Mergers are tricky business. Timing is critical, with small windows to conduct due diligence and communicate any changes to employees, shareholders and customers. Then there’s the actual work of merging two organizations.
Unfortunately, the average due diligence process focuses almost exclusively on financials and physical assets. Planning for the people side of things often gets pushed until after the deal has been completed.
This lack of planning leads to poor communication, employee distrust and culture clashes, which all contribute to employee turnover.
Here’s how to avoid losing the people you need to make a merger successful after the deal has closed.
Due diligence, plus
Yes, some turnover is to be expected in any company merger. Sometimes shedding employees is even planned. Unplanned, significant levels of turnover negatively impact a merger’s success. The reason: Lost historical knowledge, lost productivity and additional money spent hiring replacements add unplanned costs to the transition.
The usual due diligence explores the financials, processes and assets of a company, but to keep employees, it’s important you widen your due diligence umbrella to include:
- Integration planning: A process for including key stakeholders in the decisions for how the companies will be merged
- Communications planning: How and when the merger and any changes will be communicated to key stakeholders, including different levels of employees, shareholders and customers
- Organizational alignment: Implications of any changes required by the merger
This more complete form of due diligence will give you the information you need to make more fully informed decisions about the merger, as well as communicate more accurately with employees.
Being aware of “how we do things” ahead of time can dramatically reduce the occurrence of situations that degrade morale or cause frustration among your employees. For instance, let’s say Company A and Company B are in the process of merging. Company A promotes a more relaxed concept of work hours, whereas Company B requires employees to clock in within 7 minutes of their scheduled shift. Knowing these differences before the two companies merge can help leaders prepare employees early for the likely culture shock of adjusting to either way of doing business.
The change management plan
During due diligence, and prior to any announcements, create a change management plan. This plan will help shape the day-to-day tasks of merging two organizations and help you answer employees’ questions.
A change management plan is built around these questions:
- Does the new company have the right bench strength to meet short- and long-term targets?
- What is the selection process?
- What is the current turnover rate?
- How will recruiting be performed in the new organization?
- How do the companies’ benefits packages compare?
- Which benefits will continue to be offered and which will no longer be available?
- How will ancillary benefits (401K, pension plans, AD&D) be integrated?
- Do job levels match across organizations?
- How do the compensation philosophies differ?
- Are any commission plans equitable and do they encourage the right behaviors?
- How will compensation operate in the new organization?
- What are the pay cycles?
- Does one company pay in arrears and one forecasts to close?
- Are all employees classified correctly?
- How will pay cycles or payroll be impacted post-close?
– Human resources
- How do human resource policies, procedures and current practices differ in each organization?
- What will remain the same and what will change post-close?
- How will these changes be communicated to the workforce?
- What are the potential implications of any changes that should be planned for and accounted for in scenario planning and cost forecasts?
- What are the skills and abilities of the current workforce?
- What skills are needed for future success?
- To what extent do both organizations invest in training?
- How will training be used in the new organization?
- What training is needed to educate employees on new processes, products and service offerings?
– Organizational design
- What is the current organizational structure?
- What redundancies exist? How will these be addressed moving forward?
- Will there be other positions available for employees whose positions are eliminated?
- Will job titles change?
- Will roles change?
- Which leaders from each organization will assume a leadership role in the newly formed organization?
- How will such changes be communicated to employees?
- How are decisions made in each organization?
- How will decisions be made in the new organization?
- Does the new organization come to consensus within the group?
- Will all decisions be made from the top down within a hierarchical structure?
- Which systems are in place?
- How will existing systems integrate?
- Which systems will remain and which ones will be transitioned to new platforms to support the new organization? What is the estimated effort for any necessary conversions?
- What process is in place to support staff and customers during any technical transition?
A change management plan is an internal tool. It’s a roadmap for leadership, helping to prepare them to answer the many questions employees will have and to create a smooth transition.
Employees’ most immediate concerns will usually focus on pay, benefits, schedules and location of their work and should be addressed as quickly and fully as possible.
It’s helpful to build a central location to announce merger news, receive questions and post answers to the most common questions. This usually takes the form of an intranet section or blog.
While your intranet pages are a start, make sure line managers also have the tools they need to answer the questions they’re sure to get. Encourage managers to frequently check in with their teams to keep an eye out for negativity and rumors that need to be addressed.
However, avoid making announcements too early. For example, you don’t want to say that no locations will close and have to backtrack later. This is where pre-merger due diligence comes into play.
Plan your communications ahead of time and make those communications fit your company’s cultural norms.
For instance, don’t commit to frequent, open, transparent communication if your leadership can’t follow through because of legal issues or because it’s outside of their comfort zone. Responding too often with “no information is available at this time” can perpetuate fear and uncertainty, both a sure formula to send capable employees looking for an exit.
Management and leadership during a merger or acquisition are challenging for any company, no matter how prepared you think you are. Download our free e-book, Solutions to the Top 10 Challenges in Growing Your Business, for more tips.