This article was written by Mikaela Cohen and was published by HR Brew, which is part of the Morning Brew media group. Our CEO, Karan Ferrell-Rhodes, was interviewed for this piece and frequently quoted.
Thought Leadership Contribution By:
Karan Ferrell-Rhodes
Capital One announced last week a plan to acquire Discover in a $35.3 billion all-stock deal, CNBC reported. If it goes through, the acquisition would combine two of the biggest credit card companies in the world, combining over 70,000 employees into one massive new org chart. The impact of such a large merger could result in company culture clashes and reduction in workforces, according to Investopedia, that HR leaders will have to navigate.
For insight on what this could look like, HR Brew talked with three consultants about what HR pros might focus on after an acquisition is announced.
There’s going to be “angst or anxiety,” said Karan Ferrell-Rhodes, organizational strategist and CHRO at consulting firm Shockingly Different Leadership. “Not because of the work ahead [or] because they’re afraid of it, but…there’s a lot of prep, scrutiny, [and] negotiations.”
Marvels, assemble! Ferrell-Rhodes told HR Brew that after an acquisition is announced, companies will likely assemble a task force of decision-makers to perform due diligence, assessing acquisition risks, costs, operations, taxes, and more.
For companies as large as Capital One and Discover, Ferrell-Rhodes said a task force might consist of both companies’ executives, including both CHROs. On top of the legal and business assessments, she said both CHROs will need to focus on employee engagement “to keep the wheels on the bus.”
“With a long close, like [Capital One and Discover], you need 90% to 95% of the business really focused on just running the business, nothing to do with the integration,” said Sinead Mullen, a partner at consulting firm Bain & Company in the M&A practice. “Best practice is to take just a small subset of the employees and assign them to integration teams…but you want the vast majority of people to be very focused on their day job.”
Employee retention. Mullen told HR Brew the next priority for HR leaders is communicating as much information as possible. This can be critical to retention.
“I often see a lot of HR teams, right off the bat, try to do some internal communication around what to expect. What’s the timeline? When will there be answers?” Mullen said. “Often there aren’t answers right away…But [you] have to get ahead of that, because the biggest concern I often see in these types of deal announcements is talent retention.”
Jim Cichanski, CHRO and founder of outsourcing and consulting firm Flex HR, advised anticipating what questions employees will ask and supplying managers with the answers, adding those questions will likely focus on benefits, job security, and compensation.
“All of those things that come across to employees that they worry about, and they go home at night and talk to their spouse about whether they should stay and stick it out or leave and find another company to work for that they’ll know what they’re getting into,” Cichanski said.
He recommended executive leadership be honest, transparent, and expedient when communicating. This, he said, can help alleviate fear and disengagement among employees.
Key talent. Mullen recommended focusing on critical talent needed to carry the company through the M&A.
“Identifying the critical talent is so important for an HR professional upfront, because it’s impossible for you to focus on everyone,” Mullen said. “But let’s say that the sales group is really critical…for the deal to be successful. You need to be doing lots of engagement, lots of listening, lots of cocreation and collaboration with that group.”
Once HR has identified key employees, Mullen said they should tell them that they are especially important for the company’s future and define their role and responsibilities moving forward.
“If you can tell them who their supervisor is going to be, how much is going to change versus not, that helps to calm a lot of the nerves,” she said. “That often requires a bit of planning, so you can’t do that right up close, but as soon as you can, with that critical talent that’s really key.”
It’s essential to carefully consider the full scope of work when faced with a merger or acquisition. And to be honest, I have yet to see an over-staffed HR function which was ready for such change management.
However, the HR workstreams for mergers and acquisitions are part of our specialty. Conducting thorough due diligence and selecting the best consultant with relevant experience, a good track record and a collaborative personality can help mitigate some of any disadvantages you may face.
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