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The current issue and full text archive of this journal is available at www.emeraldinsight.com/0048-3486.htm PR 35,6 The HR function in large-scale mergers and acquisitions: the case study of Nordea ¨ Ingmar Bjorkman INSEAD, Fontainebleau, France and the Swedish School of Economics, Helsinki, Finland, and 654 Anne-Marie Søderberg Copenhagen Business School, Copenhagen, Denmark Abstract Purpose – The paper aims to report on an in-depth study of the merger and acquisition processes involved in the creation of the leading financial services corporation in the Nordic countries: Nordea. The purposes are, first, to describe the roles played by the HR function and examine the effects of the roles enacted by the HR function on how the workforces were managed and integrated in the post-merger processes; second, to analyze issues influencing the changing roles played by the HR function in Nordea during the merger processes. Design/methodology/approach – The data for this paper were collected mostly through 60 interviews with HR managers and top executives in Nordea. In addition to the interviews, access was provided to company-internal material and consultancy reports concerning the HR function. Findings – The paper finds that the Nordea case shows, on the one hand, typical problems in organizing and managing HR issues, but also illustrates, on the other, how the HR function is easily left with a secondary non-strategic role in these processes. Research limitations/implications – The paper shows that the general limitations of any single case analysis apply also to the present study. Practical implications – The paper indicates that the communication of expectations both to and from the HR function may be particularly important in clarifying the roles the function is to play in the post-merger process. Originality/value – The paper offers unique insights into the roles played by the HR function in merger processes. Keywords Acquisitions and mergers, Human resource management, Demark, Finland, Norway, Sweden Paper type Research paper Personnel Review Vol. 35 No. 6, 2006 pp. 654-670 q Emerald Group Publishing Limited 0048-3486 DOI 10.1108/00483480610702719 Introduction The human resource (HR) function is frequently encouraged by academics, consultants and practitioners to play more “strategic” roles in their organization. This is the case especially with dramatic organizational changes such as cross-border mergers and acquisitions. Given the apparent significance of people management in post-merger processes, it is, however, unfortunate that we currently know little about how the HR function develops and implements interventions, policies and procedures that contribute to the integration of workforces and cultures. In this article, we explore the roles played by the HR function in post-merger change processes. This helps us to uncover the inherent problems in managing HR issues in the post-merger organization and specifically highlights the difficulties in giving HR issues a “strategic” status. For this purpose, we draw from specific insights of role theory (Katz and Kahn, 1978) in general and studies on the role of HR in particular (Ulrich, 1997). Our key starting point is that the roles of the HR function are shaped by the initiatives taken by the representatives of the function itself but that the expectations and actions of top executives and line managers are essential in determining the strategic or non-strategic status of the HR function (cf. Truss et al., 2002). The article reports on an in-depth study of the merger and acquisition processes involved in the creation of the leading financial services corporation in the Nordic countries: Nordea. Based on interviews with HR managers and top executives in Nordea, we, first, describe the roles played by the HR function and examine the effects of the roles enacted by the HR function on how the workforces were managed and integrated in the post-merger processes. Second, we analyze issues influencing the changing roles played by the HR function in Nordea during the merger processes. The Nordea case shows, on the one hand, typical problems in organizing and managing HR issues, but also illustrates, on the other, how the HR function is easily left with a secondary non-strategic role in these processes. The implications of our findings for future research are discussed. The roles played by the HR function Beginning in the mid-1980s and gaining force during the 1990s, the concept of human resource management (HRM) has taken center stage in discussions of how to manage people in corporations. HRM is presented as a: Distinctive approach to employment management which seeks to achieve competitive advantage through the strategic deployment of a highly committed and capable workforce, using an integrated array of cultural, structural and personnel techniques (Storey, 1995, p. 5). The case study of Nordea 655 It is a basic assumption that the human resources constitute an important source of competitive advantage for the organization (e.g. Wright and McMahan, 1992; Pfeffer, 1994; Storey, 1995). Hence, HR practitioners need to evaluate the economic consequences of the firm’s HRM practices, assess how the human resources and their management compare to those in competing firms, and understand HR’s role in building organizational capabilities for the future (Barney and Wright, 1998). In contrast with the 1970s, when the personnel function was associated with labor negotiations and the administration of policies and procedures, the HR function is now exhorted to take on a strategic and business role. At the same time as the HR function is supposed to become more strategic, the responsibility for people management is also to be at least partly shifted back to line management (Storey, 1995). It has been argued that the distribution of responsibilities for HR issues needs to be clarified and agreed upon between HR professionals and line managers (Ulrich, 1997). Scholars have suggested various ways to classify the different roles played by the HR function in large firms (see, e.g. Legge, 1989; Storey, 1995; Tyson, 1995; Evans et al., 2002). An influential conceptual model is the one developed by Ulrich (1997). Ulrich proposes a model where HR practitioners are seen as somebody adding value to their organization in different and at time potentially conflicting ways. Ulrich’s framework is based on two main dimensions. The first