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5 Ways to Retain Employees During Mergers and Acquisitions

One of the biggest moves for a company is the acquisition of or merger with another. It typically means growth and a brighter future. However, amidst the boardroom buzz and strategic planning, a crucial element can sometimes get overlooked: the human factor. 

The success of any merger and acquisition (M&A) hinges on its people, and more often than not M&As are a rocky period for the employees of both companies.

Uncertainty about roles, company culture, and even job security can lead to a mass exodus of talent, jeopardizing the very foundation of the post-deal business. 

M&A effects on turnover can be seen from the very first year. A study published by the University of Pennsylvania titled Turnover Differences Between Acquired and Regular Hires shows that nearly 33% of employees from the acquired company leave within the first 12 months after an M&A deal. On the other hand, only 12% of the acquiring company’s employees tend to leave during that same period.

Over a three-year period, the same research found that acquired workers, also known as ‘acqui-hires,’ are 15% more likely to leave compared to new hires.

This begs the question how does a company ensures its top talent stays on board to steer the combined company towards success? 

Impact of an M&A on Employees

Redundancies are one of the most common issues any company faces following an M&A deal. Similarly common are shifts in job descriptions, seniority, and career projections.

This often translates to a chaotic scramble for survival immediately following the initial announcement of the deal.

In case of acquisition, the acquiring companies have little to worry about. However, that’s not the case for mergers of relatively similar companies and businesses being acquired.

Employees tend to feel uncertain about their jobs, livelihoods, and benefits, including retirement perks. They’re unsure whether they will remain with the new company or not.

Others worry they may get demoted or overloaded with additional work. While others are concerned about new managers parachuting over their heads.

Clashes of cultures and values are yet another major concern, especially if the companies tend to be from different regions. This is also more common with large organizations acquiring smaller startups.

Finally, M&As tend to translate to an absence of choice, especially among middle management and junior employees. This isn’t only about major elements such as working for a company they never applied for. It’s often visible in accepting new work conditions, regulations, task-handling processes, and more.

All of this uncertainty creates a negative work environment and can result in lower employee productivity and efficiency.

Read also: Can a Healthy Culture Boost Your Bottom Line? 5 Global Examples to Explore

 

Employee Rights During an M&A

A core point during an M&A negotiation should be your current employees’ rights. This goes beyond severance packages to the ones who’ll be let go.

1- Employees are entitled to be notified of business changes that may affect them and their employment with you. They don’t have to be informed of the confidential details pertaining to the transaction but they should be informed of how a deal affects them.

2- Your employees should also be protected against unfair dismissal. While some work contracts may allow companies to let employees go on short notice, protecting your employees during the M&A process will go a long way in building trust and increasing retention during and after the acquisition.

3- In the event you will let go of employees, it’s important to ensure reasonable severance packages, including a fair notice period, as well as benefits and perks that compensate for any suffering during their unforeseen unemployment period.

 

Retain Employees During an M&A

Another word for retaining employees is engaging employees. Company heads and middle managers need to stay ahead of the issues that may arise from post deal. Here are five points that help mitigate most employee concerns.

1- Be Transparent and Over Communicate

Research and consultancy house Gallup published a paper titled Often Overlooked in M&A shows a gap between how employees and company heads view communication. 

Most surveyed C-Suites feel they have said enough about the deal, employees on the other hand didn’t agree, they needed more information, especially regarding where they fit into it the company’s future direction.

It is up to business heads to ensure consistent and effective internal communication across all employees, at every step of the way.

2- An Effective Integration Plan 

A solid integration plan between both businesses needs to be set and cover every layer of your current and future operations. 

Details should include changes in the hierarchy structure; tasks handled by each department, which are then broken down by role; reporting and documentation processes, among many other details.

An important part of the integration plan is to identify, acknowledge, and address the differences in companies’ cultures. Include plans for team bonding, re-introduction of core values and ethics, and culture orientation.

3- Train Employees on Working Through Conflict

Training and development should not stop simply because your company is on the verge of being acquired. As a business owner, consider offering training on how to navigate the merger and post-merger (or post-acquisition) stage of the business. Be proactive and address conflicts that may arise during and after the transition.

4- Empathy as a Success Ingredient

A survey by executive-focused e-learning company Catalyst of 900 C-Suites revealed that empathy was the key success factor in ensuring employees feel included and valued during turbulent times. 

5- Encourage Feedback

Top-down and bottom-up feedback are essential ingredients to the success of any business. However, most research shows that employees don’t feel their feedback is addressed or taken into consideration. 

Feedback gathering alone won’t fix anything, periodical reviews of all feedback received and addressing it either one-on-one or discussing it as a team will ensure employees remain engaged, feel valued, and invest effort in your success. 

 

The Bottom Line

Completing an M&A transaction can take months or even years. During that time, businesses should invest every effort in retaining employees, especially top performers who are more likely to be headhunted.

This includes managing mental health in the workplace, navigating corporate culture, addressing employee issues and conflicts, maintaining career growth, among many other aspects.

Finally, conduct a retention analysis to uncover which of your retention efforts are working and which need improvement. 

 

Need help stabilizing your internal operations during or post an M&A? 

Our team of experts can help you. With over 30 years of experience supporting regional leaders.

Request a leadership consultation call.

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