Big things are happening for your company.
You’re in talks to be acquired by a larger organization that will give your investors their return and give you the runway you need to achieve more of your goals and faster.
As far as you’re concerned, there are big things ahead for you and everyone involved.
Or are there? As talks progress, you start hearing some troubling facts.
Acquired employees exhibit significantly greater rates of turnover than regular hires. In the case of "acqui-hires", over 33% of acquired employees leave post-acquisition.
That’s simply not an option for you.
Your current employees are the main reason for your company’s success, and you can’t meet the next phase of goals without them.
How can you ensure growing your company won’t equal losing your best people?
Understand why employees leave after a merger or acquisition
The best way to start is to put yourself in your employees’ shoes by understanding why they might want to leave after an acquisition.
Organizational mismatch
There are all kinds of reasons why your organization might undergo a merger or an acquisition.
A few common reasons include securing a bigger war chest, achieving greater brand recognition, winning more talent in a specific area such as tech, diversifying the business, and more.
The record breaking merger between Time Warner and AOL took place in 2000 because AOL was in households across the country and Time Warner had a massive entertainment footprint. The merger was meant to be a beautiful marriage between content and distribution.
The merger between Anheuser-Busch InBev and SABMiller was meant to expand famous brands like Budweiser, Corona, and Stella Artois into fast-growing markets in Africa and Latin America.
But just because there’s alignment from a business point of view, doesn’t mean there’ll be alignment from a cultural point of view.
This is a big deal. Culture has been found to be the cause of 30% of failed integrations.
What does this do in real-time?
It makes it difficult for all those “synergies on paper” to happen in practice. Teams can’t work together.
People have a different understanding of what the company’s values are.
Members of “the company previously known as x” do things one way, while members of “the company previously known as y”, do things another way. People don’t wind up rowing in the same direction.
In cases where a company has been acquired by another company, the acquirer’s culture ends up being the dominant culture.
This creates an environment where members of the acquired company feel unheard and like they don’t pull the same weight in the new organization. In this case, employees often want to leave and work elsewhere.
When Amazon acquired Whole Foods, the e-commerce giant’s efficiency-obsessed ethos clashed with the idealistic grocery chain that bucked the status quo and empowered workers.
The result was post-merger reports of Whole Foods employees leaving in droves and crying on the job.
The merger seemed like the perfect match on paper.
Whole Foods would be able to lower its prices and attract more customers, and Amazon would be able to expand its e-commerce empire into groceries and collect more customer data.
Unfortunately, this mismatch between what experts call “tight company cultures” versus “loose company cultures” led to friction.
In tight company cultures, there’s routine, discipline, and strict rules where going outside the norm is frowned upon.
In loose cultures, rules are a suggestion and sharing new ideas is encouraged.
An analysis of more than 4,500 international mergers from 32 countries found that companies with huge loose-tight gaps saw their yearly net income drop anywhere from $200 million to $600 million per year after the acquisition.
Absence of choice
When your employees came to work for you, they made a choice.
They either applied for it (after researching the company or being aware of the brand) or they were recruited and decided to come work for you after learning more about the company.
After a merger or acquisition, your employees are now working for a company they probably had no interest in.
While they may initially be interested in sticking around, if they don’t mesh with the culture, they’ll be eager to regain some autonomy and start working elsewhere.
Moreover, non-founding employees usually aren’t involved in the decision to be acquired or by whom they’ll be acquired.
They may be acquired by a company that expects them to move to a different state to join the acquiring company’s marketing team or research and development team.
They may not want to move or be able to envision their life in that particular place.
And this is only one example. Everything from the acquiring company’s views to business strategy to brand reputation may be out of alignment with what these employees want or the kind of company they wish to work for.
Uncertainties, fears, and doubts
Unsurprisingly, a merger or acquisition brings uncertainty, especially if your employees are from the “acquired” company.
What does this mean for their day-to-day work? Will they have a new boss?
Will the culture be the same?
Will they need to move to a new city?
Will they even have a job anymore?
When they don’t get these answers from their leaders, they’ll start making decisions with incomplete information.
