Organizations have a hard enough time hanging on to good talent these days. Careers have become more a collection of assignments than a collection of seniority pins and gold watches. Work has come to be seen as more an activity than a place. Because of this, the feeling of company belonging and loyalty is a rarer experience than when 20-year stints at the patriarchal corporation were the norm. Introduce a destabilizing event like a merger or acquisition into the picture, and the precarious ties holding employees in their current jobs begin to loosen even further.
The nature of today's deals makes this erosion of loyalty still more of an issue. So many of today’s mergers and acquisitions are not really based on the idea of purchasing hard assets such as plants and equipment. Due to the growth of the service industry, the de-emphasis of leveraged buyouts, and the increase in the value of knowledge, a large percentage of today's purchases and consolidations represent a pursuit of “soft assets.” These soft assets represent the knowledge of the workforce in the target company—for example, the value of patents, relationships with clients, and the opportunities that lie ahead because of the expertise surrounding new products and services under development. Many of today's deals are attractive financial propositions solely because of the knowledge of the people in the company being acquired.
What can be done to protect the investment in this sort of merger or acquisition? One key answer is to conduct a rapid, well-organized, and persuasive re-recruitment effort aimed at the key talent you want to retain.
Why People Leave
It is not surprising that people often choose to leave an organization or "de-commit" during a merger or acquisition. The widespread turmoil created by change turns people's thoughts inward, away from their job and toward personal concerns. Self-protective thoughts swirl through their minds, leaving people to wonder about the wisdom in waiting to see what will happen to their careers.
For the time being, the big concerns people are wrestling with reflect their uncertainty about how they will fare in the new scheme of things. For example, they worry, “What will happen to my job, my pay, my security?” These doubts and unanswered questions create a great feeding ground for headhunters and company recruiters, who naturally step up their efforts to pick off the best talent. These recruiters who are circling the merger scene have the advantage of being able to buzz in fast and lay a hard offer in front of a person. This immediately provides the individual with an alternative to the ambiguity, uncertainty, and personal concerns he or she is experiencing.
The turnover statistics associated with mergers and acquisitions are staggering. Based on our data, when no coordinated retention actions are taken, 47 percent of all senior managers in an acquired firm leave within the first year of the acquisition. But the exodus doesn't stop there. Within the first three years, 72 percent end up heading for the door.
The costs associated with a talent drain of these proportions are enormous. Perhaps equally damaging and just as costly, though, are those people who a stay on the payroll but don't perform. They don’t leave the company physically, but they emotionally check out. No longer feeling any true commitment to their jobs or to the organization at large, these people frequently join the ranks of the critics and are resistive throughout the entire integration process. In this instance, the organization ends up paying people to cause problems.
Remember the first word in [me]rger is me.
One of the main challenges of the merger process is the retention and revitalization of the valuable human capital that is in place. This calls for a comprehensive and well-planned re-recruitment strategy that proceeds with a strong sense of urgency.
Three actions are particularly important in carrying out this strategy. First, key people or groups must be identified. Second, it is important to achieve an understanding of their primary motivators. Finally, an action plan designed to address their motivators must be developed and implemented. Such an approach should be executed with all the focus and energy that is normally invested in finding new talent for an organization. In a sense, that is exactly what is going on here: a concentrated effort to persuade people and demonstrate to them that they should join the “new” organization.
Target the Key Talent
Earlier chapters describe in detail a systematic process for evaluating personnel. That recommended approach—or some variation of it—can identify the key people or groups whose loss would have a detrimental impact on the success of the business. Depending on the situation, people can be considered important for various reasons. For the purposes of this re-recruitment initiative, however, the “screen” to use in identifying your target personnel will be the consideration of whatever negative impact would come from losing them. To proceed, then, make a list of the various people or groups, and then determine how their leaving might damage the business. Would their departure also likely mean the loss of a key client or customer? Would it mean the loss of critical technical skills, or maybe knowledge of a core product or service offering? When the answer indicates that losing a particular person would hurt, that individual should be considered a primary target for re-recruitment.
Many organizations have a documented succession plan that identifies the actions that would be taken to fill positions vacated by critical personnel. Although these plans are reactive in nature, they can serve as an excellent check to make sure that all the key people in the organization have been identified for re-recruitment efforts. The re-recruitment plan most likely will include everyone who is on the succession plan list, as well as additional people or groups.
Understand Their Motivators
Knowing what motivates a particular executive or employee is essential for effective re-recruitment. People vary greatly in terms of their personal needs, likes, and dislikes. Obviously, motivating angles can come from avoiding the dislikes as much as from addressing appetites.
The following are the items that might be important to people:
Security. Based on the knowledge that one’s job and career path have not been negatively affected by the merger.
Feeling “in.” A feeling of importance generated by allowing people to have input to, and knowledge of, decisions before they are widely announced.
