Many watchers expected an uptick in merger and acquisition activity when the world began to emerge from the pandemic in 2021, but the current spike is record-breaking, topping $2.4 trillion in the first half of the year. That’s more than a 150% increase over last year’s M&A activity level.
Coming out of the pandemic, there’s a worker shortage that has complex causes, which has increased the competition for talent. On top of that, we’re experiencing what has been coined the “Great Resignation,” with 4 million people quitting their jobs in April alone.
The good news is that with the right leadership approach and preparation, you can address uncertainty and keep your valuable talent on board.
Business leaders everywhere have a greater appreciation of the value of their people as a competitive asset. So, if you’re contemplating a merger or acquisition at this critical juncture, you know it’s important to retain talent and keep employees happy during the M&A process. It’s simple — you need them.
The war for talent is real
Companies — especially startups looking for highly skilled talent— were locked in a war for talent before the pandemic. COVID-19 intensified it, and if employers thought they had the upper hand when workers were getting hammered with layoffs and furloughs, they know better now. A report published earlier this year cited this startling statistic: More than half of workers in North America said they plan to look for a new job when the pandemic ends.
Money alone won’t solve the problem for employees who are motivated by purpose. Employees who are invested in your company put their heart and soul into it, which is invaluable. But employers have to work harder to keep that loyalty, and M&A situations threaten the status quo.
Acquisitions add an element of uncertainty, and workers who feel uncertain about a company’s future and their role in it are more likely to look elsewhere. The good news is that with the right leadership approach and preparation, you can address that uncertainty and keep your valuable talent on board. Here’s some advice for keeping employees top of mind during M&A:
Communicate, communicate, communicate: If you’re steering a startup or established tech company through an acquisition, the most important thing you can do is share your vision of what the new company will look like and how employees will be a part of its success. Employees today have a more entrepreneurial mindset than previous generations. They are purpose-driven, and they need to feel like they have a stake in the business. In a situation where uncertainty is driving anxiety (and causing employees to eye an exit), it’s hard to overcommunicate, and undercommunicating can be disastrous.
But while it’s up to you as a company leader to formulate and communicate the vision, keep in mind that communication about the company’s future must take place across all levels. When my company went through an acquisition at the end of last year, we had an all-hands meeting where I walked employees through the upcoming process and shared as much as I could about what would take place.
Then, we held focus groups with management to answer as many questions as we could and get their thoughts and feedback. This also ensured they were empowered with knowledge if their teams came with questions. It was incredibly helpful because not everyone will speak up at a large group meeting, so we were able to find out exactly what was on employees’ minds with a new level of candor. Then HR put together an FAQ to address common questions across the company. Finally, we sent around a survey for additional feedback a few months post-acquisition.
We also had an organization design tool we shared with employees to give them a visual of what the new company structure would look like, which positions would be available, how many people would be included in each functional group, etc. This gave employees a transparent representation of the risks and opportunities, and we saw use of the tool spike during the M&A process.
Determine company structure: It’s vitally important to determine what the new company structure will look like as soon as possible. You may not have all the puzzle pieces on day one, but it’s critical to work with what you have, using accurate data to make decisions and define your new structure, and be as transparent as possible with that information. If you don’t define and communicate the new company’s structure, you’ll lose talent, period.
So, what are your chances of keeping your top talent on board during and after the M&A process? A Gallup workplace report suggests that the odds are not good: Nearly half of all key employees leave a company within a year of the M&A transaction, and 75% leave within three years.
That’s why determining the company structure is so critical. Even if you don’t have all the details, you can give employees a compelling reason to stay if you share a big-picture view of what the company will look like after the merger — and what their role in it will be.
Be real with employees about the future: Uncertainty can take a toll, so let employees know where they stand whenever possible. For example, say John is worried about his role as VP of sales and wonders how he’ll fit into the new organization. If company leaders have defined and shared the new company structure — and show that John’s role is not duplicated or at risk — John will have the information he needs to make the right decision. An organizational design tool that allows employees to visualize the structure and roles within it can maximize transparency.
It’s a good idea to be real about both the opportunities and risks with employees. If there will be expansions that result in new open positions, sharing that news can inspire your best talent to stay on board. If the new structure results in redundancies that will require layoffs, it’s only fair to give employees a heads-up about that, too. Being specific about what departments may be at risk, while sharing which others are not, will reduce fear from spreading too far. There are tools and tactics you can use to prevent or mitigate talent loss during a transaction, but leadership and preparation will be the most important factors.
Due diligence on the people side
When an M&A transaction is under consideration, everyone seems to understand the importance of due diligence on the financial side. But it’s every bit as important to conduct the same due diligence on the people side of the ledger.
M&A transactions can provide a bright future for the merged company, but the process can be incredibly stressful for everyone involved. As a leader, you know talent is your most valuable asset, so make sure you give employees the vision, communication and transparency they need to weather the changes.
That’s the way to get through an acquisition without pissing employees off.