Management Insights: Managing Employees During a Merger or Acquisition

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During a merger or acquisition, employees may understandably feel wary about the security of their jobs, new supervisory positions they need to report to, changes in management style and cultural differences between the two merged companies. If business owners do not keep these things in mind while preparing for the merger or acquisition and continue to neglect them during the entire process, employee productivity and morale could decrease drastically.

However, if business owners remain sensitive and committed to employees’ wants and needs during the process, they can ensure the merger or acquisition process is a positive one.

Before the Merger

Open and honest communication during a merger or acquisition is crucial to maintaining the happiness of your employees. As soon as the merger or acquisition deal is finalised, business owners may struggle to find a good balance between communicating openly with employees about the changes to come and only sharing information on a need-to-know basis.

After the initial announcement, create a communication plan for any questions your employees may have. You want to put employees at ease, but if you share information too soon and later have to retract it, you will cause further anxiety and concern. Information should only be shared when it is finalised. If employees ask about a certain change that is not finalised, tell your employees that you are still in the process of figuring out the details of the change—if you remain vague and refuse to answer any questions, they could assume you are withholding information on purpose, for any number of reasons.

Also, keep in mind that just sharing information about upcoming changes is only one part of the process—you should have a timeline for rolling out the tangible parts of the plan and putting them into action, as well.

Alert employees immediately if you plan to restructure your organisation chart—it will be best if employees hear directly from upper management about any changes in supervisory lines instead of allowing potentially altered information to trickle down and cause confusion. Also, if employees are told early in the process, they have ample time to get used to the possible changes in their roles and duties.

Another way to limit your employees’ stress is to refrain from making any unnecessary changes to workflows and processes. If a method or technique has been working successful, try not to burden employees with another change. If the process needs to be improved after the fact, do so then, but do not assume that it will not work post-merger. 

Remember that every company is unique, even those in the same industry, and this is true of company culture, as well. Conflict could arise between employees as they adapt to the cultural changes, so it is imperative to prepare employees for a culture shift and change in management style. Address the differences and your plan for merging them together. Employees should have a clear idea of your goal for the company culture post-merger; this will help alleviate their worries.

Employees might also be wondering about the differences in benefits and compensation between the acquired and acquiring companies. If either of the companies involved has a reputation that precedes it, employees may have unrealistic expectations for benefits and compensation. It is vital to be clear about new or changing employee contracts before the transfer occurs. Keep in mind that legal issues could arise if newly acquired employees are allowed to keep compensation and benefits under their original terms and conditions, which are different from the terms and conditions for existing employees.

During the Merger

You must know all the laws regarding employee rights during a merger or acquisition, because certain laws in your area may require you to take specific actions.

In addition to considering your employees’ legal rights, it is also important to monitor their emotional needs. Do not be afraid to involve employees in the merger and acquisition process. Ask for their insight on any changes. Many business owners are leery of encouraging employees to be involved in the process, but this constructive information often produces innovative ideas that could be implemented in the future. However, keep in mind that if you decide to ask for feedback, do not ignore their advice. If a suggestion makes sense and is feasible, use it.

Another way to keep employees’ needs in mind during the merger process is to update them frequently on the status of the merger or acquisition. If a certain change being implemented is going to be altered, let them know. If a timeline is going to run longer than projected, inform everyone. Keeping your employees informed will make them feel involved and trusted as a valuable part of the company. This also means you must be very transparent about positions that will be opening up or others that are going to be eliminated. It would be helpful if this information was decided and relayed before the actual merger begins, but sometimes decisions are unforeseen or have to be made along the way. These should be handled with tact and honesty.

Also, if employees are taking on extra work during the merger, or have moved to a position that drastically alters their current roles and duties, make sure they are compensated fairly for the change. If employees must take on extra tasks and their increased efforts are not recognised, it could cause resentment.

Do not forget to set aside time to reward and recognise employees for successfully handling changes. Employee recognition is a great way to keep everyone encouraged and moving forward.

Stay positive and keep employees motivated when working through the merger or acquisition. There may be changes in the plan that are not ideal but that are necessary to facilitate the merger. You should encourage employees along the way and keep reminding them of the end goal.

After the Merger

After the merger is complete, your most important focus will be training employees on changes to policies, processes and new systems or programmes. Coordinate small group training where employees can work hands-on and receive guidance regarding any changes in workflows and processes. Employees may feel more comfortable asking questions in a smaller group setting, and any employees who need assistance beyond the normal scope of training normal can be helped on the spot. It is also a good idea to set benchmarks to measure where you want employees to be with the training and by when. Setting goals will help employees who are struggling with or resisting the changes to stay on track.

Make sure new management is open and honest with employees after the merger so that employees will also be open and honest. Fostering these relationships and keeping them positive is imperative. Consider setting aside time for old and new employees to get to know each other outside of the office, or during the day away from work responsibilities for a period of time—this could accelerate the time it takes for everyone to feel more comfortable around each other.

A successful merger or acquisition requires planning beyond contracts and finances—business owners must remember to address the needs of their most important resource: employees. Refer to the checklists below for a quick reference to pre- and post-merger items.

Pre-M&A checklist:

• Review employment law in any new jurisdictions.
• Compile all pertinent HR, payroll and benefits information.
• Have a plan in place to protect employee data during data transfers.
• Combine employee terms and conditions from both companies.
• Review any collective bargaining agreements that apply to employees.
• Set out enough time to inform employees of the merger or acquisition and to help them prepare for the changes.
• Terminations might be necessary during the M&A. Be sure to follow all relevant laws.
• Review redundancy pay for relevant employees and take this information into consideration during decision-making.
• Consult with employee representatives to better communicate with employees.

Post-M&A checklist:

• Record all employee changes.
• Encourage feedback from employees post-merger or acquisition to address any concerns.
• Finalise payroll, time-off and pension changes.
• Update employee policies and procedures.

Conclusion

As with all things related to managing people, empathy and honesty are always essential. Trying to obfuscate or downplay the significance of a re-organisation creates uncertainty and a lack of trust. Being open about the process and communicating progress towards your shared goal is vital. 

Mergers and acquisitions can be stressful and can affect productivity. It's important that business leaders put in place the necessary support for individuals who may be struggling to cope with the change and be understanding of their feelings.