Sustaining Performance During Mergers and Acquisitions

Reducing Turnover Cost for Mergers or Acquisitions

Managing expectations to maximize merger or acquisition performance can be daunting, especially when supervisors are unsure how the new organization will emerge.

Involving both firms’ communication strategies before and during a merger will reduce financial and personnel losses.

“The reason we are at the table is that we can… determine whether this is, from a holistic point of view, a good deal or a bad deal. We have input in shaping what the deal should be or whether we should pursue it at all from a HR standpoint.” – James Otieno, VP, Compensation & Services, Hewlett-Packard

Employees feel powerless, paranoia, doubt, and low morale become contagious. Communication is critical to neutralize the uncertainty. The fear of being part of the inevitable layoff can be minimized if the workforce is kept current on the progress and next steps of the reorganization. Employees should be informed if (and how) their role will change in the new organization. To mitigate productivity losses, companies can provide what is known, and what is not known, on a regular basis (in the company newsletter, or at the start of monthly meetings). Otherwise, ambiguity about their future will cause employees to withdraw from others and avoid their commitment to responsibilities.

It is sometimes a difficult necessity, but the new organization may have to downsize its workforce. For those that will stay, a formalized transition process is critical. That process must address changes in their role and workload, integrate new work procedures and provide realistic job previews into the (post-merger) workplace. These practices will dramatically optimize merger and acquisition performance, decrease cultural conflicts and ultimately turnover.

Communication Practices to Support Organizations in Transition

The human capital angle of the merger is a crucial part of the entire financial picture. Within the organization’s financial investments, HR will focus on salaries, benefits, and contracts. However, the acquiring company is purchasing customers as well as a new organizational culture, and the emerging organization will encounter friction if new work processes are not gradually introduced. Sudden, drastic changes will erode confidence in employee’s role in the firm’s future. During transitions, frequent employee feedback is the tactic which will mediate workplace stress, maintain productivity, and sustain the quality of customer service. Lack of attention here risks the loss of valuable employees and customers.

Additionally, executives of the acquired company should ensure equitable opportunities for its key personnel as part of the deal. This negotiation is essential to prevent the exodus of talented managers. High-performing employees will quickly depart a firm that overtly favors tenure over performance.


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