HR Due Diligence, Employee Retention for Integration Purposes
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Believe the HR DD module has mentioned that the acquirer should have retention program for employees that are key for post merger integration (PMI) but didn’t really discuss what roles are considered key employees for PMI.
What are the criteria for deciding whether an employee is considered key or not for integration? Could someone provides some example?
Thank you.
Hi Chengzhi,
Thanks for the prompt. My sense is that the criteria for evaluating whether an employee is integral or not varies based on the company (and technology) being acquired. Every case is different… but generally knowledge of products (IP), key sales relationships, and leadership competency/potential are good places to start from an evaluation standpoint. It is inevitable that some employees will leave, so this is why it is important to identify and prioritize plans to retain key employees from the acquired company. These plans should be developed during the merger integration planning process.
All the best.
Craig
Dear Chengzhi, in my opinion, each department of a company should have specific criteria to identify a key employee according to the activities performed. For example, employee’s seniority, specific knowledge of end-to-end processes, difficulty of replacement, skills, abilities, risk of losing the customer, revenue the employee generates, power to influence the team. In summary, evaluating the employee in the dimension: business impact vs. risk of leaving the company.
Hi,
One element to consider here is how important the key personnel to the transformation of the organization after the merger. The buyer should identify the key skills and competencies that the organization need to transform post merger. The employee pool should then be evaluated against these future needs as well.Hi there! I think that the key element to consider when deciding whether or not an employee is key to the integration is through ascertaining whether the competencies of the employee fits the overall business strategy of the entity post-merger/acquisition. With the competencies properly aligned with the overall business strategy post-merger/acquisition, the employee will be able to effectively contribute to the growth and development of the merged/acquired entity and take it to further heights.
In my experience, someone should be considered a key employee if 1) they have independent decision making authority that does have an appreciable impact on the business and 2) they have strong relationships with outside parties (customers, vendors, etc.) that would be jeopardized if that employee left the company.
Please let me share my experience of why I was chosen by the company as key employee when GE was doing due diligence to acquire my former employer. Although I was not involved in any of the revenue generating, R&D, marketing, sales or operation activities, I was included as key employee just because of my seniority within company having worked in Finance Controlling functions at the country, region and at the corporate levels in various geographical locations. Of course I did add value to the company especially setting up shared service centers, keeping lean finance teams and identified areas for costs reduction.
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