Why a third of your talent will leave following a merger: and how to stop it happening.
At Threshold, we’re supporting with the ‘human-side’ of integrating two sizable companies following an acquisition. At the get-to-know-you off-site, comprising the two Executive Teams, we shared the projections of what was likely to happen to the existing talent over the coming twelve months to three years. It was a salutary message that quickly focused minds.
A study from MIT Sloan found that within the first year after an acquisition, 33% of acquired employees left the organization. A report from Gallup cites an EY study suggesting that 47% of key employees leave within a year of the transaction, and 75% depart within the first three years.
More broadly, organizational transformation attempts in general have a high failure rate. McKinsey & Company reports that approximately 70% of transformation efforts do not reach their goals. Studies from Boston Consulting Group (BCG) and Taylor & Francis back up the 70% failure rate, the latter estimating that this results in $2.3 trillion wasted globally.
Whether you’re managing an integration or another type of transformation, it’s crucial to recognize the hidden challenges in securing buy-in from the people who will ultimately be responsible for making the change succeed.
Four key reasons why employee engagement fails
Over the last twenty years Threshold has helped numerous organizations to avoid failure when it comes to mergers and acquisitions. Based on our experience we identified four key reasons why employee engagement so often slumps following major change. While the economic, social and technological context have changed over time, the ‘big four’ human factors have remained remarkably consistent.
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Cultural Misalignment
“It’s not the organization I joined.” This is the sentiment that we often hear. We tend to choose our place of work because it’s culture – those unspoken norms, values and and attitudes – makes us feel at home. A sense of belonging is a primary human need. When two organizations merge, differences in corporate culture tend to threaten this sense of belonging.
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Job Insecurity
Employees tend to be fully aware that transformation is intended to show a reduction in operating costs. M&A activities often result in overlapping job functions, creating redundancies. Without open and honest dialogue taking place regularly and frequently, employees will take the initiative and jump ship proactively. The problem is compounded by the fact that it tends to be the most proactive and dynamic who leave first.
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Changes in Leadership
It’s likely that the change will result in the employee having a new boss, or bosses. Research by Gallup indicates that the relationship with the line manager accounts for 70% of the variance in engagement between employees. Changes in line-management disrupt established relationships and the dynamics of trust that have built up over time. Organizations need to prepare leaders to take on new reporting relationships with care, sensitivity and emotional intelligence.
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Lack of Communication
Insufficient communication during the M&A process leads to rumors, misinformation, and heightened anxiety among employees. When employees feel uninformed about changes affecting their roles, their trust in the company plummets. The golden rule is: Communicate! Communicate! Communicate! Even when there is nothing new to report, line managers must make themselves available to listen.
If the picture seems bleak it doesn’t need to be. The key to success in the context of mergers and acquisitions is to put the emphasis on sustaining and rebuilding social capital – the relationships, trust, and sense of connectedness that bind people together. We frequently help our client organizations with simple achievable steps that make an immense difference.
Over the past 20 years, we have identified 10 key actions that line managers must take to build social capital. With the rise of technology and shifts such as remote work, these actions are now more crucial than ever. Our role is to help line managers turn these behaviors into lasting habits by demonstrating what good looks like, why it matters, and equipping them with the skills and confidence to put them into practice. To find out more visit us at threshold.co.uk
10 priority actions for building and sustaining social capital:
- Host regular and meaningful team gatherings – Whether in person or virtual, specifically, creating opportunities for your team to connect and build relationships.
- Facilitate open conversations and meetings – Encourage feedback, involvement, and active participation from everyone.
- Plan for success with performance previews – Collaborate with your team members to discuss upcoming goals and how to achieve them.
- Be fully present and listen genuinely – Show your team you value them by giving your full attention during conversations.
- Provide constructive and meaningful feedback – Help your team grow by offering clear and actionable guidance.
- Focus on their strengths – Talk to your team members about what they’re good at and how they can use their strengths effectively.
- Encourage their ideas and input – Actively listen to suggestions on workflows, processes, and ways to improve how work gets done.
- See the whole person – Get to know your team members as individuals. Learn what they care about and what motivates them.
- Treat everyone with fairness – Ensure all team members feel valued and respected, no matter the situation.
- Keep them in the loop – Regularly update your team on progress and decisions about the things that matter to them
At Threshold, we are currently helping our clients get in shape for the technology revolution, by ensuring that the human workforce is committed engaged and resilient. We do this by bringing about small shifts in line manager behaviour that make a big difference. To find out more visit threshold.co.uk Additionally, you can also watch our latest video series on our YouTube channel.
