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Assignment on

Mergers and Acquisition

Acquisition of Tata Hotels by Oberoi Hotels

Submitted by-
Group 3
Bharat Malik H009-16
Mohit Sethy H034-16
Deepanshu H013-16
Sudeshna Chandra H047-16
Vaishali Gambhir H050-16

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Oberoi Hotels
The East India Hotel later known as the Oberoi Group, also featured as “A great place to Work” was
founded in 1934 and operates as a chain of 31 hotels along with owning Nile Cruisers and a Motor Vessel in
the backwaters of Kerala. The group also has presence in six countries under the ‘Oberoi’ and the ‘Trident’
Brand. Apart from hoteling, it is also engaged in flight catering, airport restaurants, travel and tour services,
car rentals, project management and corporate air charters.

HR environment
1. Value/beliefs-The organization believes in the Dharma of putting “the customer first, company
second and self, last” and exemplifies its customer service by anticipating their need, attention to
detail, excellence, aesthetics and respect for privacy. The Oberoi Hotels conducts itself with the
highest ethical standards.
2. Culture (Corporate)-It has a culture of open door policy which encourages team-work, cross
functional collaboration, empowerment and ownership promoted by having a relatively flat
organization. It has a culture of going beyond everything to create an experience for its guests, being
friendly and professional at the same time.
3. Business Segment-The primary business of EIH is the ownership, management and operation of five
star hotels in metropolitan and major tourist destinations throughout India and in some overseas
location. EIH looks for selective expansion of its five star segments. The Oberoi, primarily targets
two important market segments, the business and leisure.
4. External Environment-The Indian Hotel industry is estimated to be around $25 billion (2014) with
share of the premium segment being $5.8 billion. The major players in this suit are- Leela Ventures,
ITC Hotels, Marriot and Taj
5. Strength of communication-Less layers of management between workers and the C-suite,
communication within such a company is generally faster, easier with less scope of
misunderstanding. The company’s Dharma also focuses on a conduct of two-way communication by
accepting constructive debate and dissent whilst acting fearlessly with conviction.
6. Business Strategy- The current business strategy of Oberoi Hotels is to expand overseas. Oberoi
Hotels have targeted corporate offices, higher-income group and urban travellers as its potential
customers.

HR Systems and Policies


1. Recruitment and selection- The Company follows a stringent interview process before hiring any
fresh talent. Most recruitment is done through campus visits.
2. Employee relations- Oberoi has an employee strength of more than 13000 and a female to male
ratio of 1:2.32. They also have Trade unions for resolving employee issues with management

Taj Hotels
Vision: The Taj group of Hotels commit itself to the overall improvement of the ecological environment.
It is our endeavour not only to conserve and protect but also to renew and regenerate the environment in
which we live and operate
Mission: Embrace talent and harness expertise to leverage standards of excellence in the art of hospitality to
grow our international presence, increase domestic dominance and create value for all stakeholders.

HR Environment
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1. Culture: The culture of Taj Hotels, “Tajness”, is marked by the extreme sensitivity, care, passion
and sincerity. The departments have specific function roles and the work is governed by authority,
structure and set of procedures.
2. Values: Taj Hotels follow extremely customer centric work ethics. Tradition Indian values like
respect for others, humility and consideration for others marks strongly in the employee behaviour.
3. Structure- Organization structure is highly hierarchical. Various hierarchical levels exist like top,
middle and lower management. Each level has its own head. They follow strict formal relationship
defined by rules and norms.
4. Strength of communication-Despite this formal structure, lot of communication goes into the
system. Employee’s suggestions and participation in decision making is valued and form a part of
their performance evaluation.