axis reflects the demands of a current/operational/tactical versus a future-oriented/strategic orientation. The second PR 35,6 656 axis consists of a focus on people on the one end of the axis, and a focus on process at the other. It is suggested that HR professionals are at least in part responsible for the following four roles in the organization: (1) Management of infrastructure of the personnel basics (the HR function as “administrative expert”). (2) Management of employee contribution (HR as “employee champion”). (3) Management of strategic human resources issues (HR as “strategic partner”). (4) Management of change and transformation (HR as “change agent”). The two latter roles are strategic in their nature. There is some indication that the HR function in some companies is becoming more strategically oriented than before (Hope-Hailey et al., 1997; Sisson, 2001). However, the available empirical evidence suggests that most HR functions still play predominately a tactical role (Truss et al., 2002) and that HR professionals have low status and influence in many companies (Berglund, 2002). The potential benefits of handling both tactical and strategic HR issues well seem particularly important in mergers and acquisitions. Several studies, have indicated that, financial and business strategy issues, tend to receive most attention, in mergers and acquisitions (e.g. Jemison and Sitkin, 1986); and there have been urgent calls, for more attention, to be paid to the people side, during the integration process (e.g. Buono and Bowditch, 1989; Cartwright and Cooper, 1992; Schuler and Jackson, 2001; Stahl et al., 2004). Research focusing on the organization and functioning of the HR function may help shed light on how the workforces are integrated and managed in the post-merger processes. To the best of our knowledge, no research has previously been published on the roles played by the HR function in international post-merger processes. However, some work has been conducted on factors that influence the roles played by HR functions in large firms in general. First, the roles played by the HR function are contingent on the expectations held by top and line managers – key actors in the role set (Katz and Kahn, 1978) of the HR organization – towards the function. These expectations are in turn likely to be deeply rooted in the administrative heritage of the organization (Truss et al., 2002). As organizational roles are at least partly socially constructed, an HR function that is perceived by key actors in corporation to already have a high degree of “reputational effectiveness” (Tsui, 1984), is more likely to succeed in enacting more strategic roles (Truss et al., 2002). Externally to the organization, the diffusion of notions of what constitutes “appropriate” ways to handling HRM issues may also ` shape top and line managers’ expectations vis-a-vis the HR function (DiMaggio and Powell, 1983; Purcell, 2001). It can be expected that the organizational roles played by the HR function in general will influence the roles it is expected to play also in specific contexts, such as in merger processes. Second, to change existing roles requires awareness of a need for change and agreement of the direction in which the HR function would like to develop its activities (Flood, 1998). Third, the power, social capital and political skills of the HR managers are likely to facilitate the expansion of the roles of HR in the corporation (Ferris and Judge, 1991; Galang and Ferris, 1997). Fourth, sufficient resources, appropriate support systems, and an absence of “corporate chocks” (Truss et al., 2002) help HR managers free time to focus on the development of their function. Fifth, the size and complexity of the corporation has been found to influence the HR function’s ability to operate in a strategic and well-coordinated manner (Truss et al., 2002). We will now turn to the case of Nordea and the roles played by the HR function in the merger process(es). The case study Our empirical analysis focuses on the merger integration process that began with the announcement of a merger of Danish Unidanmark with Finnish-Swedish MeritaNordbanken in March 2000. However, these events were preceded by other mergers and acquisitions. Notably, in October 1997 Finnish Merita and Swedish Nordbanken joined forces in an unprecedented cross-border merger in the European retail-banking sector. At this stage the representatives of the new MeritaNordbanken group announced their intention to proceed with mergers and acquisitions in the other Nordic countries in order to become “the Nordic champion”. In March 2000, it was announced that MeritaNordbanken was to merge with the Danish Unidanmark, a group created just one year before by a merger of two major Danish banking and insurance groups. Already before this step, in September 1999, MeritaNordbanken had made a public offer for the state-owned Norwegian Christiania Bank og Kredittkasse (CBK), which after long negotiations it was eventually able to acquire in October 2000. The new company name Nordea was launched at the end of 2000 and since December 2001 the entire group is operating under the Nordea brand. Nordea with three main business areas: Retail banking, Corporate and Institutional Banking and Asset Management and Life. Table I summarizes some of the key events in the creation of Nordea and in the organization of the HR function subsequent to the merger. Nordea is the largest financial services group in the Nordic region with total assets of around EUR 262 billion. Nordea has the largest customer base of any financial services group in the Nordic region, is a forerunner in Internet banking and e-commerce operation with more than 3.7 million customers, and a major provider of general insurance in the Nordic region. Whereas the merging companies in total had approximately 40,000 employees in 2000, the number of employees had been reduced to 31,000 in 2004. The Nordea merger is not only interesting because of its size. We have chosen it as case for the investigation of the HR roles because of the potentially difficult and very complex cross-border integration processes. Most of our empirical material about the Nordea merger was gathered through two different round of interviews. First, a total of 53 interviews were carried out in late 2001 and early 2002 within a research project that 1997 2000 Merger between Merita (Finland) and Nordbanken (Sweden) Merger between MeritaNordbanken and Unidanmark (Denmark) Country-based HR departments are maintained, but a Head of HR in the merged organizations is appointed Acquisition of CBK is announced The name Nordea is introduced New position as Head of Group Staffs is introduced (to whom the head of HR will report) A cross-border HR organization, divided into HR administration, HR partner organization and HR Group Centre, is introduced on January 1 The case study of Nordea 657 2001 2002 Table I. Key events PR 35,6 658 involved seven scholars from Denmark, Finland, Norway and Sweden[1]. With four exceptions, the interviews were carried out by a researcher representing the same nationality as the interviewee, using a shared native tongue. The interviews were conducted among the very top decision makers in the company, four of whom worked in the HR function. The idea was to employ a “storytelling” approach with the use of a semi-structured interview guide focusing on the key decision makers’ retrospective interpretations of events and actions in relation to the merger negotiations and the integration processes within the units each of them were responsible of. The two authors of this article carried out a second round of interviews with two of these senior managers during the Summer and Fall of 2002, when we also interviewed five other HR managers working within Nordea’s three business areas. Our interviewees included middle managers from Denmark, Sweden, Finland, and Norway. Our research objective in this interview round was to examine in more detail the roles played by the HR function in different phases of the post-merger processes and to shed light on issues that influenced these roles. The interviewees were asked to tell their story about how they had perceived the evolution of the cross-border HR organization. They were also encouraged to elaborate on the decisions made or on events that they found relevant from their specific point of view. In addition to the interviews, we were provided access to company-internal material and consultancy reports concerning the HR function. Below, after a brief description of how the HR functions in Merita, Nordbanken, Unidanmark, and CBK operated before the establishment of Nordea, we will describe the roles played by Nordea’s HR function during the post-merger processes. We will also analyze how the enactment of the different organizational roles influenced the management of people in the integration processes. Background: the HR functions in the merging organizations Compared with the other parties in the merger, Finnish Merita had an HR function that was relatively small, centralized and heavily focused on executing traditional HRM processes like pay systems and labor relations. There was only limited interaction between the line organization and the HR function. Merita had a separate central competence development unit that organized courses and also played a central role in how the bank during the 1990s was working with the cultural integration of the merging Union Bank of Finland and Kansallis, the previous archrivals. Also in Swedish Nordbanken, the HR function was largely centralized, but the regional banks also had their own HR personnel. The Swedish HR unit was mainly focusing on traditional personnel management processes that were highly standardized across business units. Few resources were committed to directly supporting the line units. However, according to some Swedish interviewees, competence development was viewed as “more business oriented and less theoretically based” than in Merita. When Merita and Nordbanken merged, the two country-based HR organizations first remained separate, but in 1999 a cross-border HR organization was established consisting of one unit for competence and management development, and another for HR administration. The leaders of these units had offices in both Sweden and Finland, and commuted regularly between the two locations. In the HR administration unit, little integration took place. More joint activities across the Swedish-Finnish border took place in the competence development unit. Notably, during 1999 the HR function organized 20 cultural seminars for more than 300 Swedish and Finnish employees. Compared with MeritaNordbanken, Unidanmark had invested much more resources in the HR function, and the Danish unit also seems to have taken more initiatives across a broader scope of HR issues. In 1996 Unibank introduced a system of “HR partners” who were to function as change agents and sparring partners in HR issues within the different organizational units. Within this system, the HR professionals were employed centrally in the HR function but were assigned an own line unit to work with, in particular its management. The HR function had also developed a detailed pay system and a standardized procedure for performance and appraisal interviews and competence development discussions used throughout the bank. The head of the Danish HR function was also involved in the process leading to an establishment of the bank’s corporate values. When Unibank merged with the Danish insurance company Tryg-Baltica in 1998, the HR units continued to operate separately. Towards the end of the 1990s, the HR function of Norwegian CBK went through a process of decentralization from a central HR team in the mid-1990s to the HR professionals gradually being transferred to the business units. In 2000, each business unit had their own HR unit, and some of the business units had developed their own HR solutions. In some units, HR managers were involved in strategic HR issues, in others they worked mostly on administrative processes. CBK had a central corporate management development unit responsible for running a career management system for the top echelons of the bank and it also conducted a corporate management-training program. In terms of number of staff, CBK’s HR function was well resourced. Organizing the new HR function When the merger of MeritaNordbanken and Unidanmark was negotiated in 1999-2000, the HR function as such was seemingly not discussed, and few issues related to management of human resources were debated apart from who would fill the top management positions in the merged bank. In fact, when the new organization was about to be announced, the official organizational chart contained no HR function and no head of HR. One of the senior HR managers tells in an interview: I remember the day before the press conferences where the new merger between Merita-Nordbanken and Unidanmark