Just as a deal needs to be sold to customers it also needs to be sold to employees.66 The best strategy will fail if it does not consider the people needed to execute it. Employees represent a challenging group to deal with in that they have high interest yet low power on an individual basis. Employees need to be kept informed about an acquisition and its implications. When employees learn of a merger, they expect and are prepared for dramatic changes.67 Most employees anticipate that when an acquisition is announced there is already a plan for integration; thus the need exists to educate employees about the M&A process.68 M&A announcement simply begins the regulatory review and planning needed to answer employee concerns.

Employees will have little tolerance for delays that fail to set a clear direction for a firm and communicate their place in it. Successful acquirers recognize that silence is not an option even if there is a lack of definitive answers.69 Employees will be hungry for information to help deal with the uncertainty created by the acquisition, and will be looking for the strategic rationale for the acquisition. Employees want to know that a plan for creating a better organization exists, that it signals that people matter, and that it addresses what the acquisition means for individual employees.70 A lack of information shared with employees about plans or their development will only lead to employee speculation and the resulting anxiety that complicates integration efforts. An integration plan needs to use frequent and effective communication to gain momentum with small wins that increase employee buy-in.

Achieving M&A goals depends on ensuring that key people do not leave soon after an acquisition is announced. Further, reestablishing leadership continuity with a target is critical.71 Under the best of circumstances, employees experience uncertainty following an acquisition announcement and employee commitment will be lowest during the planning prior to acquisition completion. Acquisitions are often motivated by gaining tacit, socially constructed knowledge in a target, but that knowledge may not survive attempts to integrate it, leading to employee turnover becoming a primary suspect in poor M&A performance/2 The first employees to leave are generally the best and brightest because they have the most options. The primary causes of departures include decreased employee perceptions of control, and discounted past contributions. Typically 12 to 25 percent of personnel are viewed as redundant.73 The combined effect of layoffs, employee defections, and the need for growth to meet M&A goals often drives resumed hiring. Care is required to avoid the need to recruit old employees back at a higher salary.74 Achieving M&A goals depends on ensuring that key people do not leave soon after an acquisition is announced. As a result, the focus of employee retention begins with top and middle managers, or the people most likely to influence employees.

Top Managers

Reestablishing leadership continuity with a target is critical as the conditions created by an M&A are stressful in that they require employees to update their organizational identity.75 Limiting political behavior will also require aligning actions and words, and top managers in both firms need to communicate commitment to an acquisition before it is completed. Successful acquirers likely avoid statements that "best practices" from each firm will be implemented, as they recognize that this is unrealistic. Making comments that an acquisition will take the "best practices" from each firm also leads people to justify their processes at a time when new processes are often required.76 The need to retain and motivate people to work together makes it imperative to include top managers from a target firm in integration planning. The importance of this goes beyond what was discussed in considerations about selecting targets with a friendly fit.

An obvious decision needing input from the target firm relates to the assigning of top jobs in a combined firm where multiple people in the acquirer and target firms perform similar duties. The management of the acquiring firm will typically need to make these decisions, but they will have less knowledge about employees of the target firm than of their own. Meanwhile, a majority of M&A integration issues are political or emotional in nature. Instability and insecurity over power bases can contribute to feelings of gain or loss that increase political activity to preserve self-interests.77 How top jobs are assigned during integration planning can mitigate political activity and enable faster implementation.78 Cisco again provides an example of how this is done well. They announce new roles and titles immediately upon completion of an acquisition, and as a result, Cisco enjoys lower turnover of acquired employees than overall levels of corporate turnover.79

Middle Managers

The management of acquiring firms need to keep in mind that there are consequences of filling managerial positions following the acquisition mostly from within their own ranks. A blended top management team that retains a target's top management can help to motivate middle man-agers.80 Middle managers require special consideration as they represent the primary means of translating strategic objectives to workers and implementing M&A objectives. When excluded from decisions surrounding an acquisition, middle managers can feel left out and foolish as employees come to them for answers they don't have.81

Middle managers who see top managers being treated fairly in a combined firm can be expected to have a more positive attitude, which can be important in reducing employee anxiety.82 Cisco has established a reputation as a "good" acquirer because no target firm employees lose their jobs unless both CEOs assent.83 An example of where this did not happen is Oracle's $7.4 billion acquisition of Sun Microsystems. Oracle's CEO, Larry Ellison, expressed a low opinion of Sun's top management84 and placed Oracle managers in positions of responsibility, contributing to a "brain drain" of Sun employees.85 By comparison, working to reduce middle managers' uncertainty allows them to better understand M&A goals and more quickly begin the task of achieving them. A potential exception would be when there are inefficiencies or poor management in a target firm. Regardless, top management assignments should pull from both the acquiring and target firm, and be followed by communication to educate and explicitly enlist the support of middle managers.

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