases also true in the merger process, as companies seek to reduce their fixed costs. As an alternatives, Outsourcing initially primarily affected companies' so-called "non-core" functions such as cleaning, catering, maintenance and IT. However, in more recent years, outsourcing is also increasingly being used to provide a number of core functions such as customer services. Another concern about the increasing use of call centres in the financial services sector is the low level of unionization among the workforce in these facilities. The outsourcing of services in general often leads to affected workers being covered by a different, less favorable collective agreement and in some cases no collective agreement at all.

Outsourcing is one of the ways in which companies have sought to reduce their fixed employment costs. However, the most common way of achieving reductions in employment has been through the use of early retirement. This was either encouraged through company early retirement schemes, through national measures available to encourage early retirement or through a combination of both. Without the development of alternative strategies by companies and trade unions, companies will at this time be forced to increasingly rely on redundancy measures. Alternatives such as working time reductions should therefore be considered not only to limit job losses, but also to create new jobs in a climate where new recruitment in the financial services sector has been limited by restructuring.

In order for mergers and acquisitions to be more acceptable to the employees, the trade unions and employee representative structures have to play an informed part in merger or take-over decisions, either by offering alternatives, or through being involved in the negotiation of the implementation and outcome of the merger process in relation to the workers they represent, it would be necessary for them to have access to timely and accurate information on merger intentions, the rationale behind them and prospective outcomes to allow them to develop, and if necessary to co-ordinate a response between different sites and employee representative structures.

However, it is empirical evidences make it clear that banking companies planning a merger or take-over rarely consulted or informed their workforce on their upcoming plans. The trade unions concerned were even less likely to be consulted. Very often, staff first hears of merger plans in the media or in the workplace after the event. Where consultation did take place, it was generally very shortly before the merger decision was to be taken and did not give the union or staff representatives the final power of veto over any decision taken by the company.

On the whole it is often difficult to separate the impact of mergers and the impact of other competitive pressures or the introduction of information and communication technology. What is clear, however, is that these factors are often linked and that merger decisions provide an impetus for workforce restructuring. The announcement of a merger or take-over is often linked with the preceding job losses. However, it is not always clear to what extent pre- or post-merger announcements are an accurate reflection of what will happen in reality about the staff, as they are clearly produced with an audience in mind. For the special case of banking, we should probably add to this that banks, being institutions that fulfill a servicing task, would by strategic necessity have to go along when their clients' requirement of face to face interaction concurrent to their own objective of becoming bigger and bigger...! As a matter of fact, this motivation is frequently invoked by bank CEOs when asked for the logic of their mergers. Indeed, the evidence that we have seems to point out that economy-wide merger waves are only rarely started in services industries.