Question: How can we reduce turnover in a newly acquired company?

My team, in a large corporation, is working on the post-acquisition integration of a 500+ employee company.

Although our primary responsibility is to integrate IT and other infrastructure... as the first team in, we are also responsible for supporting a smooth transition over next 4-5 months, at least.

We are seeing a continued exodus of talent from the acquired company (long after the first announcement). Needless to say, stemming this is a top priority for the organization.

Will delaying new org structure help or worsen this situation? On one hand, we think it will make the changes less drastic, on another it will slow down the project.

5 Expert Insights

My guess is that organization structure has little or nothing to do with the exodus - the core reason likely stems from inadquately dealing with the cultural fit (or lack therof) between the the acquiring and acquired company.  Too often the acquiring company (particularly when much larger) imposes its processes, language, culture, etc. on the acquired company.  A culture is perceived as the "right" way to do things - and to simply impose different ways of doing things will cause an exodus.

Another cause could be the future as perceived by the talent of the acquired company.  Were all the good jobs taken by the acquiring talent.  Do people feel like they got demoted (I used to be on the Management Committee, now I'm way down in the hierarchy)?  Do they see an exciting future for themselves worth staying around for?  Did the acquired company have a say in their future (not just the top bosses but the workforce itself)?  What is the acquiring company's reputation re: its treatment of acquired companies and personnel.

FYI, 70% of mergers and acquisitions fail, and 70% of them fail due to cultural/people issues.

As examples of how to do this right, see the merger of Pixar into Disney (where the purpose was to purchase Pixar's culture and processes and it was handled brilliantly by Iger).

To know how to fix this I'd have to know a lot more - the root cause (culture, perceived future as an acquired company and individuals).  The resource "Beating the 70% Failure Rate of Initiatives" on my profile page might be of help in uncovering the root cause.

I agree with my colleagues.   Many times in situations like yours, the "acquired" firm's key personnel are "locked in" for 2-3 years as part of the merger agreement, and they and others are incentivized to stay.  I hope that the barn door was closed long after the horses got out, but I'm guessing that this didn't happen on a broad enough scale if at all.    

Shared vision is critical in times like this, and you must show people the WIIFM (what's in it for me) to get them to stay.   Reorganizating is important, sooner than later, but I would ask two key questions:

1. How are the acquired people being treated - do they feel like valued partners or hired help.  
2. Are their contributions being valued, or is it like Rome has conquered?  

If you are doing the former instead of the latter, you have a good shot at making this work IF, as Ivan said, the culture is a good fit.  Otherwise, as I told one client who didn't take into account culture, "your IP walks out the door at 5pm every day - do you want that to be a permanent walk?"  

All of what others have said have sound principles to attend to. However I offer something additional...ask.  Far too often we are attempting to remedy something we only have conjecture about what's really happening in the minds and hearts of people. We take a few pieces of information, infer a conclusion and then act to remedy what appears to be happening.

Personally, if a raft of talent is leaving the ship, get whomever can reach out to those people best from the previous company and direct them to interview the people who have left for why they left. It's about going to the source rather than the symptom. Granted some may not want to be connected with post departure, and some might. There may also be gold to mine in exit interviews if they occurred.

Once you have the information you can include that in all the measures my colleagues have offered.

You need to be ACTING immediately if you are losing real talent. If these people are mission critical and the reason you acquired the firm, you need to speak with them one-on-one today and do whatever it takes to keep least for a year or two until you can stabilize the situation.  If they are just nice-to-have talent and you acquired the firm for technology, IP or other assets, then you can afford to take a less urgent approach.

Remember, people don't quit companies, they quit bosses. It is unlikely that they are leaving for ideological or financial reasons. They are either fearful of job loss and are being proactive or they simply do not feel valued. Both of those can be easily remedied with some good one-on-one conversations.

There is a series of good and relevant responses to your question above.

I guess I'd add that this situation is pretty common and a main contributory reason for the failure of acquisitions.  Much depends on why you acquired the company and what you actually value.  If it's the people and their unique knowledge, you are already in danger of closing the gate after the horses have bolted and yes, immediate action is needed but just talking to them and making them feel a certain way won't be enough, nor will just reorganizing.  You will need to analyse the cultures (yours and theirs) and make some serious efforts to acknowledge what was special about them and seek ways to either integrate or keep their 'specialness' separate.

There is also an argument that says do the reorganization as quickly as possible to get it out of the way but I certainly wouldn't recommend this without knowing a great deal more about the specifics of this situation.