We’ve all seen a lot of merger and acquisition activity in the financial services sector.
But a recent article from Gallup points out that much of the news coverage involving corporate mergers and acquisitions has focused on the CEOs or the financial aspects of the deal. But little attention has been paid to people issues: how the change will affect both employees and customers.
Most people prefer things to stay the way they are now, even if change promises some benefits.
“Companies can pay dearly for disturbing the status quo when they don’t have a plan for putting people at ease and aligning them with the bigger picture,” Gallup notes.
The key to a smooth merger or acquisition is to ensure that people are given as much consideration as the deal’s financing. This means focusing intensely on four groups:
Customers. These people are going to worry about how the change is going to affect their business and the level of service that they currently receive. A big change can cause some unengaged or unhappy customers to jump ship. The average attrition rate in the banking industry, for example, is 5 percent, according to Gallup research. Yet, this rate bumps up to 8 percent among customers of an acquired bank.
Leaders. In a merger of acquisition situation, leaders tend to deal with company culture in one of three ways: 1.They do nothing, and let the existing cultures exist side-by-side. 2. They try to merge elements of both cultures into a new, unified culture. 3. They position one culture, usually the culture of the acquiring company, as the dominant culture for the future.
The first approach usually doesn’t work, because it results in culture clashes. The other alternatives can succeed, but they require a lot of work. In particular, top managers have to define the desired culture and discover the ideal people to implement the evolution.
“These people don’t have to be from the C-suite. In this case, it may be more powerful for vice presidents, division directors or managers, and front-line employees to be responsible for heralding cultural change,” Gallup says.
Employees and managers. If anyone is going to be damaged during an M&A, it is usually the employees. A change creates stress and anxiety, which can cause work performance to slip or lead employees to look for work with another employer.
To keep employees from departing, managers need to create a communications plan that focuses on both employees in the acquired and well as the acquiring bank.
“In Gallup’s experience working with clients and change management, we find that leaders and employees feel differently about communication. Leaders tend to believe they are doing enough, but employees want more.”
Competitors. These are the people who are going to pounce as soon the merger or acquisition is announced.
“Acquiring companies shouldn’t make it easy for their rivals to steal their top performers or best customers, yet that is exactly what happens when they discount the people factor.”
The answer? Banks need to broadcast the idea far and wide that the proposed merger or acquisition is beneficial to all and that everyone—current employees as well as customers will experience positive outcomes.