Strategies to retain talent following an acquisitionWhile acquisition strategies often focus on redundancies — what to shed — many companies can overlook strategies surrounding what to keep. Keeping the right people, in particular, is critical.
The flow of mergers and acquisitions has ramped up in 2014. Companies are on the lookout to buy or be bought. Whenever that happens, rumours often abound amongst the rank and file of the companies in play. In the event of a deal, who will stay, and who will go?
How companies communicate strategic transactions with their employees — and how they decide the answers to those difficult personnel questions — can make or break a deal in the long run. If the process is not handled correctly, the best talent will walk out the door.
Bottom line: Be transparent. Be personable. Understand that the best talent comes at a cost. And, above all, start planning as early as possible.
“Procrastination is a major enemy of employee retention,” said Byron Traynor, CPA, who specialises in mergers and acquisitions at consulting firm Protiviti. “… The longer things take, the more communication you have to do. And the longer it takes, the more opportunity people are going to have to act on their own facts and rumours.”
The process of identifying talent is designed to make sure the right workers are in place to get the new company off to a strong start. Human resources consultant Towers Watson surveyed 178 companies about talent retention during the M&A process. Of the companies that reported retention success during a deal, 74% went through a talent identification process either before or during due diligence or the deal’s negotiations. Of those that reported talent problems, only 42% had started that early.
Nine steps for identifying the best talent
Some companies form committees to evaluate talent; others use a third party to ensure objectivity. But before a talent assessment begins, companies must choose leaders for the joined entity wisely. They set a tone and provide certainty. According to PwC, serial acquirers say their biggest regret in deal-making is not spending enough time on the selection of the leadership team for the new organisation.
As for the rest of the workforce, here are a few best practices to effectively assess and retain top talent in an acquisition:
1 Define strategy and culture
What is the goal of the deal: to expand an existing business line or to diversify? The buying company must define the strategy of the move before identifying the best people to keep. This step also includes a possible restatement of the company’s vision going forward, which requires buy-in from key stakeholders before the deal is complete.
2 Remain flexible
In general, deals are becoming more complex and more transformative, which means blending talent from two companies into one can be more difficult. Acquiring organisations should consider what can be gained from the skills of the target company. Part of the value of the transaction is access to new talent, said Lawrena Colombo, CPA, a partner in PwC’s M&A advisory human capital group.
3 Stay objective on talent evaluation
This can be a difficult part of the process; we’re all human. To eliminate bias, one possibility is to remove names and other identifying information from CVs, assigning a number instead of a name to each applicant. Hiring managers should also analyse the data, looking at productivity measures, for instance, for applicants in sales. Some experts recommend taking a deep dive into an applicant’s personality, using leadership competency tests and even outside evaluations.
4 Stay within established metrics
Job requirements and descriptions in the combined company should be compared against the talent pool in both companies as well as the existing job descriptions. Using a customised and standardised rating system helps companies establish baseline expectations.
5 Stay open-minded about systems evaluation
In departments where performance is harder to measure than, say, in sales, one CEO recommends looking at entire systems instead of people. “If it’s the same business, you’re going to look at the software,” said Mark Biersmith, CPA, CGMA, a Texas-based executive for an international technology company. “The best-practice scenario is looking at the most efficient software package. And the most efficient way to maintain that is to keep the people who are running it.” It’s possible that a third, new system is the best choice, especially as cloud-computing options grow.
6 Stay on schedule
Acquiring companies can minimise the loss of top employees at the target company, some of whom are bound to explore other options at the first whiff of a deal. Announce a planned timeline, quickly identify the jobs that are available, and quickly make an informed decision.
7 Stay on message
If a company is re-interviewing existing personnel for positions in the new company, the way it awards those positions matters. For instance, if a chance at continued employment is communicated as an offer, the worker might think there’s room to negotiate. While negotiation is likely for executive positions, it’s less likely down the ranks. A letter that simply states salary and job responsibilities works best.
8 Give good reasons for employees to stay
People are going to remain at organisations where they believe they have a champion. “You want to meet them as soon as you can to see if there’s rapport and a trust factor,” Traynor said.
9 Money matters, but it’s not everything
Independence and influence are also important, according to PwC’s Colombo. While employees will want to know how much money they’ll make, they’ll also ask questions about reporting structure, resources and access to training.