Retention of key employees
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Often, especially in smaller entrepreneurial companies, there is a risk that key employees leave when the company is acquired by a larger corporate and that this worsens the performance of the acquired company. What do you think can be done to diminish this risk of key employees leaving and the impact it might have on the performance?
Culture definitely matters a lot. Having a compatible culture can help maintain normalcy after a period of disruption. Also, understanding the key employees goals (e.g., career, family, compensation) is important in satisfying those desires to retain that employee.
In the deal there have to be provisions about employees, as well as clauses restricting the ability of the current owners to operate again as a competitor.
I would like to hear a specific example, though if the company acquired is based for its performance on a couple of employees, it is a risky acquisition and this has to be taken into account.There is still the option to offer shares under clauses to the employees so they keep working for at least a period.I agree with what have been said in this post. Company should come with a clear retention plans for key employees that would include career planning, incentives, bonuses, and contract negotiation, if applicable.
Sometimes key people in the acquired company might not be key people in the NewCo. For those who are, try to elevate and get them a new role. Spend time discussing with them on opportunities moving forward in the new venture. Always be transparent on the role they will play.
I’m not sure that can ever be 100% mitigated short of employments where they’re legally bound. In that case, relationship management is paramount to contain any negative culture or political challenges that employee may cause. I’ve seen where leadership is hoping the acquired leader would screw up so they had a legal reason to get rid of them, and just the risk of not performing the person was that disruptive.
All great answers – and, I’ll counter with sometimes keeping key employees can be more problematic than planned for. I’ve worked on mergers where key staff were retained as part of the deal for a set time (a year or more). Sometimes those employees, while valuable for their skills and company knowledge, are not behind the merger and their influence can be very detrimental to integration success.
Hold a townhall meeting immediately after acquisition to sell the bigger vision to the incumbent employees of the target. Also can use mechanism such as retention bonus for key employees identified.
I agree with most of the comments above especially on communication, but I wonder if the acquisition is a hostile takeover, one, would the acquired company be willing to be forthcoming on key employees and two due to negative press or publicity, would the key employees be willing to stay.
Transparency, trust and saturation of communication is a critical factor in my view for retaining talent. Whilst financial incentives such as retention bonuses are a good motivation, untimely I believe a lot of good talent is lost because the management team have not been equipped to share better visibility of the process ahead.
Hi, Pls let me share my experience here, while my former employer was going thru due diligence process by a potential buyer, my management awarded cash bonus plan letter to selected group of key employees by offering them an opportunity to share in the success of the combined business grows. Personally I was preparing to leave the company knowing the potential sale but stayed back just because of this cash bonus plan letter. Hope this helps.
It is always good to identify the key personnel prior to close. You should then tie in a performance bonus, or a stay bonus to ensure they are there for at least 6 months to help with the transition. Losing key talent could have a negative affect on what you just acquired, so it is important to have clear communications, letting them know their value and putting in an incentive plan to keep them is the first thing you should do.
Retention plans and incentives are common for keeping key employees during a deal. Stock incentives and cash incentives are good ways of communicating to key employees that they are valued and will be taken care of once a deal is complete. Often, it is the declaration of an employees’ importance for the long-term that will keep an employee (the incentives are just confirmation of this fact).
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