The M&A process is a bumpy experience for employees. How can leadership create an engaging vision of the future organisation, while knowing that for most, change is perceived as a threat?
During M&A, voluntary attrition increases by over 30%, and while a degree of natural attrition is inevitable, when unmanaged, it results in lost productivity and depleted intellectual capital.1 Financial incentives certainly help but only go so far, and while it can afford the organisation time to reach key milestones (Day 1, Day 100), overlooking more affordable retention levers will sap long term deal value.
The most effective M&A retention strategies are much more holistic. They secure trust and belief in the shared future and give clear opportunities for employees to carve out and thus invest in their experience in the new organisation – treating employees like customers, to improve their experience.
Despite being less costly, fewer than half of organisations surveyed by Deloitte, use non-financial retention strategies alongside financial measures.2 There are a few key considerations for people leaders who are looking to manage attrition before, during and after an M&A transaction.
1. Acknowledge the employee experience
While a transaction is inherently challenging for employees given the number of unknowns, a first step should be to try to understand the types of anxieties employees will be experiencing. This will allow the organisation to determine how best to provide reassurance, at a time when not all questions can be answered.
Put people at the centre of integration planning, by considering opportunities for transformation that meet the needs of employees, as well as those of clients, shareholders and investors. For instance, when rolling out a technology transformation via a Transition Service Agreement (TSA) exit, in addition to delivering on-time and on-budget, consider how it will help employees – by using the opportunity to make the technology they interact with day-to-day easier to use. Rather than focusing purely on cost and speed, employees should be involved in the design process. Take the opportunity to transform the employee experience to strengthen commitment.
2. Make opportunities for employees to step up and shape the future
The rules of engagement between employers and their employees have evolved. Employees now expect to co-create the organisation they are a part of. In a deal context, this may seem impossible, given that transparency is restricted, and statements of certainty should be used with refrain, but doors should still be opened for employees to meaningfully contribute to the change.
During a transaction employees can retreat, given perceived high tensions, demands on their time, or a desire to absent themselves from potential performance management discussions. It’s important that employers lean in to increase engagement and make opportunities for employees to step up and shape the future state of their organisation.
To engage key employees to invest in their future, a range of non-financial measures should be considered:
3. Communicating developments: Avoid the void
When an employer is perceived to exercise excessive control and scrutiny during a transaction, employees can display so-called quiet quitting. So, it’s critical to ensure that helpful and consistent messaging is reflected across all levels of the organisation, rather than just top-down. Some employees will more willingly become involved in the transaction, but it is important that the organisation takes a proactive approach to involving a cross-section of employees, of all levels, in building faith in the future.
While Town Halls will always play a part in a transaction, to cut through noise in a landscape of competing demands, organisations should review different channels of communication.
For all the above approaches to long-term holistic retention to be available, financial incentives must also be deployed to retain critical employees, to ensure the delivery of deal objectives.
4. Financial incentives: Right package, right people
During transactions, fewer than 5% of those handed a financial retention award leave before they have vested, providing critical stability to ensure transaction milestones are reached.3
There are several points to consider when finalising your approach to financial retention:
When systems, policies, processes and even locations are in flux, people leaders can turn a seemingly bumpy transaction process into an opportunity to engage employees in co-creating an organisation they want to be a part of.
Read more about Employee Experience in M&A here.
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1,2,3 Deloitte M&A Retention Survey May 2022