Cultural integration is the most important aspect of a merger: ŠKODA Auto Volkswagen’s Head HR
Jan Frydrych, Executive Director - HR and Admin, ŠKODA AUTO Volkswagen India, has worked in various positions for ŠKODA AUTO since 2004. He began his career in sales and marketing. Since 2007, he has held leadership positions in the field of human resources and has worked in the Czech Republic and other countries since then. In his last assignment prior to joining ŠKODA AUTO Volkswagen India, Frydrych was responsible for HR Management at the Volkswagen Group’s Kvasiny plant. Since April 2017, he took over as the Head of Human Resources division within ŠKODA AUTO Volkswagen India Ltd and is responsible for human resources management and the implementation of the HR strategy within the framework of the ‘INDIA 2.0’ project along with recruitment, training, and administration processes.
Frydrych was a key stakeholder responsible for the merger of Volkswagen Group India entities and smooth managerial sync amongst the brands. The group mastered its art of internal recruitment to best meet the suitable candidates for the new responsibilities. He is also responsible for collaborating with social partners and implementing HR synergies among the Group brands in the Indian market.
In this exclusive interaction, Frydrych shares some insights on what it takes to make a merger successful from all aspects, and the role of HR and cultural integration in it. He also shares his views on the impact of technological advancements in reshaping employment in the automotive sector and how organizations can ensure a pleasant employee experience during a merger.
Here are the excerpts from the interview:
Innovations in digitization, artificial intelligence, and automation are creating performance and productivity opportunities for business. What will be the likely impact of these advancements in reshaping employment in the automotive sector?
I am a strong believer of people and while Artificial Intelligence is the talk of the town, real intelligence and experience will be hard to replace. For me, automation, digitization and artificial intelligence are support tools which help improve precision, take over repetitive processes and help bring insights and predictive analysis of even future activities based on historical data.
This doesn’t mean that I am writing away the developments and the impact it will bring with it. Digitization is reaching the level of maturity that can replace almost every process there is in business, especially in manufacturing and automotive. While this frees up capacity in favor of strategic interventions, it opens up furthermore opportunity in our ability to innovate, learn and do stuff that we never had time to pursue. And that is where the human angle is irreplaceable. The need to continue to upskill with technology at the core will be imperative for sustenance in the future.
During a merger, it is not only that different entities come together to become a single legal entity, but it is also a merger of cultures, work environments, policies, and so on
What are the significant challenges an HR head faces during a merger? And how do they overcome that to sustain a successful merger?
To me, a merger is an open-ended opportunity, where along with risks, there is actually a prospective direction to a new future. A merger comes with its host of challenges - new roles, redundant practices, learnings and of course, risks of failing to reach the goals of the merger.
During a merger, it is not only that different entities come together to become a single legal entity, but it is also a merger of cultures, work environments, policies, and so on. Bringing different cultures together and getting them up to pace in sync with each other remains one of the biggest challenges. It is important to have proper planning while having an end-to-end perspective defined for all stakeholders prior to the merger, during and post-merger. Identifying the key risks, gains, potential pitfalls and the vision are the most crucial aspects of managing a merger, while keeping a humane mindset.
Identifying the key risks, gains, potential pitfalls and the vision are the most crucial aspects of managing a merger, while keeping a humane mindset
It is important that everyone from the top management to the last employee understands the ‘why’ of the process as such. Having an open and clear communication process and building a mindset that’s ready for some sort of a short-term compromise for a better future is the best approach to gaining the support of employees on either side of the merger.
Finally, a merger is not a short-term process and doesn’t end on Legal Day One, but building the unified culture will take a lot of nurturing and drive to eventually reach the stage where everyone is on the same page and aiming for the same goal.
How crucial is cultural integration during a merger? How do you bridge the cultural differences between the merging organizations?
“Company Culture” or “Cultural Integration” is the most important part. If all the people don’t feel that they are a part of the same family, it is impossible to get the best out of them.
How can HR leaders leverage technology for successful cultural integration during a merger?
Multinational companies are continuously looking for expanding their business and growing globally. But what we mostly fail to realize is that this expansion comes with a risk. While the general perspective is that of geopolitical and macroeconomic risks, we forget how cultural differences can affect the businesses. The differences ranging from simple norms and myths to religion and customs can significantly affect the operational strategy of a business. We need to adopt global dialogue, respect and tolerance in the first place for any successful cultural integration, and then we would be able to extract the best out of technology and put it to use.