should be announced. HR was simply nowhere at the organizational chart (. . .) And I thought, how can you set up an organization with 40,000 employees and claim that an HR organization is not needed' (. . .) And I said to the CEO: You are sending a signal to the employees that they are secondary to the merger. They do not exist in your mind if you do not establish a separate HR function. The case study of Nordea 659 In the end it was decided that a Swede would be in charge of the new Group HR function. Until the merger, he had been working as the secretary of MeritaNordbanken’s Executive Management Group. When taking up the job a few months after the merger, the Head of Group HR was to report directly to the CEO of the new bank “in some kind of ad hoc manner that was not visible [in the organizational chart].” In reality, very little interaction was to take place between the Head of Group HR and the CEO over the next year. The Head of HR would neither be a member of Group Executive Management consisting of seven members nor of the larger Group Management that included another eight senior executives. But Nordea is not a unique PR 35,6 660 case. Research on European corporations indicates that the HR director often is not a member of the corporate executive management board (Harris et al., 2003, p. 72). Subsequent to the merger of MeritaNordbanken and Unidanmark, after prolonged discussions among the national HR executives it was decided that a country-based HR organization would be established with a three-person HR management group, according to one HR manager “. . . because that was the only model that was accepted [in country X] where they insisted on continuing like before.” In essence, it meant that there would, at least initially, be little integration of the HR functions across the country borders. With few exceptions, people employed within the HR function were still part of the national HR units rather than the line organizations and there was little pressure to reduce the number of people employed in HR. There were (also) ideas, based on Unidanmark’s experiences with an HR partner model, to have HR professionals based in the national HR units to be appointed as “HR Partners” for the different business line units, but during 2000 and 2001 this model was only implemented in selected parts of the Nordea group. The country-based HR units functioned until January 1, 2002, when a new cross-border HR organization was implemented. At that stage, a decision had been made to create a new position as responsible for Group Staffs, including IT, HR, Identity and Communications, and Legal services. The former CEO of Norwegian CBK, who had after the acquisition been made responsible for Nordea Securities, was appointed Head of this new cross-national organizational unit, but in 2002, he was replaced by the Head of retail banking in Denmark. The Head of HR continued in his position but would now report to the person heading Group Staffs. The background for the internal reorganization of the HR function will be presented and discussed below where we will describe and analyze Nordea’s HR function in terms of the four roles of the HR function described in Ulrich (1997) conceptual model. HR as “adminstrative expert” The administrative role of the HR function concerns how it designs and delivers the processes for staffing, training, appraising, compensating and rewarding, promoting and otherwise managing the flow of employees through the organization (Ulrich, 1997). One of the challenges for Nordea’ HR management in the transition from four domestic to one multinational financial services institution was how to deal with the task of developing an HRM infrastructure that would ensure efficient, equitable and high quality HRM processes and practices while at the same time paying sufficient attention to the national and business unit differences within this complex multinational organization. This crucial question was continuously debated among Nordea’s HR managers. The merging country-based organizations had different HR systems and concepts and the differences across the three business units were also considerable. Initiatives were taken both in 2000 and 2001 to collect data to get an overview of how the different HRM activities were carried out in the various countries. Work was also done to align job titles in different countries and efforts were made to coordinate the timing of salary negotiations across borders and across different job functions, so that managers should only once a year spend time on such negotiations for the whole group or department. However, not particularly surprising, in most areas there was less than perfect agreement concerning what constituted “best HRM practices” and consequently only relatively few changes and adjustments were made at the group level in the administrative HRM processes during 2000 and 2001. An HR senior executive among the interviewees even described the country-based HR functions as a “brake block” to cross-border integration initiatives: If you maintain national HR organizations, they will tend to emphasize the national rules, highlight difficulties due to national differences and propose national solutions and thus develop impediments to joint solutions. The case study of Nordea 661 The decision finally made in 2002 to invest in a group-wide IT-based platform for HRM data was intended primarily to provide cross-border HR data but would also contribute to the alignment of HRM practices and processes across borders and business areas. After the merger between MeritaNordbanken and Unidanmark in 2000 some of the “cross-national” business areas and units soon perceived a lack of support from the corporate HR professionals for the handling of issues like staffing. Within Asset management there were particularly strong reactions to the handling of the employment contract of a senior Swedish manager. The Danish head of Asset Management eventually described his frustration in a letter to Nordea’s CEO Thorleif Krarup, after it had taken six weeks to reach a decision in the Swedish HR department concerning this manager’s contract. The Swedish HR function explained that an important part of the background was lack of resources, but also the established Swedish tradition that even management positions had to be negotiated with and accepted by the unions. This clashed with the Danish top manager’s expectation of much quicker decision-making in head hunting and recruitment. And