As an owner, partner, or investor, the culmination of a merger or acquisition can often be an exciting time of personal and professional growth, perhaps even the fruition of a dream. But, for employees of the company being acquired (or both teams in a merger,) that same period can be fraught with fear and stress as they struggle with the question of who will survive with their livelihood intact.
Merging two companies or pursuing an acquisition is a strategic move designed to fuel growth. So, it only makes sense that — once the dust settles — the remaining company should be in a better position to grow than either company was before the merger. To accomplish that, the remaining company needs to do two things with its workforce: retain the best employees and release those who are least likely to support that planned growth.
But, how is that best accomplished? And, what can you do before and during the M&A process to make strategic retention faster and easier afterward?
Establish solid criteria
A strategic merger or acquisition doesn’t simply appear on your to-do list. There are usually months, even years, of research, planning, and negotiation that go into any transaction at this level. As part of that research, you need to take time to consider what skills, experience, and aptitudes are going to define your optimal employee after the merger.
Obviously, this list of criteria will vary by department and role, but if you take the time to break it down, there’s likely a solid foundation of traits that every successful employee in your new company will possess.
Those “universal” traits aren’t necessarily related to individual job skills, but are instead based around the culture, work ethic, and team compatibility you ideally want to foster in the new company. And those traits are what form the basis of a successful employee retention program following a merger.
Prepare well in advance
You’ve likely invested weeks into researching all the intricacies of your target company’s history, finances, and playbook. While you’re doing so — to the extent possible, of course — you should also be looking into the current staff, as well as their hiring, training, and evaluation practices.
Even without access to confidential employee records, there are still plenty of resources you use to get to know the employees of your target company. LinkedIn, for example, is an excellent source of work history, education, and other information you’d normally learn during the resume/interviewing process if you were considering hiring these individuals today. Other social media accounts (like Facebook, Twitter, or Instagram) can also provide a well-rounded overview of the type of person each employee is and whether or not they display the kind of personal and professional traits you’ve already identified as leading to post-merger success.
It’s important not to make any snap judgments based on imperfect and incomplete information (such as what someone chooses to share online,) but the insight you can glean from informal research does add context and flavor to what you’ll eventually review in the official record.
Conduct a formal background search
If and when you get close enough to closing the deal that you’ve gained access to the company’s personnel records, it’s a really good idea to perform a formal background search (also known as pre-employment screening.) Even if the company you’re merging with or acquiring performed a background search before hiring an individual, you have no way of knowing how thorough it was or what may or may not have occurred since then.
One case study involving a mortgage company in California exemplifies the potential benefits of investing in this security blanket during the M&A process. This financial services company conducted background searches on 250 employees in the well-established industry mainstay they planned to merge with, only to find, “the background screening turned up criminal after criminal. From DUI to domestic violence, and even cases of money fraud, the employees our client was getting ready to bring into their fold included convicted felons and a large number of people who had clearly proven they didn’t mind stretching the ethical envelope.”
Communicate clearly and constantly
Hopefully, you’ve been effectively communicating with your own team during the preparatory process, especially if some of them may not be staying with the company. Once the merger or acquisition goes through, you’ll need to do the same with the employees of the other company.
One of the main reasons companies flounder in the weeks and months following a merger or acquisition is because employees become less productive when faced with stress, doubt, fear, and other negative emotions brought about primarily by a lack of effective communication. Even if an employee is losing his job, studies have shown that the worker will be more productive and more valuable in his final days if he’s notified well in advance and provided with adequate support and guidance.
Whether a particular employee is eventually going to be asked to leave or you intend to retain them, if they don’t know where they stand, they’re bound to be less productive, and will likely be actively seeking other opportunities elsewhere, which means you’re likely to lose those employees you most want to keep.
Make all communications concise, straightforward, and honest, but respectful as well. When those employees you’d like to retain feel they’re in the loop and being treated with dignity and respect, they’re more likely to actively support the new company’s best interests.
Integrate and appreciate
Although selecting the employees you want to retain and those you do not is a huge part of the M&A process, it’s what you do after the dust settles that determines how effective your employee retention policy will be.
Employees you have identified as worth keeping are going to be valuable to other companies as well, including your competitors. The best way to retain these individuals over the long term is to fully integrate them into their new company as quickly as possible.
- Make sure small items like new business cards, updated workstations, and the like are ready and waiting for them immediately.
- Strategically place team members from the previously separate companies into integrated teams to encourage a smooth transition and avoid forming potentially damaging cliques.
- Craft a formal “onboarding” program for new employees that highlights the new company culture and how new team members can add value immediately.
- Instruct managers to create one-on-one time with newly merged employees, and pay special attention to any signs they’re struggling or in need of support. As the CEO or owner, take the time to do the same yourself as appropriate.
- Solicit feedback from old and new employees alike regarding the M&A process and transition period, and make improvements based on what they say. (After all, if this transaction turns out positively, you may be going through it again in the future.)
These same tips for retaining quality employees can benefit businesses in nearly any circumstances, but companies planning growth through acquisition need to be especially cognizant of the needs of their workforce if they hope to fuel sustainable business growth over the long term.
Bruce Hakutizwi is the U.S. and International Business Manager for Dynamis Ltd., the parent company of us.BusinessesforSale.com, one of the largest online global marketplaces for buying and selling small-to-medium-size businesses. Bruce is passionate about helping small businesses succeed and regularly writes about entrepreneurship and business management. Connect @BizForSaleUS.
