Mergers and acquisitions can and, more often than not, will shake up any corporate setting. When Amazon completed its purchase of Whole Foods in August 2018, for instance, stories abounded of angst within the Whole Foods workforce.
Disruption aside, the number of M&As is set to rise. In Deloitte’s latest M&A trends report, 68% of executives and 76% of private equity leaders said that the number of M&A deals will increase over the next 12 months. What’s more, 63% of the 1,000-plus respondents believe that deal size will also increase.
Apart from integrating cultures and making needed headcount decisions, compensation, equity, and retirement rewards are the most likely factors to create concerns among employees. As a result, Zanvi Patel, a partner at Farient Advisors in New York City, says it’s never too soon to create a communication strategy to address these worries when you know a merger or acquisition is going to take place.
According to Patel, who formerly served as head of Global Total Rewards at E*TRADE Financial, alleviating uncertainty and stress is the most important reason for communicating clearly about compensation. The entire workforce will likely have questions and concerns about everything from their base salary to rewards such as retirement savings plans, health care coverage costs, and performance bonuses.
Patel notes that the best starting point is a side-by-side assessment of each company’s compensation program. She says it’s critical to understand the differences and similarities between the two organizations, focusing specifically on which compensation structure you will eventually adopt.
“That assessment plays really well into how you end up communicating your plan,” Patel explains.
Next, Patel says, HR leaders should meet and analyze how employees at different levels are compensated. “You have to get a clear, accurate measure of the different levels of compensation—from senior leaders to entry level positions within the organizations,” she says. The assessment needs to focus on job roles (typical in benchmarking compensation data). For example, a VP of Digital at one organization may have a very different compensation situation than one at the absorbed organization. “You need to get a real idea of what the differences are to launch an effective communications plan,” she says.
Patel emphasizes the importance of creating a communication plan that recognizes the subtleties among the different functional employee groups. For high level executives, for instance, one-on-one meetings could be necessary. Another strategy could be to hold town hall meetings for larger groups of employees. The latter, however, has significant limitations, Patel warns, because it could cause a chilling effect for those who may feel uncomfortable asking questions in that type of setting.
The channels you use for communicating about compensation can play a pivotal role in the success of your plan. In today’s world, which includes remote work, flexible schedules, and dispersed workforces, using different mediums to share your message can help you get the attention of every employee—no matter where or how they work.
Patel says using interactive tools, email, video, and/or social media can be powerful, not only to get the word out through various channels, but also to give employees personalized views into how the changes will impact them. For example, she says a platform or tool such as Webex can be used for modeling the M&A impact on bonus and incentive plans. Using that basic tool, HR can easily distribute compensation information to a dispersed workforce, with the ability to reach many employees simultaneously.
“Technology can be quite powerful because it can offer people an opportunity to see how examples work,” she explains. “You want to be able to communicate specific, real-world examples and give people the tools to see how their compensation may change over time. You can develop models, for example, for people to understand how their equity may grow in the new entity versus the old entity.”
That type of information at the employee’s fingertips, accessible online, can help put the M&A compensation changes in perspective on a personal level, she says, adding that it can “reduce stress about potential disruption to their situations regarding compensation.”
No matter how you choose to communicate changes, the most important aspect is making sure employees get details about how it will work and why it is happening. “Offer real-life examples and a clear explanation of how employees will be impacted, in addition to simply describing changes,” Patel says.
For many employees, an M&A deal can be a scary, stressful experience. But it doesn’t have to be if compensation communication is done right. “Make sure you deliver clear, widely distributed, and consistent messages,” Patel says. “This will prevent post-M&A compensation from failing to meet expectations and will help make the post-M&A outcome a cultural success.”