Late last year, Chief Executive ran a great article entitled Stars and Keepers that noted that about half of all mergers and acquisitions fail to deliver value. Although the usual suspects of poor synergy and incompatible cultures are usually blamed, much of the blame should be placed on lack of an appropriate talent identification and requisition strategy.
As the article points out, the real expertise about innovative products, services or processes tends to be carried around by employees in their heads and unlike an assembly line, such employees are portable. They can walk out the door and never return, especially if they’ve already sent their resumes, which is likely since most people get nervous when M&A discussions are in the air and start looking for new work, in case they are the ones to get the shaft. And once talent is gone, it can’t be called back. And if enough talent leaves, there goes the value you spent so many millions of dollars on acquiring. The merger is considered a failure.
Before you start M&A activity, it’s important not only to have an integration strategy, but a specific strategy for talent retention. One framework for creating a talent retention strategy is outlined in the referenced article. It starts with the creation of a simple 2*2 grid for sorting employees in the merged company along the axes of “criticality” and “future fit”. This allows you to segment employees into transition, integration keys, keepers, and long-term stars.
Even if these employees are star performers, they won’t be needed because they fill redundant support roles. A plan will be needed to assist them in finding a new job and transitioning out of their current role.
- Integration Keys
Although they have the critical skills required for the transition, these employees don’t have a long-term future in the organization. The plan will have to include offers with appropriate incentives that will entice them to stay on during the integration, as well as a plan for helping them transition out of the organization after the integration is complete.
Although these strong performers are not yet stars, they have the potential to be stars in the future. The talent retention plan will have to include a communication strategy to convince them to stick around, outlining their potential role in the company of the future.
- Long-Term Stars
These are the people central to the synergies identified as key to a successful M&A transaction. They are the ones that possess the unique skills or intellectual capital required to continue to grow the business. It’s critical that the plan not only includes an outline of their future role in the company, but a personalized communication plan and offer for each star that you want to retain. Because if they leave, the M&A will be a failure.
After you’ve identified the stars and keepers, the next thing to do is flush out the plan. The article provides the following outline, which is a good start:
- Flesh out the retention plan and stick to it
Don’t say one thing and do another. All employees have to trust you.
- Focus on best-of-breed, not just home-grown talent
The goal is to protect the value of the merger, not to favor existing employees.
- Adapt the offers to the employees
Every employee is unique. Don’t take a one-size-fits-all approach.
- Communicate early and often
People get very, very nervous through a merger. Be sure to quell their fears on a daily basis.