from a business unit perspective the perceived slowness in handling staffing issues indicated that the HR function failed to live up to the demanding needs of a cross-border financial services institution in a highly competitive international labor market. In the fall of 2001 Krarup then hired an international consulting firm to examine the functioning and organization of the HR organization. A reorganization of the HR function into three main units – Group HR Administration, Group HR Partner and Group HR Centre – became one of the concrete results of the report prepared by the consultants together with Nordea’s own HR executives. Group HR Administration would be responsible for administrative HRM processes, a responsible Head of HR was to be appointed within each business area with HR partners in the subordinate business units, and Group HR Centre would be responsible for developing corporate tools for staffing, training, leadership development and remuneration. The case illustrates the complexities and challenges involved in changing existing HRM procedures and practices in cross-border mergers. First, the decision makers who had been in charge of the national HR functions differed in their perceptions about how to handle a number of HRM issues. The following view was held by several of our interviewees among the senior HR managers: The fact that our points of departure have been so different has been a barrier for the Nordic HRM work. For instance, Unidanmark had an elaborate salary system where each position in the bank had been classified and clear rules developed concerning how to determine individual salaries. In Nordbanken (Sweden), the person’s superior and the superior’s superior were largely themselves setting salaries, while in Merita (Finland) the central HR unit played a decisive role in the negotiation process and was even evaluated based PR 35,6 662 on how well it was able to keep salary hikes under control. The perceptions held by the national HR managers about “best practices” that could be used as a basis for increased standardization of Nordea-wide policies were rooted in both national HRM practices and in how HR issues had been handled in their own organization. The differences in views led to prolonged discussions and arguably, a lack of attention to the new HRM needs in the integration of and the further functioning of the new cross-national organization. Second, the expectations of the line managers in the cross-border business areas and –units on the HR function clearly differed from the services provided by the function. The letter sent to Nordea’s CEO (see above) constituted an extreme example of how the expectations and demands of line managers were communicated to the HR function. HR as “employee champion” The “employee champion” role has to do with the way in which the HR function helps enhance employee contributions (for example commitment) to the firm through the attention paid to employee needs (Ulrich, 1997). In 2000, the extent to which HR professionals had a close and trustful relationship with employees and, hence, were in a good position to understand and address employee concerns seemed to vary considerably across units and countries. In most parts of Nordea, the HR units had a tradition of operating as a centralized and rather bureaucratic organization that mostly dealt with administrative HRM issues such as recruitment contracts and salaries. For most employees it did not come natural to approach the HR professionals with their grievances and concerns. The importance of professional counseling and support for employees and proactive actions so as to ensure employee commitment are particularly important during periods of great upheaval such as large-scale mergers (Cartwright and Cooper, 1992). For example, to the extent that there would have been shared expectations concerning an employee champion role on the part of the HR function, the loss of some employees with key competences during the merger processes might have been avoided. One HR professional admits: I could have hindered people from leaving the company, if my own role would have been well defined . . . I could have persuaded them to calm down. Often the importance of HR is forgotten. Another HR professional tells how much time he spends convincing employees that they will benefit from staying in the company instead of being tempted by higher salaries in other international companies abroad: We have experienced that foreign financial companies have tried to attract whole teams of employees who could themselves nearly set the salary level . . . But the recipe is not to offer a higher salary, but to elucidate how many other benefits you have as employee in one of the four Nordic countries in contrast to for example London. We are able to retain many of our employees and attract uninvited job applicants due to the whole range of welfare services offered in the Nordic societies. The group-wide establishment in 2002 of an HR partner model with HR professionals physically and organizationally being part of the focal line organization, may over time contribute to closer relationships between HR professionals and employees. As pointed out by a manager in the HR partner organization: if people can come to me to openly discuss their problems, this will help me to do a better job in helping management to deal with the situation. The case study of Nordea Whether or not this actually materializes will depend not only on the initiatives and the competencies of the HR partners, but perhaps even more on the role expectations communicated by line managers and employees. HR as “strategic partner” The “strategic partner” role focuses on the alignment of HR strategies and practices with business strategy (Ulrich, 1997). Whereas the organizational representation of the HR function in the hierarchy of the corporation can be viewed as an indicator of its corporate status and its possibility to participate in decision making during formal meetings, a more valid indicator of its real strategic impact is the extent to which the function influences the outcome of strategic decision making (Purcell, 2001). Previous research indicates that the HR function, rather than being centrally involved in strategy formation, mostly is called upon to advice on the people implications of business strategies once they are formulated (Truss et al., 2002). As earlier mentioned, the HR function did not have a permanent “seat at the table” in Nordea’s Group Management. Up until late 2001 there was a direct reporting line between the head of Group HR and the CEO of Nordea, but according to interviews with both of them, corporate strategy making took place without much influence from the HR unit and few issues related with human resources were discussed in depth within the executive management group. As a senior HR manager explains: I had no success in selling the HR strategy and a new HR organization [to executive top management]. 