Change Management During a Merger

The amazing long-term potential of a merger can be hard for employees to stay focused on and committed to if the short-term stress is overwhelming. The leaders at merging companies are faced with the challenge of making the most of the new partnership’s opportunities while simultaneously ensuring the success of the past isn’t undone by too much change at once.

During a merger, change management strategies should be adopted to ensure key employees from both companies feel secure in their futures. Here are four areas where change is likely to cause employees stress, and what business owners can do to help employees adapt and grow.

Keep Employees in the Loop on Policy Changes

As two companies come together to form one workplace, policies and procedures that are effective at one organization may be implemented at the other, or the two teams might develop a new procedure that the entire team must learn. In either case, the key to ensuring employees feel confident about the changes is communication. Management studies experts Sugandh Kansal and Arti Chandani have identified three core reasons employees resist change during a merger:1

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Business owners and leaders can take a proactive approach to these resistances by carefully planning changes to policy or procedure before they are implemented, and keeping employees informed about why changes are being considered or what they would mean. Training and support must be provided to employees once the new policies are actually enforced. It’s advisable to survey your employees periodically during the first weeks and months of a new policy or procedure to ensure anyone at risk of losing their dedication to the process can be supported.

Care About Employee Benefits

Offering downsized employees amenities like financial education, referrals to new job opportunities, and/or temporary paid COBRA benefits are other ways companies can remain true to employee-focused values even when these hard decisions must be made.

Employees also often worry about the impact the merger will have on their benefits like accrued paid time off hours, their health insurance, or their retirement savings accounts. If two companies have radically different policies in one of these areas, try to find a middle ground that satisfies both. This is also a good opportunity for an employer to survey their staff and get a sense of what changes might be welcomed. For example, if one company in the merger offers no 401(k) plan and another has one but employees aren’t taking full advantage, the joining of both teams presents a perfect opportunity to look around for a new provider.

Build Morale Among Employees

Learning to work with new team members and meet their expectations is one of the biggest changes that must take place for a merger to be successful. It’s also the change that might take the longest to occur. Managers and/or business owners can help employees through this change by helping them connect with new colleagues in a way that makes both cultures feel respected. According to Kansal and Chandani, culture difference was largely responsible for the downfall of merger between Chrysler and Daimler. Daimler favored a more formal approach to business than Chrysler, meaning leaders within the organization had different standards and expectations.2

It’s advisable to survey your employees periodically during the first weeks and months of a new policy or procedure to ensure anyone at risk of losing their dedication to the process can be supported.

During the merger, managers must first understand exactly what their roles and duties are, and the metrics along which their own performance will be judged. Then, they must spend time with their new teams building morale and making sure any conflicts between members of the distinct cultures are resolved. Don’t expect this process to happen overnight; in many cases a year or more is needed before employees feel secure after the merger.3 Make sure to take both major and minor steps to bring the two cultures together. Team building events and luncheons are great, but it’s in the day-to-day details that the merger will truly succeed or fail.

Don’t Leave Employees in Limbo

The stark reality of a merger or acquisition is that it’s taking place to improve efficiency and make both companies more successful. In many cases, that makes downsizing a necessity for a number of reasons, like adjusting to new business needs or evaluating a new approach to the market. In horizontal mergers, when two companies offering products of the same type become one, there’s a large risk of redundancy between employees filling similar roles. In vertical mergers, when two companies at different points of one commodity’s production consolidate, the combined abilities of both entities along the supply chain of their end product can mean some downsizing simply makes sense.

For example, in early 2017, Dell Technologies underwent a horizontal merger with EMC INC, leading to a combined 140,000 workers between the two firms. A day after they announced the merger, they released at least 80 administrative staff whose roles were immediately seen as redundant. They also announced there would be two more rounds of downsizing as both the supply chain and administrative needs of the new company become clearer.4

While you may not be dealing with the same massive number of employees in your merger, consider some of the same approaches. Employees whose roles were clearly redundant were informed right away, not left in limbo. However, depending on the size of your merger it may not be immediately apparent. If waiting a few days means you can deliver all the hard news at once, it’s usually best to do so. Management consulting firm Oliver Wyman also recommends making the evaluation process by which downsized employees were judged at least partially public, to ensure both they and remaining employees understand the reasoning behind the decision. Offering employees laid off during downsizing amenities like financial education, referrals to new job opportunities, and/or temporary paid COBRA benefits are other ways companies can remain true to employee-focused values even when these hard decisions must be made.5

Mergers can be chaotic, but careful strategy and forethought make the process easier. Like all new opportunities, challenges and risks will also be present. These change management strategies and approaches will empower you to lead your team through those moments of uncertainty and maximize the positive impact of your merger on your business.