Technology today is a crucial medium to bridge the gap between the merging entities during a merger. Independent platforms like intranet/websites are merged and collated, bringing all the employees on a common portal. There are times when existing digital media platforms are extended, for example, SAVW witnessed the extension/ availability of an existing mobile app service from one entity to three.
2020 will be the year of the experience economy where employees will be significantly impacting the business bottom-line with their intrinsic willingness to serve the company and its customers. Organizations ought to gear up and take a hard look at all the gaps - be it cultural, technical, leadership wise, design-wise or execution wise - to deliver a winning employee experience. How can organizations ensure a pleasant employee experience during a merger?
Firstly, as an HR professional, I not only know but believe in the fact that Employee Experience is the intrinsic impetus for talent to stay on with an organization. And while that is one of the quintessential factors for the success or failure as an organization, employee experience assumes critical importance to manage during a major change such as a merger & acquisition.
The only way to manage to retain the commitment of your employees and even the employees who are being reshuffled to new portfolios or in the worst-case scenario, having to end up helping them find an alternative role outside of the company, is to act with reason, taking a humane approach and having the flexibility to work around solutions which can be a win for all parties involved. After all, talents are rare resources and can’t be taken on a ride.
Finally, it is also important to analyze your actions through surveys, personal interviews, match expectations to business objectives and measure outcomes like attrition rates and employee satisfaction index. The workforce at every organization is heterogeneous; hence, it is important to understand their needs and act accordingly. It is essential for organizations to make sure that employees remain motivated, as that’s a proven performance boost and contributes to business continuity.
We need to adopt global dialogue, respect and tolerance in the first place for any successful cultural integration, and then we would be able to extract the best out of technology and put it to use
During the process of a merger, some employees may be anxious about their job security, roles, and employee benefits. According to you, what should be done to manage such a situation?
Continuity and trust are important measures to allay anxiety that employees might face during a merger. A proper mix of offering clarity of action and communication is imperative to building the same. HR professionals should not only strive to make sure employees understand the complete picture, but also take the time to follow through the process with individual action plans and identify ways to solve individual expectations.
The recent merger of three former Volkswagen Group entities - Volkswagen India Private Limited (VWIPL), Volkswagen Group Sales India Private Limited (NSC), and ŠKODA AUTO India Private Limited (SAIPL) was a massive exercise and people management becomes a big concern for HR during such times. Please share briefly your personal experience of successfully managing this merger. What was the strategic framework adopted by the company to bring together 5 different brands, three distinct legal entities, and their unique processes and organizational cultures to blend as a single unit?
The formation of ŠKODA AUTO Volkswagen India Private Limited was an exciting journey and quite a number of important measures helped us manage the exercise in a systematic manner.
I joined in the middle of the de facto merger ahead of the planning and the pre-merger stage. As an HR leader, I had two main goals. First, the successful merger including creation of the new organization, formation of the legal entity and finally building the culture over a period of time. While on the face of it, the merger seems pretty straight forward as we were already part of the same group, there is a significant influence of the distinct headquarters that impacted how every employee worked in different units, with unique policies, hierarchies and also distinct goals. The creation of a homogenous talent base from such a diverse heterogeneous mix needed creation of a concrete and sustainable vision for the future and the India 2.0 project with a committed investment of INR 8000 Crore helped in giving a glimpse of the best way forward for all of the group companies.
The merger of the three different HR units within the Volkswagen Group Passenger Vehicle units in India was my second important task at hand. I was responsible for sorting the HR structure and helping put the base in order - the same team that was responsible to drive the total process. At SAVWIPL, we approached the topic in a systematic way wherein we took workshops with every department scrutinizing every role and function. We drove up a plan to ensure that none of the employees had redundant jobs or roles. Those positions which were duplicating opened opportunities for employees to develop themselves in different areas of work within the organization. We worked on building their capabilities and making such employees take up responsibilities of other functions and even some new ones that came up due to a new merged entity.
The formation of ŠKODA AUTO Volkswagen India Private Limited was an exciting journey and quite a number of important measures helped us manage the exercise in a systematic manner
And the results - we had zero job cuts, our attrition is down to by almost 4% and lowest in the auto industry and we improved our employee satisfaction score by five percent than the sum total of the individual entities. Overall, our experience of the merger was a mixture of positive experiences that drew the appreciation of management and our empowered-passionate workforce that delivered a winning transition.