663 In fact, top management seemed to lack interest in the HR function altogether. The Head of HR had scant access to top management whose attention was more focused on the branding of the firm and how to deal with a stock price that was clearly underperforming the market. However, subsequent to complaints from line management to CEO Thorleif Krarup about a lack of support from the corporate HR professionals for the handling of HRM issues like staffing, Krarup and the Head of HR met with Nokia’s top HR executive. A senior HR manager sees this event as a turning point: Then Krarup understood how much time Nokia’s CEO and HR executive spend on every top manager, what they did, where they should be next time, what the whole pool of potential top managers is, and what kind of feedback each person gets. From being a function that was largely neglected by Nordea’s group executive management, HR now became a “problem” that had to be dealt with. During the latter half of 2001 and continuing during 2002, the HR function worked together with consultants on the distribution of responsibilities within the HR organization and on the development of objectives, strategies, policies and procedures for the function. But, although the HR function gradually received some more attention from top management, HR professionals were still not intimately involved in corporate strategy discussions. The new Group HR Centre made a proposal of a new stock option PR 35,6 664 program for senior executives, and top management approved a company-wide management training program as another issue, but with these initiatives as main exceptions it seems as if the group executive management board seldom specifically discussed questions related to the HR implications of business strategy decisions. The establishment and gradual roll-out of a group-wide HR partner concept in 2002 was intended to enhance the strategic contributions of HR professionals within each business area/unit. The interviews conducted with line managers by the consulting firm in 2001 had revealed that they felt a strong need of HR services that were directly adapted toward the particular needs of each business area. As a senior executive within a “global” business area expressed it in autumn 2001: I have a growth strategy, we want to be four times the size we have today in order to be one of the biggest in Europe. Therefore, I need a HR strategy in all areas: recruitment, training, incentives etc. . . . but I cannot get this kind of service from the four country based HR organizations. They can hardly deliver me transparent information about my employees’ salaries . . . Therefore it is urgent to develop a Nordic HR organization in the Nordic bank. In line with suggestions made by consultants and similar to practice in many successful corporations, HR professionals were now to be “hired and fired” by the line organization. Each of the three business areas, Retail Banking, Asset Management and Life, and Corporate and Institutional Banking, now got a Head of HR, who, however, typically was excluded from membership in the top management group of the business area he or she was in charge of. Most business areas got HR partners responsible for each business unit within the business area. To exemplify it, in the business area “Asset Management and Life” there would consequently be employed HR partners responsible for each of the business units: Investment Management, Investment Funds, Long-Term Savings and Life, Nordic Private Banking, European Private Banking, and Life and Pensions. In most instances, except in the large retail banks, the HR partner function became organized in cross-national teams, typically with one HR partner appointed country responsible but also with a responsibility for either some function within HR (say, competence assessment and development) or a sub-unit within the larger business area/unit. The organizational change of the HR department seemed to rather quickly produce other changes. First, it led to more interaction across borders within the focal business unit rather than domestically across business units. Second, according to line managers, HR professionals who had previously been employed by the central HR organization gradually shifted focus and began: to understand what we [in the line organization] had been fighting for all these years. The Heads of HR in the different business areas only had a “dotted line” to the Group Head of HR and only participated in formal meetings with him four times a year. Therefore, they developed a stronger loyalty and commitment towards their own business area. But, this was done at the expense of a potentially dynamic interaction within a board of HR directors joined in dealing with strategic HR tasks at the corporate level. Third, according to the Head of HR in one of the business areas the reorganization had the implication that it was now less feasible for top management just to launch an initiative or present a new HR tool such as a standard for performance appraisal interviews and make it mandatory for all business areas and units: If the association of the HR function with the different areas is to be taken seriously, initiatives must grow from the bottom. And when you realize that there are some issues where it is reasonable to harmonize and coordinate in order to offer something to the whole company, you can of course do it. But with this reorganization of the HR function top management cannot continue managing HR issues in a top-down process. The case study of Nordea As a consequence, the adaptation and contribution of the HR function to the performance of the focal business unit was more stressed, and a more reserved attitude emerged in the HR partner organization towards corporate policies, standard procedures and joint processes developed in the Group HR centre: We run the risk – and I have already experienced it – that for example common strategies and tools are developed in relation to recruitment, but there are no customers to buy them . . . But out of necessity recruitment is carried out in different ways in retail banking and asset management, and therefore we must have the initiative and express a demand of specific tools and administrative services which the Group HR center afterwards can develop and perhaps coordinate at a group level. 