Stay-in-Place Bonuses

This topic contains 14 replies, has 14 voices, and was last updated by  Henrik Jernstrom 8 months, 2 weeks ago.

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  • #113062

    Gina Miele
    Participant

    What are your thoughts on stay-in-place bonuses for staff being phased out of the acquired entity in order to assist with transition/integration?

    #114421


    Participant

    Great question, Gina. I have a client grappling with this question currently so it has been on my mind. There are a lot of factors to consider. Here are a few:
    – culture/ climate (trust/ respect level, transparency, history of how employees are treated (layoffs, promotions, etc.), leader capabilities
    – length of transition/ integration period
    – current job market for skills these employees possess. Are the bonuses large enough to sustain a job search period?
    – other assistance / elements of the eventual severance package. Can you help them find new employment?

    I think what can be challenging is employees may begin some level of job search while still employed and working on the transition/ integration. If they land a job they may have the difficult challenge of weighing guaranteed employment in the future vs. guaranteed cash in the future. If the numbers are right, they may still leave. Perhaps in the end the decision is an expression of the organization’s values and culture. What action speaks to who the organization is?

    #114689

    Karl Heinz Foertsch
    Participant

    To retain key employees for a certain period of time during the integration it would make sense.It benefits the employees since they do not need to worry too much about the near-term future since the company is committed to keep them employed during at least the transition and integration period. Additionally, if they really want or must leave the company they have enough time to look for an adequate new job.

    #114780

    Rodney Satterwhite
    Participant

    Common practice in the States is to identify key people and functions and secure them by offering layer stay incentives with may include incentives to accomplish certain milestones or targets.

    #115766


    Participant

    Great question! I have always been an advocate for retention strategies in place with M&A. If you want key people to stay, you will need to show them! I have experienced the other side with no retention and we were up a creek without a paddle of technical expertise for their proprietary systems. The challenges we found were timing and transition. How long do you retain for and how would you transition the employees after a certain period of time. The exit transition is just as important as the limited duration retention offer.

    #115790

    Gregory Weisser
    Participant

    May experience is too (within US-EU or EU-ASIA deals) to offer retention packages or some sort of carve out bonuses for key people. Important is to agree on a proper plan to achieve targets/milestones/KPIs too, so to keep effected staff engaged and not just waiting to get paid. Believe this is the case mostly anyways. At least from what i haven seen.

    #115841

    Riccardo Scaioli
    Participant

    All valuable points here – i personally agree with Gregory, and the point he touched with reaching targets and milestones. In this way, the company will be more protected by an agreement made in the early stage, so with no full visibility on the real capacities of the employee/s in the new working environment – to maintain staff engaged and productive and not just paying for staff only waiting to get paid. I saw these milestones applied only to KMPs or very key employees, where language and culture barriers also were increasing the risks associated with the post-transaction.

    #115862

    Mauricio Weissberg
    Participant

    Hi guys!!!
    If HR perform a deep pre-merger DD and let no doubt about the employee stability after the deal has done, this proactivity will make easy the PMI team life. Moreover, the retention of skilled people is paramount; even in aspect of that intellectual asset goes work to the rivalry.
    Parallel a good confidence agreement and a clear career path with fair payment should be more effective of any Stay-in-place bonus. Convince them, they are a very important part of the big plan.

    #115912

    Kai Jie
    Participant

    Agreed with the many good points mentioned. Stay-in-place bonuses would certainly be an effective tool to retain key talents that are potentially key revenue drivers/enablers of the company in the post-integration phase. Losing them could mean a great deal for the company in the long run, as the opportunity costs of hiring replacement and growing industry competition could impact the company’s growth adversely. Cheers.

    #115977

    Mandana Javaheri
    Participant

    it can help retain the talent however it is not enough. In my opinion, clear and transparent communication, cultural inclusion, and clear longer term career path are critical to retaining talents.

    #116475

    Beau White
    Participant

    Bonuses for key staff is commonplace in US M&A. Many times it is critical to keep key staff in place for a while in order to mitigate client, customer service risks.

    #116476

    Michael Hubsmith
    Participant

    When should the Poison Pill be invoked?

    #116477

    Michael Hubsmith
    Participant

    Most acquiring firms agree – the people are the most important asset. Stay in place or retention bonuses – help the seller company feature the strength of the management team.

    #116956


    Participant

    Stay-in bonuses are a good idea. When properly implemented with clear communication, it can be a win-win for both the company and employees who are targeted to be kept.

    #116995

    Henrik Jernstrom
    Participant

    Agree that financial bonuses are often needed. But I think more focus should be put on the areas of creating an exciting environment to work and grow in. I find people just staying for the money are likely to do a good job – of course depends how much money… And it might be a high transaction cost, offering retention bonuses.

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