The traditional way of thinking about a merger is that one company is established as the dominant company that calls the shots. And, the traditional way of thinking about an acquisition is that one company swallows another company and absorbs them into their existing entity.
Neither way of thinking is accurate. Whether it’s a merger or acquisition, the result is a brand-new company. It does not matter if one company is retaining a majority of its value in the deal; the end result is still a new company.
The key for HR leaders is to embrace this reality of an entirely new company with its own unique culture; not treating this like two companies living together and acting like ships passing in the night.
Things such as old company habits, “this is how we did it” statements, and a “we vs. them” mentality must be quickly eliminated to create one uniform, synergized company.
This leads into how to handle compensation issues in mergers and acquisitions. There will certainly be debates, disputes, and comparisons at all levels in the new company. The challenge is to take time to weigh important factors that help decide compensation such as key business objectives, key talent to retain, duplicate roles, and of course overall cost.
HR leaders need to take a proactive approach in mergers and acquisitions to be fair to executives, managers, and employees, while also considering the implications surrounding compliance, benefits, synergies, and culture. To do this, HR must be involved and highly engaged during the M&A process.
The Role of Compensation in a Merger & Acquisition Situation
Remember that people are the most valuable asset in organizations. The success of any merger or acquisition is heavily dependent on the finding synergies, alignment, and culture integration that maximizes the potential of your human capital.
HR leaders must engage with business leaders to identify the most valuable employees in the newly-formed company. These employees are critical for immediate success during the transition and for the long-term success of the new company post-merger or acquisition.
Therefore, immediate strategies and retention programs must be put into place and quickly communicated to employees as to not cause more anxiety about the change and potentially disrupt the business.
Be proactive. Surprises will not go over well. Be decisive on who will receive communication and what will be communicated when. Allow those impacted time to digest and understand the changes.
Also, explain the whys. People may not always agree with a change but will be more receptive and accepting if they understand why change is necessary.
Frontline: Communicate Pay Changes to Employees
Employees that are retained in the new company are typically concerned about their new pay, especially in comparison to other employees. Additionally, employees are concerned about their job titles, their roles, and how actual work may change in the new company.
Equity is key here. It should be expected that employees will discuss pay with colleagues from the old company and new colleagues from the other company. Employees will visit LinkedIn to compare their experience against the experience of new co-workers and make evaluations about whether pay is fair.
Again, HR leaders need to be proactive. Communicate changes to pay, explain why certain decisions were made, and be prepared to answer questions. The goal is to ensure that employees stay motivated, engaged, and encouraged in their new role. Also remember that various types of communication may be necessary during this stage to be effective.
Consider Support for HR & Compensation Issues During M&A
Leaders should be mindful of important people issues to address in a merger or acquisition:
- Synergies, cost savings, and mitigating risks that can be very costly to the company.
- Retention of key employees.
- Engagement and motivating all employees during this time of change and transition.
- Targeted communication to different employees across the enterprise.
What is HR’s strategy? What is the plan? Do you have the team in place to be proactive and address these issues? Remember that the end goal is a smooth transition.
To support this transition, consider working with NB Business Solutions. We can help with the merger or acquisition process from an HR perspective.
We can start from the beginning once a target company has been identified and perform due diligence to identify potential risks. We work with the business leaders, legal teams, IT, and liaison between the HR departments of each company to ensure that key issues are addressed prior to the deal being signed, and work towards a successful Day One and throughout the integration and transition period. Contact us today for support.