665 Some Heads of HR in the three business areas also voiced skepticism concerning the added-value of a corporate management development program organized by the Group HR Centre: that would focus too much on general leadership rather than business skills needed in our unit. However, it is still too early to tell whether the reorganization of the HR department will lead to a HR partner function exerting more influence on strategy making and implementation both at the business area and unit levels. Some interviewees at least mentioned that it was also a challenge to ensure that the HR partners currently employed had the competencies needed to fulfill a more strategic role. A Head of HR in a national retail bank says: Looking at my own HR organization, I believe I will have to replace several people who don’t have the necessary competencies and recruit new persons from the outside instead. And . . . we will have to develop those we already employ. Another future challenge will be to engage HR managers from the business areas and units in a dialogue concerning the kind of tools that on the one hand serve to integrate personnel and business practices across units, and on the other hand are sufficiently adaptable to the needs of each unit. Networking and exchange of experiences across units is likely to be important in the processes of both clarifying the roles to be played by HR professionals at different organizational levels and to further develop how strategic HRM issues are handled throughout the corporation. HR as “change agent” The second strategic role in Ulrich (1997) conceptual model is that of the HR function as a change agent. Based on the normative literature, this role could be expected to be particularly important in the integration of cultures in the merged corporation during the post-merger period. However, the picture emerging from the interviews is that the HR organization had limited influence on the transformation and integration process following the mergers and acquisitions in 2000. PR 35,6 666 Overall, socio-cultural issues were given little attention in the integration process following the merger between MeritaNordbanken and Unidanmark and, later, the ¨ acquisition of CBK (Søderberg and Bjorkman, 2003). As earlier mentioned CEO Thorleif Krarup was involved in the negotiations about the corporate statement including three common corporate values (“adding value”, “being creative” and “empowering”) for the merged companies. Our interview with him shows that he was well aware that these values had to be translated into social practices to make a difference in daily business: I have emphasized in talks with our communication managers that they must forget their plans about launching a big campaign in order to externally market our new brand values. The branding process has to start internally, and I simply don’t know yet when we will be able to say to our customers that this is the way we want to be perceived. First of all our employees will have to relate themselves to these values and translate them into local practices. It is the reason why we now launch a big internal project called ‘From Words to Action’. The corporate HR function played only a secondary role in this phase of the cultural integration process which was driven forward primarily by Nordea’s Identity and Communications department. While the Identity and Communications unit was in charge of the production of a booklet “Making it possible” adding words and pictures to the Nordea corporate statement, the HR managers in each business unit were given the responsibility to plan a cascade process for the internal branding. Several of them were critical towards this top-down process, and moreover they found the division of labor between Communications and HR problematic. The following interview statement gives an impression of how this process was evaluated by some of the responsible HR managers: Top management initiated the branding process and made a promise to the employees about a continued dialogue. But they did not redeem it, and that is fatal. It is the way management looses trust capital in relation to the employees. The branding process was conducted as a top-down process, and top management did not show interest in getting any kind of feedback. The department Group Identity and Communications made it into an issue about how Nordea gets a new profile and thus differentiates itself from other companies. But they totally underestimated the big challenge concerning how to facilitate the employees’ brand identification process. If we talk to our customers about what Nordea stands for, it is crucial that the Nordea employees get a feeling of what makes the difference. What is it they must do in a different way, because they are now working in Nordea and not any longer in Unidenmark, Nordbanken, Merita or CBK. The central role of the Identity and Communications function may be explained at least in part by the relatively close and already well-established relationship between this largely Danish-driven function and the Danish CEO of Nordea. The lack of ` expectations by top management vis-a-vis the Head of the HR department probably made it difficult for the HR responsible – in spite of the fact that the HR function in the MeritaNordbanken had played an active role in the cultural integration process – to take center stage in the processes of change in the merged corporation. Additionally, the absence until January 2002 of a cross-border HR department that could match and collaborate with the Identity and Communications department may also have tilted the influence in favor of the latter. Consequently, in the initial phase of the integration process external corporate communication and branding initiatives were emphasized at the expense of a focus on internal change management. Compared with the interviews that we did in 2001, our interviews conducted during the summer and fall of 2002 revealed a more positive perception among HR managers of the two strategic roles played by the HR function. However, in terms of Ulrich’s model of the different roles played by the HR organization, the