Control. At a time when feeling in control is uncommon, giving people options can make them feel valued as well as less vulnerable.
Ego items. Those things that feed the ego and make one feel special are important to even the most pragmatic business people.
Opportunity to “do the right thing.” Helping people understand the reasoning behind merger initiatives—sharing the “why”—appeals to people by helping them feel they are supporting the right approach.
The keener the insights into the individual, the better aimed your re-recruitment efforts can be. It is not necessarily the most expensive or most flamboyant motivator that gives you the most mileage in your efforts to retain someone.
Above all, remember that it's a mistake to attribute to others your personal values or priorities regarding which motivators should count the most. The thing that would guarantee your willingness to stay on board might do nothing at all to keep the next person from leaving the organization.
When people think of organizational change, they often think of potential job loss. Job security, then, becomes a very basic issue to be reckoned with at all levels of an organization that is being acquired or merged. Obviously, the issue of job security needs to be addressed as promptly as possible for those employees who have been identified as critical to the company’s future. Explain to them individually that they are each seen as someone who will play an important role and, as a result, will be kept in the organization. This communication should occur in private, and the message should be delivered in person. Acknowledge that the environment is uncertain at this early stage, and that there are many unknowns. But emphasize to these people that they are an integral part of making the changes work.
The second major aspect of security concerns financial matters. People will have all kinds of questions about their pay and benefits. Because money is such a fundamental concern in the minds of most people, re-recruitment can be a tough drill if you are not in a position to answer the dollar-related questions. The best situation, of course, is to be able to use pay raises, incentive contracts, and performance bonuses as part of the re-recruitment effort. But you often need to be re-recruiting before policies have been hammered out on compensation. In that case, consider “stay bonuses” as an interim means of assuring that the key people have the financial safety necessary to feel good about staying with the organization.
A basic need of people working in organizations is to feel “in” on things. They want to know what’s going on. So one of the best ways to maintain the loyalty of key people during times of change is to keep them in the loop.
This can be accomplished in various ways, such as involving them in important meetings or sharing key information with them on a regular basis. Keep them posted about the alternatives being considered. Ask for their input. If these individuals are considered good enough to re-recruit, often they are good enough to help make the difficult decisions.
Some managers make the mistake of presuming they don’t need to share information since no decisions have been made. But people feel more valued and more connected to the organization if they are kept informed.
Over time, managers and executives develop a certain addiction to control. They want to enjoy a generous amount of influence over how things are handled. Many executives, in fact, develop a strong sense of self-worth relative to their span of control. During the merger-integration process, you can appeal to this need by leaving some decisions to them.
While it's true they might not handle things exactly the same way you would, there can be real benefits in allowing them to make the call. Granted, it may be necessary to set some boundaries around the decision-making process or to stress the need for communications about the decisions they're making. Beyond that, however, providing them latitude to make meaningful decisions can be a powerful motivator. This is particularly so in the merger/acquisition environment, where so many people in the management ranks are concerned about how they will be affected by the inevitable shakeup in the power balance.
Remember, too, that the effect of criticism is magnified during the transition period. Don’t be too quick to criticize people for what looks like a bad decision.
To the extent possible, reward people for acting quickly or taking accountability for making things happen. Then, as necessary, provide advice regarding how the decision could be made even more effectively the next time around.
Apart from satisfying managers’ and executives’ need for control, giving them decision-making latitude can help accelerate the integration process.
They demonstrate more ownership of the desired changes, and show more initiative in the implementation of these changes.
Employee and management “work egos” operate on the belief that “I play an important role in the success of the organization.” This belief gets fueled by a variety of things: a favorable self-concept, positive feedback from others, clear evidence of successful performance, and the status symbols provided to people in organizations. Ego plays a powerful role in how people feel about their employment. And in the merger/acquisition scheme of things—where trust is low, self-protective behavior is rampant, and so many people feel vulnerable—the egos belonging to high-talent personnel often get a little shaky.
Bruised egos cause many of the bailouts. Sometimes the people in question feel threatened. In other cases, people with high need for attention and approval leave because they are being romanced by recruiters, and more or less ignored by their own superiors. While it overstates the case, a guideline to go by is that high performers have developed a larger-than-average appetite for ego gratification. So a person’s ego serves as a promising avenue for re-recruitment.
This argues for getting close to your good people. For making them feel special. The more they feel valued and important to the corporate cause, the better the chances that their job commitment will remain high and they will think in terms of staying with the organization.
Sometimes a big ego boost comes from giving this sort of person a key role, maybe an important assignment in the merger-integration process itself. And typically the ego gets pumped up if a person gets a better title or new perks that normally go with high rank or reputation.
