IQ Insight | Summer 2006

Retaining Talent After a Merger

By Dr. Tim Rutledge

Mergers and acquisitions (M&A) are kind of like making babies: two corporate entities join to form one with the intention of becoming stronger. Granted, this is a fairly simplistic look at the M&A world, which is controlled by lawyers and senior executives making sure all the functional and administrative areas of the new company are harmonized.

However, what often gets overlooked in the M&A hubbub is the human capital belonging to both companies. Employees are kept out of the information loop until the merger or acquisition becomes official – and rightly so – but managers need to be prepared for the fallout that ensues when the new entity is made public.

Statistics show that in most mergers and acquisitions, the new company's performance falls short of projections. And it's not because product lines weren't rationalized, risk mitigation processes weren't overhauled and legal documents weren't executed with great care. It's because the human capital wasn't addressed as human beings in the M&A processes. You may be paying only for your employees' skills and expertise, but don't forget that the whole person – both emotionally and psychologically – shows up for work.

Employee management is necessary because most people are averse to change that wasn't their idea, especially when they think their livelihoods are at stake. Fear of job loss and changes in corporate culture are just two reasons why employees may feel compelled to make rash decisions, like turning in their letters of resignation. You can expect to lose a few employees, but it's not acceptable to lose top performers as a result of M&A activity.

The secret to keeping your top employees is to think like them. For employees of the acquiring company, for example, they would be thinking of things like:

  • Will I to lose my job to someone who's coming over from the other company?
  • Will it be awkward working with people who are from some other place?
  • What makes management think that the new people will be any better than us? They better not try to change anything!

Similarly, the fears for the acquired employees are just as potent:

  • How could our managers have abandoned us like this? We're loyal and hardworking – such ingratitude!
  • What did we do wrong and why are they getting rid of us? Why are we being punished?
  • Will we fit in with the new company? We're going to miss the way things were before.
  • Will we end up reporting to people who are less experienced than us?

Indeed, news of a merger or an acquisition can be poisonous to a work environment where employees were once attracted to, committed to and fascinated with their work. Employee engagement is replaced with fear in the workplace, and employee retention becomes even more problematic.

Lost in transition is the fact that the employees of both companies joining together need to be properly managed. Representatives of both the "acquired" and "acquiring" employees should be at the boardroom table when the planning is in full swing. Pension plans, employee benefit packages and other administrative HR gets taken care of; however, what gets overlooked are the employees' expectations of, reactions to, and concerns about the merger or acquisition.

It's easy for senior executives to downplay the need to help employees transition. They don't always realize that they, as "insiders," have made the transition by the time the deal is announced. Their employees don't have this luxury and still have to deal with changes that weren't their idea and over which they have no control.

It's best to have programs in place to deal with employee issues as soon as the merger or acquisition becomes official. Enlightened employers offer coaching and mentoring to help employees through the transition from one reality to another.

These opportunities can range from one-on-one sit-down sessions with a trained facilitator to focus group-like forums where employees on both sides of the M&A action can get answers to their most pressing questions. Employees will find that they're not alone in feeling overwhelmed or stressed out by their new workplace.

There is no standard timeline for this transition process – it can take half a day for some and six months for others, but without any assistance, employees may never fully transition from their old firm to the new one. This will result in reduced productivity for your firm.

It may also result in reduced employee retention. Employees who are in mid-transition are more likely to disengage from your company and entertain other job offers. And you stand to lose key employees since they're the ones who can find new jobs and leave most easily.

Mergers and acquisitions are never easy to navigate, but the process can be simplified by having the right human capital ramped up and ready to hit the ground running. In order to rely on your employees, you have to properly manage their transition from being either an "acquired" or "acquiring" employee to simply an employee of the new firm. And by taking early steps to identify your top employees and building walls around them, organizations can reduce the risk of key employee turnover and improve their employee retention.

- Dr. Tim Rutledge is a consultant, writer, speaker and trainer with special expertise in the areas of employee engagement and retention. His is the author of "Getting Engaged: The New Workplace Loyalty," and is regularly sought out as a media source.

IQ Insight is published by IQ PARTNERS Inc.

IQ PARTNERS helps intelligent companies hire better, hire less and retain more. Our services include Executive Search & Recruitment, Qualification & Assessment, Employee Retention, Career Management and Contract HR Services. We specialize in Marketing, Communications, Media, Technology, Legal and Financial Services, and operate at the mid-to-senior management level. IQ PARTNERS has offices in Toronto and Ottawa, and internationally via the Aravati Global Search Network.

Privacy Policy
August 2006 IQ PARTNERS Inc. All rights reserved.