Leadership Fcatory

By , on leadership, Mergers & Acquisitions (M&A), Potentious.

Effective Leadership and Employee Engagement in Deal Success

Employee engagement is a hot topic these days. Consulting firms and think tank groups alike are trying to provide new insights on the topic. Just from experience and like many of you, I have seen the effects of poor employee engagement on companies’ ability to grow and succeed. Poor employee engagement has impacts across many important talent areas like retention, performance, and innovation. With my expertise in M&A leadership, I don’t think its a major surprise to anyone that employee engagement can impact M&A deal success and that effective leadership plays a very important role.

New Study on Employee Engagement in M&As

Enter Willis Towers Watson with a number of insights from their 2016 Global Workforce Study as it pertains to M&As. Key findings like the following jump out at me:

  1. Target companies have lower levels of highly engaged employees (34%) than the new merged organization (39%) or the acquirer (42%).
  2. Target’s employees are 2x as likely to have their jobs affected (44%) as acquirers (20%).
  3. Turnover risk of target’s employees increases due to perceived lack of advancement opportunities.
  4. Targets lost productivity increases by nearly a third due to employee absenteeism during M&A transaction.
  5. Employees with effective leadership (senior leaders and managers) are 6x more likely to be highly engaged through M&A transactions.

Employee Engagement Perspective

The employee engagement numbers captured in bullets 1,2, and 4 make perfect sense. While I appreciate the quantification of the findings, this is what you and I would expect. M&A transactions generate high levels of uncertainty and ambiguity. Job security is the number one priority for target employees.

Bullet 3 is interesting for me because of the perceived lack of advancement opportunities and effect on turnover. In my research on what leadership skills are predictors of M&A success for acquirers and targets, Developing Others was predictive of M&A success for targets, but not acquirers. Therefore, I can see a connection between this data and my own research.

Effective Leadership Perspective

I have proselytized for a while now that effective leadership determines M&A success. Having leadership with the right sets of leadership skill sets and at the right levels is important. A firm can better utilize identified leadership strengths and minimize the impact of the risk areas. Bullet 5 reinforces my stance about leadership in M&As.  Effective leaders have an important role in keeping employees engaged, particularly in M&As. Acquirer leader’s skilled in communicating effectively, fostering teamwork, leading change and building relationships play an important role in employee engagement. While target leaders with skills in team leadership, motivation, and leading change as well, lead to maintaining employee engagement in firms going through an M&A.

Remember, focus on your firm’s leadership capabilities first in M&As. Everything flows from this key piece.

Delivering actionable leadership intelligence.

Dr. J. Keith Dunbar is founder and chief executive officer of Potentious and recognized expert in M&A leadership

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