Sustaining Performance During Mergers and 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.

Your Companies Have Merged. Which Executives Will Stay?

“It appears that their [long-tenured executives] idiosyncratic knowledge of what the organization can do and their ability to implement it outweighs the likelihood that they will be rigid when faced with uncertainty.” – Donald D. Bergh, Journal of Management Vol. 27 No. 5, November 2001

The success of Mergers & Acquisition is dependent upon retaining the right executives.

The synergy of merged companies is dependent upon the human capital value as well as the monetary value of the deal. A mass exodus of experienced, revenue-generators leaves the company vulnerable to competitors poaching these executives and their clients. Donald Bergh’s research in the Journal of Management indicates that the long-term success of a merger largely depends on the retention of the right executives. The strategic alliance created by the merger must include retention plans for valued employees that are aligned with the unified company’s goals. The merged companies must work to develop a new organizational culture. Losing executives that have long tenures in the acquired organization can be detrimental to the outcome of the merger. These executives have amassed large breadths of knowledge of effective processes used . Executives with less familiarity of either of the merged companies do not have the same grasp of the company’s capability to respond to change. The executive level focus is often overlooked because the drivers for a new corporate culture are based upon the collaboration and integration of both human resource structures, but if HR is colliding, they aren’t driving.

Smoothing the transition.

First, the buy-in of skilled executives into the merger process will ease the transition of their subordinates into the new organization because they can minimize the effects of the upheaval. Creating teams to integrate the companies’ services and practices is essential for the transition process. Communicating with employees about the process and shifts in services will alleviate job security issues and prevent the decrease in job engagement. Including a variety of management in this integration will be helpful in retaining your most talented employees because they are most apt to identifying their strengths as opposed to those from the other organization. Managers’ can use this information to help executives determine where employees will be most effective in the new company. Encouraging top executives to participate in the integration of the companies will bolster the morale from the top-down by integrating the retention of key employees into the merger. Key employees can bring loyal customers into the transition process as well.