You’ve acquired the ideal target. The deal has been signed, and you’re poised for growth and profit. You want to move forward with the new combined organization, but a critical factor remains: How do you keep the staff on board? How can you create buy-in, bring out people’s best, and keep them giving their best to this new organization that you’re now leading? Integrating these five components can help retain employees through an acquisition.
1. The right mindset. You know going in that retaining key employees is critical to the success of the combined organization. Just because you are paying the selling principals for the business it doesn’t guarantee their employees and customers will come with them. Don’t get short sighted here. Be prepared to invest in ways that will keep them with you. Many times the employees and customers are the greatest assets a buyer is purchasing. Take care of them!
2. Retention pool. Dollars do matter. Set a retention pool aside before you close the transaction that is worked out and agreed to with the seller. If you are a public entity, you can use stock options. You can use signing bonuses with some payouts upfront and some subject to a vesting period, deferred compensation, and even phantom stock.
At my former employer, we created a deferred profit-sharing program that was highly effective as a retention tool and a recruiting tool. It was a five-year vesting program in which the value was derived from the company’s profits. This type of program can be necessary if you are in a highly competitive industry or marketplace and if the seller’s benefit programs are a little better than yours. Don’t underestimate this one.
3. Employee advancement and development. Many employees who are technically savvy are “knowledge workers.” Having programs for training or education that will show an employee a five-year roadmap to enhance their skillsets and their bank accounts is huge. At my former employer, we developed a cutting-edge program that addressed these things and, as a result, our technical workforce turnover was among the lowest in the industry.
4. Mingle. If you’re the buyer you need to be visible and spend some time in the field or trenches with the employees and customers. They need to see and hear from you and know that you have a vision and you care about them. Depending on the size of the target, roadshows, town halls, and roundtable Q&A forums are very effective. Don’t try to cut corners here. Let them see you in the field and in the trenches with them.
5. Commitment. Honor your commitments ALWAYS. And if for some good reason you can’t, then make sure you proactively communicate that reason and have an alternative plan that everyone understands and will support. This applies even for simple things like promising to get back to someone on a matter, no matter what it may be. People remember these things and the word will spread. Do it right upfront, as sometimes you only get one chance to “nail it.”
A good advisor can help package deals that ensure your company retains staff so you can move forward successfully. Through a well-thought-out and executed M&A strategy, acquirers can be confident that key employees stay on board — rewarded, committed, and ready to go the distance for the newly combined entity.
Steve Pomeroy is the founder of Big Change Advisors, a unique M&A consulting firm in Los Angeles that helps businesses achieve big goals while making a big impact on society. To request a free consultation, contact us.