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HR can help minimize the people risks when combining companies.
Mergers and acquisitions (M&As) have been on an upswing in recent years, and an increasing number of companies are using the deals to branch out into new markets, services or products.
Such “transformational” M&As have risen from 29 percent in 2010 to 54 percent in 2016, according to PwC’s 2017 M&A Integration Survey Report released earlier this year.
While merged companies are generally achieving greater financial and operational success than in years past, they’re having trouble retaining workers from the newly acquired organizations, the report revealed.
Fewer than half of the survey respondents reported that they were successful at holding on to employees through a transition, dropping from 56 percent in 2010 to 45 percent in 2016. That could be attributed to low worker morale and a lack of clear direction provided for employees by organizational leaders, the authors of the report say.
“Fear, indecision and just plain confusion can paralyze companies until people have some sense of where—and even if—they fit within the new organization and what will be expected of them,” report authors Gregg Nahass and Marc Suidan wrote. “Often, the difficulty is due to lack of a cohesive, choreographed plan for the workforce transition and insufficient involvement by human resources staff in deal planning and process.”
PwC partnered with Oxford Economics, an independent survey company, to survey 151 senior executives at Fortune 1000 companies with recently completed M&As.
Previous studies have shown that executives preparing to acquire a company focus more on assessing the other employer’s finances than on how to blend the values and cultures of the two organizations. And transformational deals create even greater workforce challenges since the organizations involved have bigger differences. That’s all the more reason to have HR involved as early as possible.
Sue Quackenbush, chief human resources officer at Vonage Holdings Corp., a provider of cloud communications services, has been involved from the earliest stages in each of that company’s six acquisitions over the past three years. She offers the following advice:
Take the time to understand the people. For each of the Vonage acquisitions, Quackenbush met early on with the target company’s owners to learn about their organization’s culture, values and talent base. Why do the owners think they’ve been successful? Why are the employees proud to work there? Focus on how to retain those employees when you create an integration and assimilation strategy.
Look for cultural similarities and differences. What do the two workforces have in common? Where do you need to work to bring them together? If the differences are too great, the acquisition won’t succeed. “The last thing you want to do is pay really great money [for a company] and then have that talent resign and leave the organization,” she says.
Be open to learning. While the buyer’s culture typically prevails in acquisitions, you can learn something from any organization. “Our latest acquisition has a tremendous employee recognition program that we’re going to adopt and roll out across the organization later this year,” Quackenbush says. “You have to look at the best of the cultures.”
Ensure consistent communication. Help minimize employees’ uncertainty and stress as their company is being acquired by providing frequent and consistent communication, she says. Be visible and listen to people’s concerns. Explain why changes are being made.
Merge HR teams. By integrating the other company’s HR team, you can use their knowledge of their employees and anticipate problems before they arise.
Train the people managers. Supervisors are responsible for setting workers’ expectations and ensuring that newly combined teams are clear about their roles. They also can motivate their staff members by giving them opportunities to help with the transition and show off their skills at the same time.
After acquiring six companies, the Vonage HR team conducted focus groups with new and old employees to create a new employer brand. The goal is to build a new culture that is the best of all worlds.
Dori Meinert is senior writer/editor for HR Magazine.
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