The statistics are somewhat daunting. 50 to 70% of mergers fail to meet their targets. More than half destroy value. What’s worse, the average acquired firm loses 40% of its managers during the first 24 months of the merger.
And the reasons are no secret; in fact, there’s a fairly clear consensus about the top contributing factors to merger failure. According to an Aon Hewitt study, 33% of respondents blamed “cultural integration issues” as the reason their deal failed. According to a study by Marsh Mercer Kroll, 50% of respondents cited “organizational cultural differences” as the most significant post-deal issue they faced.
Mergers are especially common in the financial services space, effecting both banks and credit unions. It’s important to understand what’s happening here, so you can take meaningful steps to correct it.
What can go wrong when companies merge?
People don’t buy in to the newly merged organization
They don’t get the right information from leaders about the purpose and plan for the deal, which leads to distrust and fear about the future. They disengage, and their loyalty to the company slips.
People don’t understand each other
They don’t learn about the cultural characteristics of the merging companies. They can’t connect with new colleagues.
People don’t collaborate
Different systems and business styles keep employees apart. There’s an “us vs. them” mindset that produces internal competition and conflict.
People are distracted from the core business
A poorly planned or challenging integration takes too much time and attention. Productivity drops, eroding the company’s revenue and customer base.
People leave
They don’t feel like they fit in anymore, or they’re unhappy with the problems and delays of integration.
Lee Bryant, co-founder of Postshift, describes the worst case scenario from his experience watching several mergers of large firms: “There is a perception on both sides that wherever there are two IT departments or two HR departments, one of them will win and one will disappear or be forced to integrate. I’ve seen a lot of fear, a lot of grumbling if the other party doesn’t accept their way of doing things. There’s not enough exploration or discovery of the other side in the transaction. They treat each other with suspicion and try to avoid being the one that loses.”
In other words, people fail to come together in ways that serve the company. There is a culture clash that never properly resolves.
But it doesn’t have to be that way. When companies put time, money, attention, and leadership into uniting their employees, cultures can be successfully integrated. And internal communications plays a key role in that process.
How to improve employee retention during a merge or acquisition
1. Reduce fear with transparent communication
The moment employees learn about a merger, fear, uncertainty, and doubt usually take hold. Your first merger communications priority is to answer the “me” questions. What does this mean for me? Do I still have a job? Who do I report to? If you don’t have answers to those questions, tell employees when you will. Until the “me” issues are addressed, employees will have difficulty focusing on work.
2. Clearly highlight the benefits of the merger
Once you’ve addressed the uncertainty, your next communications priority is to start “selling” the deal internally. You need to share the rationale for the deal and a vision that employees can buy into.
Merger communications expert Shel Holtz says, “Good communication is not just a one-way push of information down. Communication depends on people absorbing the information and ending up on the same page.”
A two-way dialog is useful here. You’ll know your “selling” is done when employees have confidence in and allegiance to the newly merged organization.
3. Communicate across multiple channels
Face-to-face communication is the best, but there are practical limitations on the number of meetings that can be held.
Intranets or secured merger websites are invaluable for merger communications, as they allow employees to consume information on their terms. They support interactive communications, such as Q&A forums, and they support fresh, consistent content dissemination on a 24/7 basis.
4. Provide regular updates to keep employees in the loop
According to merger integration consultancy Pritchett, “Silence is deadly. It only leads to rumors and speculation, giving a voice to the typical 30% of the people in the target company who oppose the merger.”
So communicate without let-up. When there is no new news, share the dates when information will be available or when decisions will be made. Share the same information repeatedly—your message has to be heard multiple times before it’s truly digested. In a merger situation, there is no such thing as too much communication.
Ultimately, the goal of merger communications is to win the hearts of employees. Long after close, you need to continue to sell the deal internally. As employees buy into the deal rationale and the common vision and values, they become engaged. And engaged employees don’t quit.
