Mergers and acquisitions are tools used by corporate firms to strengthen and maintain their market presence and absorb new technologies. Mega deals by corporate giants discuss all aspects such as finances and legal concerns. Deals generally focus on the benefits to the companies involved. They would also discuss human resources (HR). However, the focus is usually on their budget and employees are often reduced to mere statistics.

In order to ensure a smooth transition following a merger or acquisition, the HR department is entrusted with several tasks. Companies often face overabundance of staff and talent. They may leaf through resumes of their managers and evaluate them based on their performance, attitude and abilities. They may decide that managers from both the companies are not required. This means that only one of them is retained. It is possible that even if both are retained, one of them may be reduced to a subordinate position. This may not be a pleasant experience for a manager who has enjoyed a superior position. While they may understand that the choice was based on merit, it does not reduce the bitterness involved.

Countless number of employees in organizations participating in the deal may have nothing to do with the deal, but find themselves most affected by it. The chaos that follows can be quite unnerving. Pink slips elicit fear and it is often associated with mergers and acquisitions. Employees may find this a helpless situation. Absence of proper communication can further deteriorate the situation. It is also possible that the key people may find it easier to get another job in such a situation, resulting in talent drain, which is not an objective of the merger or acquisition. According to a Forrester report, leadership attrition increased 47% within 3 years and employee satisfaction dropped 14% following a merger or acquisition.

Stress
Acquisitions are generally stressful for employees as most of them tend to see only the threat, not the prospects presented by the deal. Merger or acquisition deals are often done hastily, leading to lay offs and decrease in salary. Employees of the firm being acquired may feel that their positions would be taken over by employees of the other company. They may fear change and the culture of the company that takes over may be dominant and they may lose the working atmosphere that they have grown accustomed to. In the same way, employees of the company that conducts the acquisition may feel threatened by competition.

How do mergers and acquisitions appear in the eyes of the employees? An employee shared his views about the ongoing takeover process in his company. The company was taken over by a corporate giant. He did not want to be named and informed that generally all employees are confused and worried, even if they didn’t perceive any immediate threat. Although most of them are not actively looking out for jobs, they do not consider themselves in the best of positions.

Following the takeover, there is duplication of department activities. Many employees feared that their department might be dissolved as the taking over company would take charge. They would only require additional number of employees, but not an entire department. What happens to others? The HR had its answers. It assured the employees that they would be taken care of. The HR informed the employees that they would be accommodated in other departments. However, this didn’t go well with the employees as many of them didn’t want to change their departments.

Some of the employees who had worked with the company for many years had a different reason to be worried. In the small company they were important people and were responsible for their pet projects right from the inception. However, they found themselves being controlled by the new companies and felt that they had lost their importance and control over their projects.

Worry
Existing departments itself found that their powers were cut down. They were given fewer rights and were told that higher responsibilities would be taken care of by the taking over company, which already had its systems in place. Employees generally felt that change of job may be a better option.

Dan Stockdale, president of Adventures in Leadership, an educational firm that specialises in applying the principles of positive reinforcement to organizations, states that the way in which executives of both companies involved in mergers and acquisitions deal with employees, play a major role in employee productivity and morale.

It is important to have constant, honest communication with employees as they want to know the truth even if it is not all good news. They tend to assume the worst when they are not well informed.

In case of employees who cannot be retained, Stockdale recommends a severance package. They should be allowed to exit gracefully. Even though any compensation cannot make up for the distress caused, companies can try to offer career counseling, resume services, or anything else to help them. This may still help people leave without too much hostility.

Even in the case of employees who are retained, acquisitions may still have a negative impact. This may lead to reduced productivity, low morale and dissatisfaction. Gaining employee trust is an important factor for the management.

For any company, the frontline executives are the face of the company and are closely associated with its customers. Dissatisfaction among the employees can affect the customer, which may become evident in course of time. A merger or acquisition deal which is employee-centric, is the key here. X

Check out
IT Examiner: here
Economic Times: here
European Management journal: here