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Are there alternative strategies that could be employed to achieve cost savings and increase efficiency without resorting to staff reductions? How can organisations balance the need for cost savings while maintaining a positive culture amongst employees and retaining key talent?
I feel like overlap is inevitable, however if an organization has versatile talent that can flex across disciplines, then more associates can be retained.
There are many factors that influence the answer. First, what type of merger is it? Staff reductions are much harder to avoid in a horizontal merger as there is inherently more crossover and duplication. Second, how big is the company? Smaller companies have fewer options and less ways to absorb costs. However, larger companies may be able to leverage other divisions to retain redundant staff in complimentary roles. Third, how specialized is the skill? This will help or hinder the number of options for an individual to fill an open position.
I think it is inevitable as one of the main factors of having merger is to have economies of scale and cost saving, which is actually cutting of staffs, one of the ways that I can think of is to have a better exit package so at least the staffs leaves happier
I agree with all of the above posts, however, I think exploring the option of a shared services department is important, specifically with administrative roles. In my experience, admin departments are often short staffed as it is, so this could solve a problem of recruitment and hiring if skilled staff can be integrated into and trained on the new practices and protocols.
Staff reduction is often seen as the most obvious solution to cost savings and economies of scale, especially when there’s significant overlap or redundancy in the skills and operations between the entities involved. While it may not be avoidable in certain circumstances, conducting it in a manner that empowers those who are departing can have the effect of building trust and inspiring those who are retained. When employees see themselves as more than just headcounts, they will be more inclined to add value to the company.
Some staff reductions are inevitable, however, to what scale is dependent on multiple factors like skill levels, maturity, and depth of knowledge. The company I work in seems to keep entry level members and keep only a proportion of essential Heads, VPs, and Directors due to the nature of the business. A top-heavy company with conflicting interests and strategies cause mayhem.
Cutting of staff is one of the common post-merger synergies that is inevitable when considering how to reduce overheads especially in shared services roles. It is also a quick win synergy that can be realized within 100 days. The challenge is how to cut the right staff (from both acquirer and target companies) so that the remaining employees are optimised with compatible set of values and mindset on one hand, and with a fair exit package on the other hand for the employees leaving the organization.
The decision to cut staff post-merger is highly dependent on the specific circumstances and strategic goals of the merging companies. In some cases, staff reductions may be necessary to eliminate redundancies, achieve cost savings, and streamline operations. However, whether staff cuts can be completely avoided or minimized depends on several factors:
1. Synergy Assessment
2. Integration Planning
3. Strategic Approach
4. Long-term PlanningLayoffs are often a natural outcome of merger and acquisition activity. When two companies come together, there may be overlap in some areas, leading to the decision to eliminate positions. Not every merger leads to layoffs, and in some cases, companies add new jobs when they merge.
As many before me have pointed out, it sometimes happens, but it depends on many factors. For example, one M&A engagement I’m working on is an acquisition for a subsidiary relationship with little existing business overlap, so no, not looking to reduce headcount. However, in another merger, I was exposed to, yeah there was redundancy and layoffs.
The cutting of staff post-merger is not always avoidable, but it depends on various factors and the specific circumstances of each merger. In some cases, job redundancies may occur due to overlapping roles and functions between the merging companies. This can be a result of efforts to streamline operations, eliminate duplication, and achieve cost savings.
However, it is important for companies to approach staff reductions with sensitivity and consideration for the well-being of employees. They should strive to minimize the negative impact on individuals and provide support in terms of outplacement services, retraining opportunities, or alternative job placements within the organization if possible.
Companies can also explore strategies to retain valuable talent and retain key employees during the integration process. This can include effective communication and engagement with employees, providing clear career development opportunities, and offering incentives to retain critical skills and knowledge.
Ultimately, the decision to cut staff post-merger depends on the goals, strategy, and financial considerations of the merged entity. While job reductions may be necessary in some cases, it is crucial for organizations to handle these situations with care, transparency, and fairness to mitigate the potential negative effects on employees and maintain a positive organizational culture.
In my experience I focus on synergies in sales rather than costs.
Staffing implications are dependent on the type of merger/acquisition and whether or not scalability is required. If integration processes are started during the due diligence phase, the critical positions, staffing and relocations can be determined prior to closing and incorporated into the KPI monitoring & evaluation.
Highly dependent on your cost structure to begin with, but in most cases is not avoidable in the case of mergers of similar businesses.
I wouldn’t go as far to say that it could always be avoided. For example, if a company was in desperate need of cash for survival, then likely it’s not avoidable and a company should always maintain the right to “right size” itself should major unexpected events occur. However, I do see that it could often be avoided and surely minimized through the use of a different strategy. Often the first strategy that comes to mind is to layoff staff. However, one could instead chose to leverage the extra staff via dedicated improvement teams that accelerate integration and business improvements in key areas that enable the company to grow at an accelerated rate. To do this means using people to work “on” the business instead of “in” the business and such a transition requires new skills. Under the guidance of external support though with the proper skills, these internal resources could be of great benefit.
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