In 2015, companies spent a record-setting $2 trillion on acquisitions, a majority of it in the technology, health care, insurance, and banking industries. In 2016, we’ve already seen two market-shaking deals go through: Charter Communications’ $55 billion takeover of Time Warner Cable and Comcast’s recent $3.8 billion purchase of DreamWorks Animation. 2015 was notable for the DuPont-Dow Chemical announcement and brewing giant Anheuser-Busch’s bid to take over SABMiller.
Mergers and acquisitions are enticing, especially to organizations looking to expand during uncertain economic times. They hold the promise of an expanded customer base, a larger global footprint, instant product diversification and an easy route into new markets. However, M&A is usually anything but smooth for the employees on the ground floor, and can wreak havoc on engagement by besetting them with worries about job security, relocation, retraining, and sweeping policy changes.
The problem with change
Although human beings are hardwired to go out and make change, we are, by nature, resistant to change. We can observe how this phenomenon works by examining the Change Curve.
The Change Curve was originally developed in the 1960s by Elisabeth Kubler-Ross to explain the grieving process, where she identified the more colloquially known “stages of grief”: shock/denial, anger/bargaining/depression, and finally, acceptance/integration. Kubler-Ross insisted it could be applied to any dramatic life-changing situation.
Since then Kubler-Ross’s Change Curve proved difficult to deny and has become a psychological maxim. By the 1980s, it became widely adopted by management types to better understand how employees react to significant change or upheaval. By visualizing the phases of change as a function of time and performance, you can see how the curve operates.
By stage two of the grieving process, performance (ergo engagement) drops by half. In the case of any major company change or upheaval, it’s an engagement gap that can’t be avoided, and is much more pronounced when employees are directly affected by the fallout.
Case in point: Aon Hewitt found that the top drivers of engagement within an organization shift considerably during mergers and acquisitions, reflecting the changing priorities of employees:
- Involved in decision making
- Co-workers make personal sacrifices to help the organization
- Senior leadership is visible
- Provided proper training to do the job
- Understand career paths
Mitigating the engagement dip
While the engagement dip is inevitable, you can still mitigate the psychological impact on your employees by being aware of these drivers and using common recognition and communication tactics to stay on the right side of them:
- Involve employees in decision-making. Doing so gives them a point of control amid uncertainty.
- Step up rewards for personal sacrifices and above-and-beyond performance. Employees navigate change more easily if they know discretionary effort is appreciated.
- Get senior leaders to check in with and recognize staff more frequently. Senior leader visibility and attention can go a long way toward building confidence.
- Ensure any new employee duties come with proper training. Show them exactly how things will change and give them the proper support to feel good about it.
- Communicate how the merger will affect your employees’ career path. Be available and listen to their personal concerns.
The focus should be on those employees who will be directly affected by the change, and managers need to be very aware of the vibes in their departments. We often lose good employees simply because of inaction — something obvious wasn’t brought up, an easily solved problem was left to fester, or their needs weren’t proactively addressed in some other way.
Curb your M&A enthusiasm
It’s easy to get excited about closing a major deal, but we can’t let that distract us from the fact that with major deals come major headaches. When a merger or acquisition threatens to cause upheaval, the priority should be the very boring task of getting everyone from the ground floor to the top floor on the same page. I know, we all want to celebrate the good times, and you should! But a few awkward moments broaching the subject or making an extra effort to assuage their very real fears won’t ruin the party if you don’t let it, and it’s a far smaller price to pay than the cost of turnover.
Cord Himelstein is vice president, Michael C. Fina Recognition.
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