Merger and acquisition activity is beginning to rise after a cautious start in 2023. Mergers and acquisitions (M&A) can signal excitement and transformation for business executives but result in uneasiness and even turnover for organizations’ most important asset—their people.
Understanding why employees leave after a merger or acquisition is important in preventing unnecessary turnover. This article will explore how to retain employees after a merger and why it can be challenging.
Why Do Employees Leave After a Merger or Acquisition?
Mergers and acquisitions signal a time of change for organizations. For business leaders, this change can be exciting and full of promise about their new capital, assets, or business models. For employees, this can come with uncertainty and insecurity. That is why nearly 34 percent of acquired workers leave a company within a year, compared to 12 percent of regular hires with the same work experience and skills.
Some of the key challenges employees face during a merger or acquisition that impact their retention include:
- Cultural Misalignment—When companies merge organizational cultures, it can create a clash of work styles, values, and expectations, resulting in some employees feeling misaligned with the new culture.
- Job Redundancy—M&A activities can create overlapping job functions, which leaves some employees, or even entire teams, believing their positions are at risk and leading them to proactively seek new opportunities.
- Changes in Leadership—Employees establish rapport and expectations with business leadership. When leadership structures change during a merger or acquisition, employees can lose their sense of alignment and security with business leadership.
- Lack of Communication—Minimal communication ahead of a merger or acquisition can leave employees feeling uninformed and unprepared about the major changes taking place, which erodes their trust and results in them leaving.
- Disruption in Status Quo—Employees may need to change their workloads or adjust their job functions. During this time of change, employees may feel disenfranchised about a change in work-life balance or a pivot in their workload.
- Major Work Changes—In addition to changing job functions, mergers can occasionally ask employees to relocate geographies or accept change. Employees may not be willing to make significant disruptions to their lives and choose to leave the company instead.
How to Build Employee Trust Following a Merger or Acquisition
It’s understandable why employees would feel uncertainty during a merger or acquisition. It’s during times of change that business leaders should step up and bridge the gap to help employees embrace opportunities in the situation.
Retaining employees after a merger or acquisition requires a three-pronged approach focused on clear communication, employee engagement, and support.
Clear and Consistent Communication
Help employees prepare for change by providing routine updates about the merger or acquisition. Share the reasons that prompted the M&A in the first place, explain upcoming M&A activities, share timelines, and be clear about expected changes.
Create space for employees to share their concerns and ask questions openly. Then, answer those questions honestly while being sure to communicate the larger goals and vision of the M&A so employees can understand the purpose and how they fit into it.
Ahead of M&A activities, business leaders should be trained in effective change management skills. Leaders from both organizations should jointly demonstrate a commitment to the merger’s success and lead by example by embracing change.
In order to maintain cultural alignment with as many top employees from both organizations, it helps to assess and compare the cultures of the merging companies. Business leaders should develop a plan for integrating the best components of each culture while acknowledging and respecting their differences. The integration should result in a new set of shared values and cultural norms that reflect the newly merged or acquired organization’s identity.
Wherever possible, involve employees in the decision-making process, especially when it directly affects their roles and teams. Employees were given autonomy when they chose to work for you, but they may feel like they’re losing autonomy during the M&A. Encouraging employee feedback and implementing their suggestions for improving the integration process can help restore a level of autonomy and choice.
Additionally, it can be helpful to create cross-functional teams or committees to work on integration initiatives for the M&A.
Talent Retention Programs
Show employees that retention is a focus and you value their commitment to stick with the organization through a period of change. Retention programs that involve stock options, career development opportunities, or bonuses can incentivize key talent to stay with an organization.
Career Pathing and Career Development
Help employees visualize their future with your organization by creating clear pathways for career growth and development within the merged organization. Set up routine career pathing conversations between employees and their managers to facilitate training, mentoring, and coaching that can help them adapt to changes in their roles. Ensure that career development is catered around new opportunities that arise from the merger or acquisition. Not only does career pathing help employees visualize their future with your organization, but it is also a pillar of organizational succession planning.
Flexible Working Arrangements
Change during a merger or acquisition can be overwhelming. Consider offering additional flexibility during this period of change so employees can maintain a work-life balance. Flexible working arrangements might mean providing work-from-home or hybrid options instead of asking employees to relocate during an M&A. It could also mean equipping all employees with new technology so they can work collaboratively from anywhere.
It’s natural for growing pains to come up following a merger or acquisition as employees learn to work around new processes, leadership, and colleagues. Be proactive about addressing conflict as it arises. This can be done by providing training and resources on conflict resolution to business leaders and HR. It can also be done by encouraging and rewarding transparency when employees speak up about issues they’re facing.
Rewards and Recognition
Recognition plays a crucial role in motivating employees and boosting morale, and this is especially true during a merger or acquisition. Business leaders can provide recognition during an M&A by hosting integration milestone celebrations to recognize teams or individuals who made major contributions to the merger’s success. Employee of the Month programs, spot bonuses, and customized thank you notes can also communicate gratitude and retain employees after a merger.
Throughout the entire merger or acquisition, businesses should continuously monitor and analyze employee retention data to identify trends or potential red flags. Retention insights can help leaders make data-driven decisions about what retention strategies are working and which strategies need to be adjusted. It’s hard to forecast how an M&A will impact a workforce, which is why actively monitoring and assessing retention activities is important.
In some cases, retention agreements may be beneficial to signal to employees that their roles and benefits are secure for a defined period of time following the M&A activities.
Monitor Employee Satisfaction
Throughout the merger and for a while after, employers should actively monitor their employee’s satisfaction levels. Regularly hosting employee town halls or employee surveys can help gauge satisfaction with the new work environment and the integration process. By routinely collecting feedback, business leaders can track trends and see how satisfaction changes over time or is impacted by specific changes.
Commitment to Continuous Improvement
Mergers and acquisitions can take years to implement. Retention efforts should be ongoing and adapt based on evolving or emerging employee needs.
Create a Stronger Culture and Retain Employees After a Merger or Acquisition
Mergers and acquisitions signal a time of change for companies. But not all change needs to be scary. When organizations take time to assess their employees, prepare them for the change, and equip them with the proper support, they can create a smoother M&A process for all and retain employees after the acquisition.