When star performers jump ship

by Elizabeth Barnard27 Jun 2012

Despite the fact that mergers and acquisitions remain a business reality, HR may not quite have cracked the code in retaining key talent during times of sweeping change. The shock resignations of the Sydney Morning Herald, The Age andthe Herald Sun’s editors has thrust the issue of retention firmly into the spotlight.

The reality of executing widespread organisational change is that employees will inevitably view changes as a potential threat to their job security. In turn, many merger and acquisition (M&A) deals have inherent retention issues resulting from negative attitudes often felt by employees.

In essence, employers are at risk of eroding the trust in employer-employee relationships. According to a 2009 report by consulting firm Deloitte, many employees begin to contemplate "jumping ship" in an attempt to regain control over individual job situations.

However, during a merger or acquisition, it is essential for HR to communicate in the boardroom exactly why it is integral to allocate funds to limit change-related employee turnover:

1. Business continuity is the key to realising the benefits of the planned shakeup

2. There can be large financial implications from the cost of hiring new employees, the loss of knowledge/ intellectual capital, and the loss of client relationships

While the vast majority of companies use retention agreements to retain key talent, a recent survey by Towers Watson showed that companies that are more successful at retention begin the process early — identifying people and tactics — and don’t rely solely on money.

The survey included 180 companies from 19 countries and focused on current retention practices as well as specific tactics used by those companies that the survey identified as more successful in keeping top talent below boardroom level.

Since most companies that use retention agreements (bonuses offered to employees who remain at the company) as part of their overall strategy still face challenges in keeping people, Towers Watson focused on a subset of the acquirers that reported greater success at retention to learn what they did differently.

Key findings:

  • Companies with the most successful retention strategies identify which employees they want to target for retention agreements early in the process.
  • Almost three-quarters of successful acquirers (72%) determine which employees are asked to sign retention agreements either during due diligence or during transaction negotiations.
  • This is twice the number of less successful acquirers (36%) that ask employees to sign agreements during either of those times.
  • Nearly six in 10 (58%) of less successful companies don't ask employees to sign agreements until after the transaction closes.

While companies with the most successful retention strategies use many of the same tactics as their less successful counterparts, they also emphasise certain ones to a much greater extent. The vast majority (92%) of successful acquirers use retention bonuses, compared with just 53% of less successful companies. What's more, three-quarters of successful companies use personal outreach by managers and leaders.

Yet retention efforts can only go so far. The bottom line is that the sooner companies are able to pinpoint retention targets, the more thorough they can be in designing an effective retention program.


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