Many of the biggest household brands are where they are today due to strategic mergers and acquisitions (M&As). However, among largely successful partnerships, such as Disney and Pixar or Oracle and NetSuite, there are an estimated 80% of M&As that fail to achieve their strategic objectives. One of the biggest reasons attributed to this failure are stresses on Human Resources.
When two companies are undergoing a merger or acquisition, they don’t always prioritize how well their cultures and employee base will integrate. Because of this, mergers have a tendency to cause a higher turnover rate than planned for. Leigh Richards, a writer for chron.com, identifies three reasons: Stress, Fear of Job Loss, and Competitiveness. According to Richards, “During mergers and acquisitions, change can be especially difficult and can lead to stress which can have a negative impact on morale if not handled effectively.”
Change is stressful
Stress is one of the biggest M&A impacts to your workforce. Communication is critical while big changes are happening. With uncertainty on the horizon, employees may stress over new expectations and how to handle them. It’s not what they signed up for, it’s not what they agreed upon, and now they just plain might not want to be a part of it anymore.
Fear of Job Loss
Many M&A employees fear that they will lose their job. When companies merge, new business leaders may want to bring their own teams onboard. There could also be less opportunity for their skillset once the teams are consolidated.
For example, take Susy Promotimus, who was supposed to move into a leadership role before her employer merged with another company. The decision to promote Susy is no longer made by the same Directors. Not only may she not be promoted, she may be also be expendable. Poor Susy.
When companies merge, the public relations teams will make sure to report how great it’s going to be for everybody. And for the greater vision of the companies, maybe it will be. But for the people involved, that may not always be true.
The Wharton School at the University of Pennsylvania recalls a merger between two major companies, Procter and Gamble, merging with Gillette. “When Procter & Gamble announced in January that it would buy Gillette for $57 billion, the fact that 6,000 people would lose their jobs was all but buried in the details of a deal that would link some of the world’s most well-known household brands.” That doesn’t sound like much cause for celebration for the employees of these two companies.
Richards final point is the competitiveness of employees. They may no longer be on the same page and it can sometimes cause serious conflict between employees who fear for their jobs. Richards notes that “During mergers and acquisitions it is important for managers and HR professionals to be alert to signs of negative competition and to ensure that employees are being kept informed about impacts on their jobs and their futures with the company. While some competition is good, competition is not good when it creates tension and negative conflict in the organization.”
Knowing these challenges, it’s important that companies handle M&As with care in regards to their people. According to americasjobexchange.com, there are certain things that need to be considered on how to handle these large organizational changes, such as “Handling employee dynamics correctly, focusing on training, motivating employees for the difficult time, and preparing employees for a culture shift. Preparing employees and communicating expectations are critical.”
It’s important that employees whom are to be laid off are informed immediately to reduce uncertainty. Those who remain need to have clear guidelines on their roles and expectations moving forward. They will need to be properly trained on new processes, so as to be efficient and effective in their roles. Employees will also need to be aware on culture shift expectations. And lastly, it’s very important for them to maintain morale. Motivate them for performance and reward them for their dedication.
In conclusion, M&As are extremely common and can be great strategic plans for growing businesses. But their success is always affected by people who are impacted in the process. After all, your people are what have made your company run all these years and they have a tremendous impact on the success of your business in the future.
“The Effects of Merger and Acquisition on Employee Morale.” Chron.com, http://smallbusiness.chron.com/effects-merger-acquisition-employee-morale-3196.html
America, Mar 30 2005 Strategic Management North. “The Human Side of Mergers: Those Laid Off and Those Left Aboard.” Knowledge@Wharton, http://knowledge.wharton.upenn.edu/article/the-human-side-of-mergers-those-laid-off-and-those-left-aboard
“Mergers & Acquisitions: How They Impact Employees.” Mergers & Acquisitions: How They Impact Employees | America's Job Exchange, http://www.americasjobexchange.com/employer/employer-articles/business-mergers-and-employees