In M&A transactions, no two deals are alike. Yet every organization faces complex people-related challenges as a deal progresses from concept to reality. HR teams must make quick decisions about numerous talent-related questions – including headcount – with often imperfect data. Talent movement and reductions analysis is prone to error as situations change quickly in response to business requirements evaluation. Working on thousands of transactions a year, WTW finds certain themes arise and there are often common strategies and approaches to workforce management that have been proven to improve the chances of deal success. But first, we’ll clarify what workforce management in M&A means.
Workforce management in the context of M&A is a strategic approach to address the new organization’s talent needs and employee experience during a merger, acquisition or divestiture. Though HR and workforce management play a critical role in the success of any organization, in the case of M&A, HR’s importance is amplified and workforce management becomes broader in scope. At the critical juncture of a merger or acquisition, the decisions HR makes regarding the composition of the workforce, how it is communicated with, who leads it, how teams will be integrated and more will have a significant impact on the combined organization’s future success.
Workforce management involves planning, change management, organizational design, total rewards, notification communications, due diligence and integration strategies focused on talent management, organizational culture and employee engagement.
There are numerous complexities HR must navigate in M&A, and all deals are unique. But we find the following seven imperatives are common across all transactions:
Assessing talent requirements and determining redundancies is among the first things that HR must help the business accomplish. A strategic, systematic, fair and legally defensible approach is required to identify immediate cost reductions while ensuring the organization retains the talent needed to maintain business continuity and support long-term growth.
This starts with identifying areas where there are clear redundancies and where reductions can occur without undermining the organization’s essential capabilities. It means carefully analyzing all roles and determining which are essential to the company’s core functions and long-term strategic goals. By focusing on retaining roles vital for innovation, customer satisfaction and market expansion, companies ensure they are saving costs in the short term while investing in their future.
Striking the right balance between speed and thoroughness of talent assessment is tough. Moving too quickly could hinder precision and transparency, while taking too long could unnecessarily prolong uncertainty and discomfort among employees. Balancing immediate cost reductions with long-term growth objectives is a delicate task that requires careful consideration of knowledge transfer and restabilization objectives.
While achieving cost synergies is important and demonstrates value to the market, there’s also risk associated with moving too quickly. Rapid changes can lead to an organization losing essential knowledge, which is why transitional roles are invaluable. These roles ensure that critical knowledge is transferred effectively, maintaining business continuity and stability during the integration phase.
One of the most critical decisions organizations must navigate is the timing of integrating various functions. A common dilemma companies face is determining the optimal sequence for integrating specific functions, particularly support functions such as HR. The timing of when to integrate HR is significant because it plays a pivotal role in shaping the organization's culture and supporting its workforce during the transition.
Integrating HR early in the process can be advantageous as it allows for the swift alignment of policies and procedures and ensures that employees are supported and informed from the outset. Early HR integration helps establish a unified culture and clear communication channels, vital for a smooth transition. Addressing HR early can also facilitate the more technical aspects of M&A, such as harmonizing benefits and streamlining support systems, which contribute to overall organizational efficiency.
But delaying HR integration until the later stages of the merger can also have benefits. This approach allows the initial focus to be on combining other critical operational functions that might directly impact the company's service delivery or production capabilities. Delaying HR integration might also provide HR teams from both companies additional time to plan a more cohesive integration strategy.
Ultimately, the decision on when to integrate HR should be tailored to the deal’s specific circumstances and strategic goals. Companies must weigh their immediate operational needs against the long-term benefits of a well-integrated HR function that supports a unified company culture and employee wellbeing. Such careful consideration will help ensure that the integration process meets strategic business goals and fosters a positive work environment during significant change.
Even when most information cannot be shared, implementing a thoughtful change and communication plan is essential to maintain trust and morale among the workforce during these transitions. This includes establishing the schedule and key employee-facing milestones for integration. Consistency is a stabilizing force, helping manage expectations and maintain employee trust.
It’s essential to communicate regularly, share what is known and be clear about what’s still being decided while providing a broad timeline and a clear way for employees to access the resources they need. Many companies provide employees a user-friendly and accessible consumer-grade technology platform to get information and answers to their questions.
Though it’s usually not possible to share all the details, it’s important to show empathy by acknowledging employees’ need for information and explaining as fully as possible why all information cannot be shared. Being thoughtful and as open as possible can help employees feel more connected to the new organization and maintain a positive employee experience through a potentially challenging time.
Managers aren’t just facilitators of workforce management decisions. They too are personally affected by the changes. Often, we expect managers to maintain stability and guide their teams through transitions, though they themselves may feel overwhelmed and uncertain. Acknowledging the dual role managers play during M&A is essential. Providing managers with clear, consistent information and instructions can significantly alleviate their stress and enhance their ability to support their teams effectively. It's important to communicate empathetically, understanding their emotional and professional challenges.
Technology platforms can also help support the process, as long as they don’t replace human interaction. They are a means to deliver information efficiently and reliably. They can also offload time-consuming administrative tasks from both HR teams and managers, giving them more time to focus on empathetic communication and attaining future-state results. Such platforms should meet high user and consumer experience standards, making it easy for managers to access necessary information.
In M&A, recognizing and respecting cultural differences in reactions to news is necessary, particularly in those that involve global operations. Each region will react differently based on its cultural context and legal framework around employment.
For example, in the United States, the immediate concern when restructuring is announced might be job security. In Asia, the instinct might be to find career progression or payout from the announcement. In Europe, employees might feel more secure due to strong labor protections under Protection of Employment and Acquired Rights Directive regulations.
Understanding these global cultural nuances is essential to effectively tailor your communications to different employee populations. It's not just about what is communicated but how it is conveyed that can significantly affect how the message is received. Technology can facilitate clear and culturally appropriate communications across different regions.
Moreover, the shift toward a virtual world has changed how communications are handled. The person delivering the message is likely to not be physically present. This makes ensuring that communications are clear, accurate and culturally sensitive even more important.
WTW offers a proven online portal that enables electronic delivery of customized severance notification materials, including facilitation of electronic waiver signature collection and waiver return tracking/auditing.
When there are workforce changes, it’s essential to treat all employees with the same respect and follow consistent processes, regardless of their position within the company. While it's common for organizations to prioritize executives, best practices suggest a uniform approach across all levels. This consistency ensures fairness while maintaining organizational integrity and reputation.
Treating employees equally during transitions is not only about fairness but also about futureproofing the organization. Junior employees today are the potential leaders of tomorrow. If treated poorly, they will communicate that negative experience much longer and more broadly than current executives. This could affect the organization's reputation and ability to attract top talent.
Therefore, adopting a consistent and respectful approach to managing workforce changes for all employees is a matter of best practice and a strategic imperative for sustaining long-term organizational health and reputation.
The strategic management of the workforce during M&A transactions can drive the short- and long-term success of the new organization. An approach that balances immediate cost considerations with the broader goals of efficient transition, stabilization and sustainable growth is necessary for success.
Ultimately, the success of any M&A deal hinges on the ability to harness and retain talent, foster an aligned culture and ensure that all employees feel valued and respected. A thoughtful and holistic approach to workforce and talent management by HR isn’t just a best practice; it's a necessity in today's complex transactions landscape.
