Article: 7 key issues employees face during M&A-I

Strategic HR

7 key issues employees face during M&A-I

Cultural incompatibility and employee communication are two of the biggest roadblocks of an M&A
7 key issues employees face during M&A-I

Mergers and acquisitions are key to organizational transformation, which may lead to profound structural and cultural changes in its systems and processes for one or both the firms. Organizations would want to drive increasing shareholder wealth, creating more opportunities for senior and mid-level managers, maintaining or increasing market share and broadening a firm’s knowledge. These transformations always bring excitement – if people perceive a value in transition with confidence and clarity in future – and anxiety – when people fear unpredictable future and job insecurity – along with them. For instance, when smaller brands acquire bigger brands, it is like a python swallowing an elephant and acquired employees fear system indigestion.

As per Deloitte’s Divestiture Survey Report 2013, 93 per cent of executives cited “sensitivities with employee morale of the for-sale business” as a challenge when undergoing a merger or an acquisition with 46 per cent noting it was very challenging”. If we examine some of the research around M&A, the data indicates that 89 per cent of the mergers and 47 per cent of the acquisitions were perceived as negative. People have felt that M&A was stressful and at times ambiguous and uncertain. The impact of acquisition can be significant for employee morale leading to:

  1. Anxiety: The change has significant impact as employees are largely not involved in such decision making and information reaches them in bits and pieces through grapevine. Sometimes this information is correct and sometimes it’s incorrect.
  2. Job Insecurity: Due to two organizations coming together, some of the jobs may be not required. Favorites will play.
  3. Conflicts: Insecurity leads to negative competitiveness, which further leads to unavoidable conflicts

Even if we look at some of the big M&As around the world, we will find mixed stories.

We have mergers that were successfully managed and some that miserably failed. One of the biggest drivers to M&A failure have been around managing cultural incompatibility amongst the two organizations & employee communication effectively.

While M&As are one of the key drivers to organizational growth and expansion, managing these two key drivers at employee, system and organizational level would be critical for success. Leaders involved in M&As need to evaluate both tangible and intangible benefits in advance, including culture fitment and gaps, assess and pre-empt employee concerns and rightly estimate these and other pieces before initiating actions to ensure long lasting success. There are multiple issues and questions that may linger in employees mind during merger period. They could be around:-

Management/Leadership movement and stability: Employees may have apprehensions if their leadership will move along with them or will the management stick to the new organization and they will also want to know if there are any changes to the hierarchy.

Job Security: One of the biggest fears in the minds of the employees being acquired is their job security. During the initial phase, there is no clarity on the organizational structure, roles and profile.

Compensation & Benefits: Employees may have questions on whether their salary structure will remain the same. They may also expect sweetners in lieu of the new acquisition or brand loss.

Organizational Culture and Best Practices: There could be uncertainty in the minds of employees with respect to the new organization’s work culture and continuity of the best practices like work flexibility, accommodating employees’ preferences, employee engagement, retention, focus on employee safety security health etc.

What’s in it for me? A very common question that gets triggered in employees’ mind is around his/her benefit out of the entire transformation. Will the change bring growth and development for employees or will it be centered around profitability? Will there be opportunities for promotion or will it lead to role/profile dilution?

Managing Client reaction: Employees may have apprehensions around clients reaction to the organization decision on merger and acquisition, as this would be as new a change for Client as it is for internal employees. Employees may have fear around Client’s retaliation which will have negative impact on the business

Whom should I speak with? : The merger related stress creates a ripple effect in the minds of employees especially during initial phase of transformation, wherein the employee sensitivity is very high. At this junction, employees look for a trusted source that can rest their fears and address their doubts and queries.

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Topics: Strategic HR, #MergersAndAcquisitions

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