They’ll rely on the rumour mill and trust official communications from their leadership team less and less.
How do you prevent your employees from leaving?
So you’ve got a pretty good idea of why your employees would leave. How do you prevent them from actually leaving?
You can start by doing the following.
Provide sufficient information
Your employees will be grappling with a lot of doubt and uncertainty, especially if most of their news about this acquisition is coming to them through the rumour mill or media speculation.
You can combat this by providing sufficient and clear communication.
If possible, announce your merger as early as possible.
Hearing from the company rather than other sources can demonstrate to employees that they’ll be informed throughout the process rather than given information about big changes at the last minute.
When you announce your merger, announce your reasons for the merger, such as branching into new markets, integrating complementary products and services, acquiring tech talent, or diversifying.
This explanation can help your employees understand what the future direction of your company is, even if they don’t have all the details yet.
Make it clear why your new merger will be advantageous.
If you’re branching into new markets, explain the reasons for this by citing challenges or opportunities that your employees are familiar with.
Make it clear how important this is for the future growth and success of the company and employees’ futures.
Anticipate what the most frequently asked questions are going to be.
If there’s a question you can answer, provide a clear response.
If there’s a question you can’t answer, be straightforward about the fact that you’re still working out the details.
Aim for consistency and transparency, so you don’t have to contradict yourself later.
This will help you maintain your credibility and build trust with your employees, which will be critical to retaining them during and after the merger.
You should expect questions like:
- Will there be layoffs? In which departments? How many?
- Will our compensation change?
- Will our benefits stay the same?
- Will we be asked to move offices? Relocate to another city?
- Who will we have to report to after the merger?
- Will we still be able to work with the same people?
Once the merger is underway, make it clear what the new expectations are for this company.
What is the new business strategy and goals?
Are they being shared clearly with the entire company?
Do you have a plan in place?
Harvard Business Review recommends a five-step strategy that makes a post-M&A company three times more likely to achieve their goals and objectives.
- Prepare a profit and loss statement that goes beyond the cost of the merger and also accounts for the disruption to the organization
- Assess the weaknesses and strengths of your new organization by consulting with leaders and managers within your organization or getting feedback from consultants.
- Consider different options for how the new organization’s processes will work, ideally by merging different approaches from both originating organizations
- Keep an eye on the implementation after the ink is dry to ensure your teams are property supported during the changes
- Keep learning throughout the process and make changes and corrections in real time especially as your employees point out issues and provide feedback
Monitor employee workloads
After your merger, there’s the risk of overworking your employees. If you do undergo layoffs because of redundant departments, your remaining employees may wind up doing more work with fewer people, leading to burnout.
There may also be the need to overcompensate and take on extra assignments out of anxiety about losing their jobs.
Over the long term, it’ll become obvious that your employees are overworked.
For instance, work quality might decrease, absenteeism might go up, the company culture might change, and turnover might increase.
That said, you want to spot these signs before they lead to expensive turnover.
Employee engagement pulse surveys that ask your team members about their level of satisfaction can help you spot issues before they turn into vacancies.
Keep an eye out for how well your employees are meshing with people from the new company. If you’re the acquired company, chances are members of your team will be reporting to brand new people within the acquiring company.
If there’s friction, poor management, or lack of appreciation, this can quickly turn into an employee satisfaction problem that impacts your employee retention.
Solicit and act on feedback
Want to know how your employees are doing post-acquisition? Ask them. Make it clear that they are valued members of your organization, and that you consider them a critical part of meeting your goals.
The best way to do this is by soliciting feedback and then acting on the feedback you receive, so people know you’re serious.
Give your employees a voice. That'll help you sync up with how they’re feeling about the acquisition.
Do your employees view this merger or acquisition as an opportunity for growth and advancement?
Or do they think their days at this company are numbered?
This is an important element to understand quickly.
If you assume the worst, you’ll spend all your time on the defensive rather than capitalizing on your employees’ enthusiasm and getting them excited about your vision of the organization.
If you assume the best, you risk dismissing your employees’ concerns and not addressing them at all, leaving them to take matters into their own hands and continue their career progression elsewhere.
