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Mergers and Acquisitions present a company with the ultimate change. There can be few business events that have the potential to create chaos, lose key people (Top Talent) and adversely affect morale than a merger and acquisition.
The process can be viewed as pre acquisition and post acquisition. Pre acquisition establishes a good business fit. Post acquisition comprises of making it all work. This includes developing a common strategy for the new organisation, consolidating duplicated services such as HR, finance and legal, consolidating corporate policies and procedures and deciding who will govern the new business.
Throughout this process Top Talent are looking at the results and saying to themselves, "If it doesn't work…I'm off!
A major mistake that encourages key people to leave is that Executive Directors will drive through an M&A and once the due diligence has been completed will pass the process of integration to middle management.
Senior management must be involved in the overall plan and the implementation. They must direct and guide the integration process, assigning project managers to the process. They must lead change through communication, by bringing people together, resolving issues and establishing expectations.
The reason for this involvement is that it's during the second phase key people will decide to leave. Our research indicates that concerns about one's future means that in acquired companies almost 50% of key people, including Top Talent, will leave within twelve months. One insurance company we know when involved in a merger lost almost 80% of their Top Talent and key staff within two years. Those that had been identified as "Key people" tended to be those that left first.
In our experience the Top Talent involved in Mergers and Acquisitions are asking the following questions:
Pleeeease…Tell me what's going on.
It is estimated that "at least 360,000 hours of productivity can be lost during an acquisition of a company with just 1000 people.* They stop because they are establishing the new political agenda and influence groups and because the rumour factory is working overtime and needs to be listened to.
The big danger is to keep people in the dark or not to tell them enough and the result is that they assume the worst. The action needed here is to tell people the facts, all the facts, often and repeatedly. Once people start to agree on the facts they will accept them as reality and once accepted everyone can move on to create change.
Who's in charge?
Many M&As will begin by trying to tell people that both parties are equal partners and that both parties will benefit equally through co-operation. This is nonsense and was understood thousands of years ago by Alexander The Great who on his deathbed was asked to name the person would rule after him. "The strongest" he replied.
I've seen a number of M&As that try to adopt the "best practice" from both companies and set up various committees to integrate conflicting staff rules. It slows down the process of merger integration and creates confusion in the minds of people. The result is that they can end up with a three-humped camel.
The action here is for fast integration of structure, re-assigning people, establishing rules and practice, definition of job roles and indicating to all the individuals who are in charge. The longer this takes the greater the impression of confusion. Such confusion only encourages key people to leave.
In one merger that I was involved with it had been the tradition for one of the companies to allow staff half a day off before the end of December to do Christmas shopping. One head of Department with people from both companies held a team meeting and announced, "Those who used to work for XXX can take this afternoon off to do Christmas shopping but those that worked for YYY must stay here and continue work." There followed a riot!
If I don't understand the vision… how can I contribute to it?
Giving people a new vision of the future is important and the only people who can do this are those at the top. The most successful mergers seem to be those where the CEO, COO and other key executives are moving around at all levels of the business telling people what's going to happen.
In one merger the CEO decided to hold briefing events for all staff and meet over sandwiches and a few drinks. We encouraged him to meet with the receptionists and post-room staff first on the basis that these people were often key to the informal communication channels. Within days the CEO was seen as a popular leader with a clear vision of the future.
The culture's changing…will this be good or bad?
Corporate culture is like a security blanket for many people and an M&A means that a culture will change. Key people will be looking for clues as to how this will affect their perception of the "Management style" they are used to.
Corporate culture is often defined by informal company historians who will relate stories about heroes and villains that illustrate what has worked in the past, how success is viewed and so on. Much like Regimental battle stories. Trying to invent a completely new culture takes too long and removes the informal indicators that tell people "How things are done around here".
Retain one dominant culture but actions that can be taken involve a review of the rules to remove those that are no longer of use and the elimination of redundant forms of communication.
How does all this affect my pay and promotion prospects?
The most complicated aspect of an M&A is to end up with a fair and uniform compensation and promotion structure. Failure to do this can result in divisions and conflict in the workforce. The action here is to establish a compensation package based on past practice and future needs of the company. In managing a M&A one of the main objectives should be to maintain productivity it is worth considering that a major aspect of compensation should be based on performance.
It is inevitable that key people will be lost during an M&A. The trick is to ensure that this is as few as possible. Answering the above questions will encourage key people to stay.
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