In any disruptive period for an organisation, employees have a variety of different concerns that will influence their desire to resign or remain. Yet many organisations undergoing transactions struggle to come up with effective retention strategies—even if they know that human capital aspects often determine success or failure in achieving deal goals. Often, particularly under the time pressure that is part and parcel of the transaction process, organisations focus their retention efforts only on high potential employees and senior executives in business-critical roles, but it is also important to consider the broader population, where there are individuals with specific technical or leadership skills that can have just as much impact on future success.
A talented, cohesive and engaged workforce influences every aspect of a company’s performance, including revenue growth and productivity, so companies who neglect to identify their most critical employees risk putting their financial success in jeopardy. Aon studies have found that more than 60% of organisations said an inability to retain key employees contributed to deals not meeting their goals.
Particularly during times of slower market conditions, organisations can have a false sense of security that employees are less likely to leave due to a lack of other opportunities. Our experience shows this is not the case, as it is usually those most critical to the organisation that will be able to find other opportunities easily, all too often taking part of the deal value with them. A broader approach to talent retention allows identification of areas of institutional knowledge, technical skills, and internal and external relationships.
Is workforce segmentation the silver bullet?
Workforce segmentation gives an organisation the ability to fine-tune its talent, identify inefficiencies, develop talent in the right direction, and equip employees to contribute positively to the growth and success of the organisation and achievement of deal goals.
Even without the context of a deal, workforce segmentation allows an organisation to understand its employees and how to ensure that they are remunerated and managed effectively. As the level of complexity in an organisation increases, particularly as employees from different organisations come together in a transaction, the need for segmenting the workforce becomes more pronounced.
Workforce segmentation is helpful to:
recognise the business contribution these jobs make to the future of the organisation
differentiate compensation levels to attract and retain talent in these jobs
proactively plan succession for these roles to minimise business disruption
determine appropriate retention strategies for different segments of the workforce
Broadly speaking, the workforce for most organisations can be segmented into four categories, by considering the scarcity of the skills they have and the business impact they have.
Leading organisations that achieve high rates of employee retention in the medium to long-term after a deal ensure that HR and business leaders work in collaboration right from the due diligence stage of a transaction to segment the workforce and determine the business-critical employees.
How can HR leaders facilitate the decision on business-critical employees?
Here are 5 questions HR leaders must ask the business:
Are these jobs working on projects/products that will drive the future growth of the business?
Are these jobs performing activities others cannot do or are not equipped to do?
If we lost someone in this job, will it result in business disruption or potential loss of revenue?
Are these jobs doing something that has a direct impact on the reputation of the firm?
Are these jobs contributing to building capability, without which deal goals are threatened?
An organisation’s approach to workforce segmentation should be aligned to its business and deal strategy.
Once workforce segmentation is completed, retention strategies can be determined, which will include but not be limited to financial incentives. Equally important are areas such as benefits, alternative work schedules, career development opportunities, employee communication and organisational design. Taking a more holistic approach enables organisations to develop a strategy that retains employees beyond the period when they receive the final payout of a retention bonus.
All employees are different, and each has a different contribution to the business and different factors that motivate and drive them. The more an organisation is able to understand these differences and nuances, the better the quality of its talent management framework and retention planning.
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Need help with your talent retention strategies after a merger or acquistion? Get in touch with us.