focus of Nordea’s HR function still seems to be more on HRM processes than on people issues. Discussion and conclusions In this article, we have examined the roles enacted by the HR function in the processes following the merger between MeritaNordbanken and Unidanmark and the acquisition of CBK up to the summer of 2002. In this two-year period the HR organization went through considerable changes. Especially in the initial post-merger period, the emphasis was clearly on integrating, rationalizing and developing the administrative HRM policies and procedures, while there is little evidence of the HR function playing roles as employee champions, strategic partners or change agents. Based on our analysis we suggest that the organizational roles played by the HR function influence how the workforces are in fact managed in cross-border mergers. The low expectations by top management concerning the strategic contributions of the HR function seems to have contributed to the limited attention to people management and cultural change issues in the integration process. A number of factors appear to have influenced the largely non-strategic roles played by the HR function. First, from the initial merger negotiations processes onwards there is little evidence of top management having high expectations of any strategic contribution of the HR function. As a consequence, the HR function was not invited to play any central role in the post-merger integration process. Second, it was clearly difficult to identify one way in which to organize the HR function and its work so as to satisfy the demands and expectations both of different cross-border business areas and business units, and the more country based retail banks. The national HR organizations and HRM systems in place before the quadruple cross-border merger had largely been developed so as to support retail banking. As there were limited changes in the operations of retail banking in 2000-2001, there was still a reasonable fit between the national HR systems and the local needs of this business area. According to one of the four national HR managers: it was completely natural since the majority of the personnel were in the retail banks. As [the retail banks] were to continue to operate locally, HR could also continue to be handled domestically. The case study of Nordea 667 However, the establishment of cross-border organizations in other business areas led to a misfit between the expectations and needs of these areas and the services offered by the national, retail-oriented HR organizations. The early experiences with the establishment of an HR partner organization in 2002 indicate that the reorganization of the HR function may lead to a more significant strategic role for the HR function at least at the level of the individual business area and/or business unit. However, a too strong pendulum swing towards a business area/unit focus may in the long term create a risk of failed synergies across business areas and units. PR 35,6 668 Third, the merger situation itself seems – at least during the initial phase of post-merger integration – to have diverted the attention of the HR managers from the function’s potential contribution to the strategic development of the rest of the organization to decisions concerning how to organize their own work. There were disagreements how to develop the function, and there were a large number of decisions to be taken concerning how to deal with the transactional elements of HRM in the new cross-border HR organization. The attention of Nordea’s top management also appears to have been more focused on the financial outcomes of the integration process than on how to deal with people management, including the input and activities of the HR function. Previous research on merger processes provides evidence that this often tends to be the case (Jemison and Sitkin, 1986). Furthermore, the emphasis on reaping integration benefits in terms of cost reductions meant that it was difficult to obtain support for investments in IT-based HRM systems needed for the cross-border HR organization. Fourth, when more significant changes were initiated in the HR organization in 2001 and further developed during 2002, models were sought from the outside. External business consultants played a key role in developing a new model for the HR organization, and examples of how to handle HR issues successfully were sought from other large multinational corporations like Nokia, IBM, Citicorp. and British Telecom. This benchmarking exercise also appears to have played an important role in convincing both the Head of Group Staffs and the Group Executive Management about the need to invest considerably in IT as support for the corporate HR system. At the same time, HR managers gave sense to the idea that a decentralized “HR Partner model” was the “right way” to organize HR support so as to add value to the business areas and units. This piece of research should be read as an attempt at exploring and analyzing the organizational roles played by the HR function during the post-merger period. The empirical analysis in this article has mostly been based on interviews with HR managers, while few of the line managers interviewed directly commented on how they perceived the HR function. Future research should collect empirical material from members playing the different HR roles within the HR department, but also from top managers, line managers and other employees. The Nordea case indicates that the communication of role expectations both to and from the HR function may be particularly important in clarifying the roles this function are to play in the post-merger process. Additional research is clearly needed both on the enablers and constraints of the organizational roles played by the HR function, and on how these roles relate with how people are managed in large-scale cross-border mergers. Note ¨ 1. The members of the team of researchers were: Ingmar Bjorkman, Janne Tienari and Eero Vaara (Finland), Christine Meyer and Tore Hundsnes (Norway), Karl-Olof Hammerkvist and Annette Risberg (Sweden), and Anne-Marie Søderberg (Denmark). The main findings of the project are reported in Søderberg and Vaara (2003). References Barney, J. and Wright, P.W. (1998), “On becoming a strategic partner: the role of human resources in gaining competitive advantage”, Human Resource Management, Vol. 37, pp. 31-46. ¨ ¨ ¨ Berglund, J. 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