Status symbols may come in the form of administrative assistants, larger offices, first-class travel, or bigger budgets. At management and employee levels, the symbols are perhaps smaller in scope or importance, but they are just as powerful in terms of how they feed people’s work egos. Awards banquets, getting one's name printed in the company newspaper as a high achiever, and trips for reaching major goals all provide an ego boost.
But consider what happens so commonly in a merger. Imagine a $200 million company where executives, managers, and employees are operating a successful, profitable, growing business. Depending on their level in the organization, they can make decisions, allocate capital, respond to customers, set policy, and count on being paid for performance. Then, without much warning, their company is acquired. Soon they find themselves operating as a small, fairly insignificant division of a $12 billion conglomerate. Egos take a hit all across the organization, from top to bottom, and it is a hard thing for people to swallow. They now must abide by new rules and policies set by someone else. Their pay for performance gets replaced with a standard scale set by the acquiring company. Their budgets are cut. They see their latitude to make decisions and respond to customers impeded by a new level of oversight on the part of the acquirer. And the bigger the ego, the harder the hit.
Quick repair of key people’s egos helps greatly in the re-recruitment of the organization’s most important human capital.
Simple actions—timely taken—counter the feelings of losing status that often are associated with change. For example, key individuals might be flown to corporate headquarters to meet with parent company management. They might be given a little better office accommodations or better equipment to work with. Something as simple as a special dinner with senior management in the acquiring organization, or one-on-one meetings to discuss their career opportunities in the new organization, could be just the thing to salve the ego of someone on the verge of seeking a career opportunity elsewhere.
Doing the Right Thing
Whether it is in service of their career, family, or employees, people generally want to do what's right.
The difficulty arises, however, when what seems right for one party is potentially not right for another. When organizations are involved in a merger/acquisition event, key personnel are ordinarily introduced to a new set of stakeholders: investors, analysts, new customers, employees, and others outside the company. During those times of change, the question is not only, “Are we doing the right things?” but also, “Who are we doing the right things for?” Resolving these questions is of paramount importance in making a merger successful. This is especially true in terms of how key people feel about the decisions being made in the change process. The answers heavily influence whether or not people will choose to commit themselves to helping with the integration effort.
It helps, as discussed earlier, to provide people with some sense of control. That gives them more of a feeling that the changes are the right thing to do because they, personally, have some say in them. But most of the time it is not practical, or perhaps even possible, to involve all of the key people in the decisions being made. In those situations where key people are unable to play an active part, the reasoning behind the decisions needs to be made clear. If people have a good sense of the rationale for change, they are better equipped to deal with the second question posed above, “Who are we doing the right things for?”
Obviously, some of the merger-related decisions are not based directly on what is right for specific personnel in the company, but what is right for customers, shareholders, or overall company profitability. Still, doing what is right for the customers or the shareholder or profitability in general should have a positive impact on company personnel—at least in the long term, global sense. This impact commonly comes in the form of higher sales, greater market share, or better margins. And that translates into better chances for pay raises and promotions. Giving people this rationale for the decisions that are made probably won’t make everyone happy. The idea, though, is to help them understand that staying on board and committing to making the changes successful is the right thing to do.
Turn the Motivators into Re-recruitment Actions
Once people’s primary motivators are understood, they should be turned into action steps that correspond with re-recruiting specific individuals and groups throughout the organization. This should be organized as a formal plan—written down on paper—and truly should be actionable.
A well-crafted re-recruitment program will include measurement of how effective the effort has been. Many organizations already measure turnover rates on an annual basis. But in times of change, when re-recruitment becomes extremely important, measuring overall turnover in this manner is not sufficient. Time frames for turnover measurements need to be shortened.
For instance, turnover can be measured on a monthly basis. Historical turnover also should be converted to the same time basis so an accurate comparison can be made between historical and current retention statistics. The rate at which people are leaving also should be tracked in a way that allows trouble spots among specific groups to be spotted early. For instance, turnover measurements might be broken down by rank or hierarchy, geographical location, work group or functional area, and so on.
In addition to tracking turnover, exit interviews should be performed with anyone who announces his or her departure. Because the merger environment accelerates the timeframe in which information needs to be gathered, it is probably wise to conduct these exit interviews before the person’s actual last working day. Regardless of when they are conducted, though, exit interviews can be a valuable tool for gaining insights that strengthen subsequent re-recruitment efforts.
It takes time to develop and execute a compelling re-recruitment strategy, and there are many competing demands for people’s time. Far too often, there is virtually nothing done by way of deliberate re-recruitment, except for scattered attempts to hang on to a handful of upper-level executives. Usually, the measures taken to retain key talent are superficial, poorly coordinated, and carried out with a serious lack of urgency. This helps explain why so many merger/acquisition situations are marked by a mass exodus of valuable talent, and why so many mergers end up in the failure statistics.