Mergers and Acquisitions (M&A) bring excitement and dread in equal measure, depending on which side of the equation you’re on. However, one aspect not often accounted for is M&A onboarding best practices after deals close. If handled poorly, it can affect the company’s market capitalization.
Employees of both companies are at risk of leaving for another opportunity due to the uncertainty surrounding the merger. Of those that stay, engagement may drop until the dust settles. A recent article by Slalom calls this out from a 2019 MIT Sloan School study, “the average attrition during the first year of acquired company employees at 34% and of hired employees at only 12%. One can argue that if 34% of employees leave, an equal number are looking for another job and are not fully engaged. With these turnover and engagement challenges in mind, it shouldn’t be surprising that most deals struggle to achieve the intended deal objectives. In fact, Harvard Business Review puts the failure rate of mergers and acquisitions (M&A) between 70% and 90%.”
The MIT study does indicate that attrition levels off in year two, so retention for acquired and hired employees is similar. This implies that the first year after a merger is the most volatile from an HR perspective. Creating a sense of belonging through a well-designed and thoughtful onboarding process can help reduce attrition rates and improve employee engagement.
The article also references Baumeiser and Leary’s belongingness theory. During the transition liminal space or the period when acquired employees have not yet built a strong connection with the acquiring organization, there is a much higher chance of the employee departing. Unsurprisingly, there are those in the recruiting field who use M&A activity as a cue to reach out to their network and see who is open to making a move.
The Slalom article examines M&A onboarding best practices and notes three important distinctions between acquired and hired employees.
- Choice — Acquired company employees generally didn’t interview at the acquiring company and therefore didn’t experience the exciting “got the job” moment.
- Workload — Acquired company employees must perform their daily tasks related to their legacy organization to “keep the lights on” while simultaneously attending onboarding training and events. Many are also called upon to support integration activities, which can easily lead to burnout.
- Environment — Hired employees are usually surrounded by teams with tenure at the organization, enabling them to receive informal support and encouragement. Acquired company employees, however, often transition into the acquiring company as a team and are surrounded by colleagues who are new to the organization.
As the MIT Sloan School study illustrated, there are better approaches than using traditional new-hire onboarding processes for acquired company employees. According to Slalom, here are a few of their recommended onboarding best practices.
Cascade onboarding
Consider onboarding needs beyond the company level. These employees may also require functional and or team-level onboarding.
Integration roadmap
The process of putting a roadmap together helps you think through the information you’ll need to share with different groups of employees and can provide context for the new employees.
Employee experience
Onboarding is a great time to share the organization’s culture. You can also use Design Thinking to understand these new employees’ challenges and develop solutions.
Change overload
Consider the changes across the entire organization and develop integrated impact heat maps to prevent burnout and coordinate work streams.
Leadership participation
Include leadership of the acquired company in planning and implementing onboarding steps. Their inclusion and contributions signal a sense of belonging to acquired employees.
For the remainder of their best practices, visit their article.
Developing an onboarding process that generates a positive employee experience can reduce attrition, improve engagement, and help realize deal value.
For more information on hiring and building a strong culture after an M&A activity, send us a note.