Is Corporate Consolidation Good For Employee Retention?

It Depends!!

Corporate consolidation is, at its core, a marriage of convenience. But in it, you're asking employees from different organizational cultures, corporate missions, and values to find a way to work together.

Keep in mind that this is a large group of individuals with differing ambitions, personalities, and working preferences. Therefore, if the value of human capital is not put at the forefront of the consolidation strategy, employee retention after the merger will be nearly impossible.

On the other hand, aggressively honoring employee rights, whether you lay them off or not, during the merger ensures that your employees will be more invested in making the merger work.



So, the goal is to definitively understand corporate consolidation's positive and negative effects and how they contribute to retaining employees and then build a retention agreement around that.

So, How Do Consolidations Affect Employees?

A study by AON/Hewett showed that a change event in an organization causes a 23% increase in employee disengagement even if they retain their jobs. And to get back to pre-merger engagement levels, the consolidated entity takes about three years. In summary, the disruption caused by mergers causes employee anxiety because:

• Mergers tend to overlap existing roles making it imminent that some employees will be removed to create a budding new workforce – and your employees know this too.
• The change in the social dynamics in your "new" organization throws your employees into disorientation as they try to find a new way to work with a new group of individuals. And if the "change" requires them to upend their lives, the most probable option will be to resign.
• Change in leadership roles might cause frustrations among managers who lose their positions to other leaders, causing unrest that trickles down to subordinates. Also, if valued managers or leaders leave the organization, their subordinates might jump ship in tandem.

This fear of the unknown causes employees to look for work elsewhere, motivation to dim, and the value in the workforce to deteriorate.

Make Corporate Consolidation Good For Employee Retention

A Harvard Business Review report sort to determine why 70% to 90% of corporate consolidations fail. The report showed a lack of a clear strategy for open communication and effective project management as reasons for these failures.

In a word, problems concerning employee retention after a merger are primarily caused by miscommunication and poor communication. Vague communication is also a recipe for reduced employee productivity and morale because your employees don't feel protected or respected.

So, in a merger, over-communication is not a thing. Instead, working on your communication strategy helps you win the hearts of your key employees, and retaining them might not be soo difficult. Here's how you can do that:



Create, Implement, and Share your Change Management Strategy

It gives you a chance to communicate with your employees about the nitty gritty of the merger and how it will affect their roles and responsibilities. Engaging your employees throughout the changes empowers them to add value and advocate for the consolidation. That said, in your strategy:



1. Show You Understand The Importance of Organization Culture

An organizational culture enforces shared beliefs and values that reinforce employees' attitudes toward an organization. And assuming that a merger will create a suitable alliance between key employees organically is myopic.

Besides, your business is only as good as its key employees. Therefore, resolving the cultural differences in a merger is imperative. This harmony should segue from obvious issues to obscure ones like feedback styles.

For instance, figure out how employees interact, their personal preferences, and how communication is broken down between individual employees. Understand how employees from both organizations interact with problems and processes individually and in a group setting. Then curate a complementary culture for key employees post-merger.

The challenge is that mergers and acquisitions are shrouded in secrecy. As such, the organization can set a new direction, advocate for employee buy-in for this new direction and create a supportive channel for implementing these changes.

That is, define desired processes, systems, and behaviors clearly. Once you've created a brand that all your employees can relate to, develop realistic goals for your new business culture. Give your employees time to adjust to the new normal and offer training to those who need it.



Your new senior managers also need a channel defining their role in the new organizational culture. Gaining credible leadership requires the organization to provide clear communication consistently, which, in turn, appraises the consolidation and secures employee loyalty.

2. Make Consolidation Benefits Clear

While some employees might not want to upend their lives, others would be thrilled by opportunities that allow them to go abroad, upskill, or work for a more prominent company.



Therefore, share the ambitions of the merger with your employees and how they create opportunities for employees to uptick their careers. Include better salaries and other benefits in your benefits package if available.

 3. Honor Employee Rights

Respect the rights of the employees you choose to lay off by providing their severance pay where applicable and other benefits outlined in their employee-employer agreement, like giving them ample notice before letting them go.



If you retain employees, clearly communicate any changes in the employee-employer contract in the retention agreement.

For instance, benefits packages and employee roles change in an acquisition, and employees have a right to know. It'll also reassure your remaining workforce that their welfare is top of mind for the organization.

4. Provide a Feedback Channel

Use this channel to answer your employees' questions and provide obvious and comprehensive answers. If you cannot communicate this strategy to your employees face to face, leverage technology to reinforce your message consistently. Include a support system where employees can feed and get answers.



The Human Element Is Not To Be Trifled With

As Catherine Hawkes, a senior employment associate at RWK Goodman, once said, cultural integration is critical in an organization because it determines workplace collaboration, leadership style, and decision-making.

Yet, it is often overlooked in merger integration in favor of the legal and financial implications of the acquisition. And when employees feel left out, they experience increased unrest, contributing significantly to the failure of most mergers.

Well then, is corporate consolidation good for employee retention? The simple answer depends on your overall merger integration strategy and retention agreement. You must contemplate whether a merger integration suits employee retention post-merger.

C-suite executives, management teams, and the buyer's board must conduct due diligence concerning human capital and its contributing value to the merger integration. It requires open communication, employee recognition, and outstanding leadership where buyers become curious about the culture and values of their incoming employees pre-merger.



And from this information, the organization can create a new culture that provides a middle ground between the two companies that support employee retention.