Do your employees feel like the culture of the new organization is aligned with the culture they had before?
If not, what’s the difference?
Have they noticed behaviour that doesn’t align with their values?
If your employees are now working on new teams or with new managers, do they feel respected, valued, or appreciated?
If your senior employees now have to share duties or collaborate with people from the acquiring company, how do they feel about the new dynamic?
Getting an answer to this question gives you the context you need to make changes. Will every problem be solved? Unlikely. But it will help you identify the most pressing matters that need to be fixed and in a timely manner.
Sparkbay's employee engagement software can help you gather and understand this feedback in an efficient way.
Your employees may not feel comfortable sharing all of their concerns in a public town hall or in a face-to-face meeting.
They may, however, feel more comfortable sharing their thoughts in an anonymous survey where they can provide ranked responses (e.g., How much do you agree with the following statement…)
Employee engagement surveys are also scalable.
If you have hundreds of employees, it’s not easy to gather feedback from everyone without technology.
Once you’ve gathered feedback from your employees, act on it. This will be one of the fastest ways to build trust in a post-acquisition environment. Your employees will be paying attention.
Deliver ongoing training and professional development
The nature of your employees’ work will have likely changed following an acquisition.
They may have modified roles or new roles altogether.
Depending on how much information your employees were given before the acquisition, they may feel as if this new work arrangement has been thrust upon them with very little notice and time to prepare.
In this case, it’s important to put resources in place to help your employees thrive in their new roles.
Use your employee engagement surveys to ask your employees how prepared they feel for the work they’re currently doing and whether they need more training.
Once you have this feedback, organize different ways for employees to receive the training they need either through a learning management system or on-site training.
Throughout the process, continue to touch base with your employees through employee pulse surveys in order to gauge how effective this training has been.
There are some employees who will figure out how to navigate a re-organization on their own. It’s important to not leave this to chance though.
For instance, how can you help your star players reframe challenging situations?
Consider the experience of one professional working as an HR Director at Verizon before its merger with Bell Atlantic.
This employee had worked for the company for over a decade when her co-worker was fired and her boss retired.
The big changes within her team and across the company meant that she had to take charge of the entire HR function without getting the accompanying title because she couldn’t move from Baltimore to New York.
While this was frustrating, she decided to reframe how she viewed the situation. She viewed it not as a slight and “more work for the same pay” but as an opportunity to get facetime with senior leaders and to learn as much as possible.
She worked regularly with the president of her business unit, led her team through the stress of navigating the company’s changes, and kept her team focused by reminding them that their work had meaning.
She let them know that they weren’t just gritting their teeth through a merger. They were going to create policies that laid a solid foundation for the future organization.
Her efforts caught the attention of another senior leader who asked her if she was interested in doing work beyond HR which led to a series of bigger assignments and promotions.
This employee knew how to make the best of an uncertain and frustrating situation. But not every employee will have the intuition or work experience to do this.
Plus, they may not have lemons to turn into lemonade. This Verizon employee had the exciting prospect of working with senior leaders who would notice her efforts.
This is why it’s up to organizations to recognize these potential sources of dissatisfaction or feelings of stunted growth and create programs and opportunities for employees.
Develop an effective integration plan
Your post-merger integration plan should consider:
- What new hires you’ll need to make
- How the roles of existing employees will change
- How benefits and compensation will work across the new organization
- How layoffs and severance will be managed
- What the new org chart will look like
- How you’ll merge different technology, systems, and processes
- How you’ll manage HR and employee reviews within this new organization
It’s also important to consider how welcome your employees feel within the new organization. Do they feel like they’re meshing well? Is there friction?
It’s helpful to think of your employees as “new hires” post-acquisition, since they’re technically working for a new company.
In a traditional hiring scenario, the onboarding process can take up to a year, which means you should be checking in on your new employees’ “onboarding” well after the merger is complete.
Sparkbay's employee engagement software can help you ask the right questions to determine whether your employees are at risk of leaving. Implementing Sparkbay during an M&aA can help you undergo a successful organizational transformation. Click here for a demo.
