Assess the likelihood that a key employee will leave the business. Prevent negative impact on integration plans and ongoing operation of the combined business.
Premature exit of key employees can significantly affect both integration plans and ongoing operation of the combined business. In many cases, an exodus of certain critical team members can destroy deal value.
Because of this effect on the success of the transaction, one of the most important steps to ensure retention is understanding how likely it is that a key employee will choose to leave.
Use this play to assess the likelihood that a key employee will leave the business. This play provides a rough measure of the likelihood that a critical incumbent will leave for a different opportunity. The appropriate members of the deal team should come together for the discussion, allowing enough time to discuss each employee’s individual situation.
HR, Corporate Development, Business Sponsor, Diligence Team
Paper and pen, good judgment
Working with your critical stakeholders, create a list of those roles and employees who are key to
During the diligence phase, notice employee names that arise during conversations. They should include:
Using the preliminary integration plan, understand which work should be done by an employee at the target company.
For example, if novating supplier agreements is a significant part of the deal, the supplier management leader should be on the list. Look for any roles that should be part of the retention discussions and add them to the list generated in step one.
Working as a group, review each employee as an individual. Discuss what the team knows about each key employee, their criticality to deal success, and what you know of their professional and personal life.
Your group should not limit your discussion to only these factors. Remember, these are a guide, not a hard and fast rule.
The factors shared below are common indicators of an employee who is a flight risk.
Each of these factors is worth one point, except for those related to compensation, which are worth two points. The total score then helps ascertain the likelihood of the employee leaving.
Ken is the IT manager of a company that is about to be acquired. He recently turned down a job offer because he has a great relationship with his manager and peers.
However, Ken is starting to show signs of stress and is regularly working more than 40 hours a week. His wife is pregnant, and he’s concerned about having time to bond with the new baby.
In this scenario, Ken has a total of four points: two points for the job offers, one point for the stressful work conditions, and one point for the life change.
Take the total points for each employee and understand how likely they are to depart the organization during either integration or operations.
Total points: Risk of Flight
1 or less: Improbable
2 or 3: Unlikely
4 or 5: Possible
6 or 7: Likely
8 or more: Almost Certain
Once you understand the risk of flight, you can combine it with the criticality of the role to determine the right kinds of retention incentives.
Both role criticality and retention incentives are discussed in more detail in The HR Practitioner’s Guide to Mergers & Acquisitions Due Diligence.