HR Systems
1. Performance Management Systems-A 360-degree feedback is followed where performance of an
employee is also assessed based on the feedback of the subordinates. Assessment is not only done on
the basis of performance (customer satisfaction scores, customer compliments, contribution in the
suggestions, work behaviour) but also on the personal qualities. Promotions are strictly merit based.
2. Employee satisfaction- They have strong employee satisfaction tracking system. They have
excellent employee recognition programs like STARS. Employees are given numerous opportunities
to build on their competencies. They strictly follow job rotation and job enlargement to ensure
overall development of employee capabilities.
3. Recruitment & Selection-The Taj group go for very few lateral hires. They develop employees
from within the organization. It hires young people, often straight out of high school and make them
undergo intense skill training. At the managerial level too, the company recruits from the lower-tier
B-schools. They believe that such talent group would want to build careers with a single company
and tend to fit in better with a customer-centric culture.

Key Differences in HR Environments

HR Oberoi Hotels Taj Hotels


Environments

Structure Flat Hierarchical

Culture Informal, open communication, Highly formal guided by strict norms and procedures,
relatively greater autonomy to the
employees

Employee talent Give very high importance to Importance given to core values , believe in the
excellence in prior education, philosophy that skills can be developed through
Recruitment very high through training and not personal values, Recruitment mainly
campus visits through tier-2 and tier-3 cities

Values Relatively high International Guided by traditional values like humanity, respect for
standards in serving customers, elders, being considerate, roots of Indianness in their
highly output, productivity driven day to day operations, highly customer and employee
driven, luxury with Indian values

Reasons for Acquisition

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Oberoi Hotels will seek to acquire Taj Hotels while giving it independent operating rights because:
1. Taj Hotels’ identity is due to its culture. If Oberoi hotels brings about any change in the culture post
acquisition, Taj’s Customer Value Proposition (luxury with Indian values), will be damaged reduce
their customer base
2. The entire transition plan is expected to take around 2 years
3. Oberoi Hotels can increase their customer base through Taj Safari which caters to an entirely
different market segment

HR due diligence post acquisition


 HR strategy- It is of utmost importance to develop a shared vision and align the overall HR strategy
to meet the new business goals. The HR should be aware of the business strategic needs. Assess the
strategy, estimate the cost of integrating, people issues, and cultural fitment issues. The major
difference is in organizational structure of them.
 Communicating to the employees- Communicating to the employees regarding the acquisition is
the most important and sensitive task and needs to be handled very carefully. Such acquisition news
can create an environment of anxiety and uncertainty, thus communication should always come from
the top leadership. Both the HR teams should work in parallel to create better clarity among
employees about the purpose of integration, the mission, vision and what kind of changes that are
going to be made in HR systems.

Anticipated Problems
1. Jobs will become redundant when structure is make flat at Taj Hotels
2. Issues with organizational culture
3. Issues with reporting for the top management for Taj Hotels

Action Plan to combat the problems


1. HR subsystems that can be aligned are Compensation philosophy, Performance appraisal cycle and
Learning and development
2. HR subsystems that need to remain separate is Recruitment and selection- Taj Hotels tap into a very
different talent with the selection criteria being that they should have strong moral and cultural
values (they recruit mostly from 2nd tier cities and develop them internally)
3. Increase the number of Board of Directors to include executives of the Taj Group
4. Important to retain key employees through effective retention pay-outs at least for 2 years because
they would facilitate the smooth alignment of two entities
5. Retention of key employees with expertise with first year plan and second year plan
6. Management structure need to be intact in initial periods of acquisition
7. Looking into cultural Fitment- The cultural fitment will take a bit of time. Taking it slow will ensure
successful M&A. Design the workflow system in such a manner that it doesn’t hamper Taj’s culture.
Interview internal stakeholder inside of the leadership team, sample of middle manager and front line
employees to understand their way of work
8. Alignment of Employee benefits- The employee benefits should include both the companies’
benefits already given to employees. There should be a bucket of Benefits inclusive of benefits of
both companies. Employees should be allowed to choose their own benefits.
9. Understanding labour relations- Here the relationship between all the employees is more important
rather than the relation between HR and employees. While dealing with job redundancies over the
years HR should also give incentives to retain best performers
10. Measuring Progress- HR should specify certain metrics to measure the progress of employees target,
company's strategic goal and re-evaluate action plans and take steps accordingly

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