The First 100 Days: Ensuring Successful Mergers & Acquisitions
It seems like every week that there is an announcement of a new merger or some company in the pharmaceutical or technology industry looking to acquire another company. When these announcements come down, a lot of angst occurs for front-line staff and management who are unsure what role, if any, they will have in the new company.
I recall being at Roche’s New Jersey offices a little more than 5 years ago when the announcement came down for the merger with Genentech. One client I was there to meet walked past me in the lobby and didn’t even see me. Not too long afterwards, his secretary called down to say he was unavailable.
I was not surprised. The look on his face was one of bewilderment and loss.
A couple of years later, I mentioned that day to the client and asked him what he remembered. He told me that the day was a blur and that he was in a fog for many days after. He was thinking about his friends, would he have a job (he did), and what it would mean for the work he and his team had been doing for years.
Such thoughts are not uncommon. Philip Lop in his article “How employees are affected when mergers and acquisitions occur” noted that employment engagement often falls off following an announcement. It is up to leaders to provide transparent and open communications, if they want to gain employee trust and ultimately earn the loyalty of those who remain in a merger.
A few years ago, Best Practices, LLC, conducted a study to gauge what high-performing companies do to ensure successful integration after a merger. The No. 1 thing cited by executives and employees was open communication that occurred throughout the integration.
Still, as we dug deeper into the issue, we discovered that the first 100 days are critical to a merger’s success and vitality. Yes, a merger can overcome a lack of communication and spotty transition, but it will do so at the cost of valuable employees who will seek new opportunities.
What we found were five simple steps that can keep employees informed, minimize workforce drag related to the merger and win the loyalty and trust of those who will work for the new entity.
1. Communicate Basic Info: Handling the WIIFM (What’s In It for Me?) mindset upfront can head off issues and angst.
With this in mind, companies must speak to the Good, the Bad and the Ugly. Accurate information, from direct managers in a prepared and timely fashion, can keep entire groups from falling victim to the rumor mill” that can negatively impact employee morale and performance.
Time and time again, we discovered that skilled integration teams understood that they could not “solve” all of the issues that emerged during an acquisition. What mattered for these teams, according to executives, was that they show responsiveness to issues. For many employees, responsiveness was as important as having a real solution in the short-term.
2. Retain Talent: Companies that fail at the first step will undoubtedly find employees who are ready to abandon ship for what they see as better, more secure opportunities. As one executive told us, if you don’t value YOUR people your competitors will.
“We made the assumption that we could merge sales forces, realign them and collapse them into each other, but we found at the same time competitors were somewhat aggressive in pursuing our talent, realizing there was a structural change and it was a good moment to kind of pick up key personnel,” he said. “We failed to anticipate an aggressive campaign by key competitors to recruit our staff .., really using the gap between the announcement of a transaction and everybody knowing individually how it’s going to impact them.”
It is important to talk with key staff to eliminate ambiguity, increase stability and demonstrate greater opportunities for their careers. In some ways, you are re-recruiting your core employees, especially if you wish to retain them and motivate key colleagues.
3. Return to Productivity: Motivating those key colleagues is crucial if the merging companies want some level of normalcy and productivity to return. Consider these 3 facts from Frost & Sullivan:
- 50 percent of companies decline in productivity following a merger announcement
- 47 percent leadership attrition can be expected within the three years following a merger
- 14 percent drop in employee satisfaction can be expected immediately after a merger
Companies must bring the focus back to strategic initiatives and meeting the goals set for individuals, teams and functions. The reality is that without productivity, it is likely few, if any, people from the acquired company will survive a merger.
4. Define the New Company: Having an experienced integration team in place from the start of an M&A process is crucial. While others are wringing their hands and walking around in a daze, this team will be assessing core competencies, talent and products to help establish the new vision of the merged company. As things settle down, this team will help position what the new company will be and the type of employees that will be valued.
5. Maintain Morale & Momentum: Throughout this entire process leaders at the top and in the frontline will be called upon to keep morale up and momentum moving forward. Obviously, this is not an easy task, but many successful companies build plans for how to execute programs that can boost spirits and drive success, using incentives and contests to keep staff energized.
Ultimately, the key factor remains communication. This means all types of communications from town-hall meetings, memos to face-to-face talks that allow staff to be hear.
As one executive explained: “We tried to answer the big questions really quickly – what your salary’s going to be, what your benefits are going to be… We had the owner of the company on the other end very heavily involved in all of the communications pretty much in the very beginning, and I think that’s really what helped overcome most of the kind of cultural issues.”