July 31, 2023
To improve retention, top managers might wish to initiate a cascading top-down initiative in which every manager sits down with subordinates to discuss how the merger will affect their jobs, and then asks them to do the same with their subordinates, and so on.
You might be surprised to learn that when two companies merge, there is typically a turnover of at least 20 percent across the entire organization. With such a high rate of employees walking out the door, many of whom are very high performing, Joe Labianca and Gatton Ph.D graduates Wookje Sung, Meredith Woehler, Jesse Fagan, Travis Grosser, and Theresa Floyd sought to answer a fundamental question: “why?”
Their research paper, “Employees’ Responses to an Organizational Merger: Intraindividual Change in Organizational Identification, Attachment, and Turnover” (Journal of Applied Psychology), follows a major corporate merger, focusing on what happened to 599 corporate professionals over 15 months.
“This is actually a critique of most post-merger integration literature,” explains Labianca. “Mergers and acquisitions (M&A) researchers are too focused on how different the corporate cultures are for those organizations, and the role that plays in slowing down the merger. But that’s not what drives people to leave."
"Our study showed that the big question these professionals were asking themselves was, ‘How is this merger going to change my job?’ Even high-performing individuals were worried that the merger would change their jobs and ruin what they were doing. The more they worried about that, the more likely they were to leave and take all of their accumulated knowledge with them.”
The research has implications for M&A theory and practice. It suggests that top managers should not focus solely on explaining the benefits of the merger through such mechanisms as videos or town halls. Instead, they might wish to initiate a cascading top-down initiative in which every manager sits down with subordinates to discuss how the merger will affect their jobs, and then asks them to do the same with their subordinates, and so on until it hits the front-line employees.
In the absence of this type of discussion, employees experience uncertainty through unfounded rumors, imagine all the potential changes to their jobs, and end up succumbing to that uncertainty through turnover.
Joe Labianca, Former Gatton Chaired Professor of Management, Gatton College of Business and Economics at the University of Kentucky
Wookje Sung, Hong Kong Baptist University
Meredith Woehler, Vanderbilt University
Jesse Fagan, University of Exeter
Travis J. Grosser, University of Connecticut
Theresa Floyd, University of Montana
Journal of Applied Psychology, Vol. 102, Issue 6, pages 910-934, March 2017