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Mergers and acquisitions (M&A) either propel companies to greater heights or send them spiraling into uncertainty. Companies seek M&As for their potential to expand market presence and bolster financial performance, but they also bring challenges, especially the retention of top talent.
EY research shows that 67% of executives identified company talent as a strategic driver for M&A. Yet according to Deloitte and EY research, 47% of executives leave a newly merged company in the first year of integration, while 75% leave by the third year.
Retaining talent during M&A is just as crucial as choosing the right partner for the merger. Employees may perceive themselves as being part of a strategic puzzle within the corporate landscape and the uncertainty that M&As bring can leave them feeling anxious about their future within the organization.
Understanding the Impact of M&A on Talent
An M&A can make employees nervous and sometimes it can result in a decline in employee morale, engagement, and performance. Some of the common reasons are:
- Uncertainty and anxiety about job security, role changes, compensation, and benefits.
- Loss of identity and loyalty due to cultural clashes and organizational restructuring.
- Reduced trust and communication between employees and management.
- Increased workload and stress due to integration challenges and new expectations.
These factors can lead to employee dissatisfaction, turnover, and reduced productivity. Not surprisingly then, efforts to keep people engaged through the change tend to yield positive results.
According to McKinsey, organizations that focus on employee experience as a core element of talent management have a 65% chance of achieving superior total returns to shareholders.
Ten Strategic Approaches to Retain Talent in the Face of Mergers and Acquisitions
Communication and Transparency:
Foster a sense of inclusion by establishing clear communication channels with employees. Employees need to be informed about the rationale, vision, and goals of the deal, as well as the integration process and timeline. Communication should be frequent, consistent, and honest, addressing employee concerns and questions. Transparency can build trust and confidence among employees and reduce rumors and speculation.
Recognition of Employee Value:
Acknowledge the skills and experience that key employees bring to the table. Implement recognition programs to celebrate their contributions and efforts. Recognition can be expressed through verbal praise, written feedback, awards, or incentives. Recognition can help boost employee morale, motivation, and loyalty. A simple pat on the back can go a long way in boosting morale.
Offer an Employee Retention Agreement:
Recognize common worries like job stability, potential role changes, and shifts in team dynamics. Provide reassurance through well-structured employee retention agreements (ERA) that address these concerns. An ERA is a contract that guarantees an employee’s job security for a certain period of time after the deal closes. An ERA can also include financial incentives such as bonuses or stock options for staying with the company. An ERA can help alleviate employee fears and encourage them to commit to integration.
Tailored Career Development Opportunities:
Provide avenues for employees to gain access to new markets, customers, products, or technologies to enhance their skill set and knowledge, aligning with the expansion goals of the newly merged company. Investing in training and resources empowers individuals to grow within the evolving organization. By doing so, you can help employees have clear career paths, goals, and expectations in the merged company.
Integration of Company Cultures:
Help employees interact and delve into the distinct cultures of the merging entities’ different values, beliefs, norms, and behaviors. Cultural integration can significantly impact employee satisfaction, engagement, and performance. Develop strategies that harmonize these cultures, fostering an inclusive environment that appreciates the richness of diversity. Navigating this cultural blend is vital for a unified and cohesive workforce.
Leadership and Role Clarity:
Post-integration offers crystal-clear definitions of reporting lines and roles within the restructured organization. Equip leaders with the information and tools to effectively guide their teams through the transition, ensuring stability and effective collaboration during this transformative phase. They must also provide clear guidance on managing teams effectively during the change. Additionally, leaders must ensure that their teams’ reporting lines, responsibilities, and roles are clearly defined post-integration.
Flexibility on Working Conditions:
Recognize the changing landscape by allowing employees to choose their work mode, whether remote, hybrid, or in-office. This flexibility empowers individuals to adapt to their optimal working environment. Flexibility can also foster innovation and collaboration by allowing employees to contribute ideas for process improvements in the integrated company.
Employee Well-being and Work-Life Balance:
Employee well-being can be affected by the stress and uncertainty of M&A and the increased workload and expectations. Therefore, it is important to prioritize employee well-being and work-life balance during integration. Offer resources and support such as counseling, wellness programs, or flexible work hours and guide them in maintaining a healthy equilibrium between work and personal life.
Create an Incentive Program:
Celebrate employees’ dedicated service and valuable contributions as they transition into the new merged entity with an incentive program that could be monetary or non-monetary rewards such as bonuses, stock options, recognition, or career advancement. An incentive program can motivate employees to perform well, align their interests with the company’s objectives, and retain them for the long term.
Understanding Every Employee:
Foster a culture that encourages employees to freely share their opinions, feedback, and concerns. Establish consistent communication loops to gauge employee satisfaction and address concerns. Utilize this feedback to refine integration approaches, creating an environment where every voice is heard and valued. Understanding every employee can help create a positive employee experience that fosters trust, engagement, and loyalty.
Closing note
Keeping your best employees during a company merger or acquisition can be tricky, but it’s also a chance to strengthen your workforce. PeopleOne, a modern digital workplace, can help you implement these strategies and foster stronger, more integrated teams.
Talk to our experts and get more valuable tips to retain your A-team and supercharge productivity post-merger or acquisition.
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