Companies must put up more than money if they want to retain staff after an acquisition.
While retention bonuses still work, it is only a short-term inducement in many cases. Staff members frequently leave after the bonus period, which is usually one year.
Financial incentives “buy time, but not loyalty,” said Scott Oberstaedt, executive compensation consultant at Willis Towers Watson, in a release announcing the results of the company's 2017 Global M&A Retention Study. The best ways of keeping staff longer are through communication, promotions, lateral moves and cultural integration, Oberstaedt said.
Senior executives generally steer the transaction before it closes and are most responsible for getting the deal done. “To make sure they aren’t distracted by concerns over their own futures, early communication is critical to get them on board and aligned with the goals and strategies of the acquisition," said Oberstaedt in the release. "Retention agreements provide a clear personal stake in the success of the new company.”
Companies' ability to keep employees through retention packages has improved over the past three years, according to Willis Towers Watson. The firm found that 79% of acquirers were successful at keeping at least 80% of their employees with agreements. In the company’s prior survey in 2014, 68% stayed. But after the retention period ends, just about one-half of the companies keep at least 80% of employees who signed agreements.
“Acquirers have made good strides at keeping key talent for an initial period, but there’s room for improvement one year later,” said Mary Cianni, global M&A practice lead at Willis Towers Watson, in the release. “Companies are not using the retention period to capture hearts and minds to keep talent on board for the long term and help ensure success of the merger over a longer period.”
Cash bonuses, most commonly expressed as a percentage of base salary, are still the primary award in retention agreements for senior leaders (77%) and other key employees (80%). “Retention bonuses are important—at least for the length of the retention period—but they’re only part of the equation in retaining talent,” said Cianni.
Among employees who do leave the company before the end of the retention period, nearly half (44%) blame the new or changing culture. Other top reasons include being aggressively pursued by competitors (36%) and not liking their new role (25%).
“Key employees understand their value in the marketplace, which raises the importance of additional retention tactics,” said Oberstaedt. “By not using their arsenal of tools to build loyalty during what can be tumultuous periods, companies often lose talent that would serve them well in the long run.”
The study collected data from 244 respondents, the vast majority of which had been involved in an acquisition within the past two years.