Challenges In Employee Retention Post Merger & Acquisition In India

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India is a developing country where organizations are diversifying their portfolio and expanding businesses either by acquiring or merging with similar entities. Organizations are doing merger and acquisition as a growth strategy but employees do not accept this strategy easily, most the employees view such strategy as a threat for their career. The purpose of this research is to highlight the challenges in employee retention post-Merger & Acquisition in India. During the M&A, the main objective is to retain talent of an organization. One of the most challenging tasks for the organizations today is how to retain the talents they want to keep. Considering the criticality of M&A as a strategic tool, the methodology used for this research will be the researches conducted by researchers in this field. The literature review method will aimed at examine the perspective of HRs in terms of retaining talent of their organization post M&A.

Key words: Employee retention, Merger & Acquisition, Challenges.

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Merger and acquisition is an attractive option for the management and investors but employees views it as a threat. So after merger & acquisition organization face the problem of retention of employees. Employees have negative attitude towards merger & acquisitions due to following reasons:

  • Uncertainty about the future organizational direction
  • Feelings of loss of previous organizational culture
  • Uncertainty regarding job security
  • Perceptions of lack of leadership credibility
  • Feelings of uncertainty due to a lack of communication
  • Survivor guilt due to downsizing of other employees
  • feeling of increased job stress and workload

In actual, due to merger & acquisition, employees start search for new job and quit the job because of uncertainty and lose of trust over the organization. However high rate of employees turnover is not good for the organization. Employees turnover rate should be low due to following reasons:

  1. Business continuity is key to realizing the benefits of a merger or acquisition
  2. Large cost of hiring new employees, as well as the loss of knowledge/ intellectual capital, and the loss of client relationships.

Therefore, organizations must proactively work to build up employee trust to keep them. Employees are the assets of the organization and managers should make effective plans to reduce turnover during a merger or acquisition.


  1. To highlight the challenges in retaining talent post-merger & acquisition.
  2. To provide recommendations on how to deal with organizational human resources and retaining talent during merger & acquisition.

Literature Review

Avinash and Dr. Jaya (2016) found that the major factors that should be considered in retaining talent post-merger and acquisition are lack of employee motivation ,lack of shared vision, misaligned structures, management leadership clash, cultural mismatch ,poor communication and poor change management.

Nishith, 2010 have tried to investigate various aspects of M&A in India . Gubbi, 2010 have tried to predicting the targets of M&A and identifying the motives. Few papers have been studied to predict the targets and determine the characteristics of acquiring firms like on manufacturing industries, financial sectors etc.

Harpreet, 2010 have tried to find out the efficiency of merger & acquisition but no significact researches has been find that can conclude whether merger & acquisition increases the productivity or reduces. It is an ongoing debate.

Siddharth and Gopi (2009) examine the effect of centralization of possession on firm performance and productivity. From one viewpoint, grouping of possession that, in turn, moves management control in the hands of a key financial specialist, reductions of organization issues connected with distributed ownership. While on the other side, it might prompt entrenchment of senior management which might be conflicting with the goal of profit maximization. Their paper focuses at the effect of M&A on profitability of organizations in India, where the corporate scene is overwhelmed by family-claimed and aggregate associated organizations.

Eilen and John (2004) talk about the qualities of both the acquirer and the target organizations in India between the years 1993-2004. Utilizing logic regression model, they reasoned that the acquirer firms have higher income, higher PE proportions, higher book value, higher fluid resources, and lower debt to total resources proportion which are measurably critical when compared with the target organizations. The acquired firms were smaller in revenue, had lower PE proportions, lower profits payout, and lower development in deals and resources. The acquirers had higher cash flows and lower influence which, on a basic level, run with the organization philosophy.

Mohibullah (2009) in his paper, ‘Effect of culture on mergers and acquisitions: A hypothetical structure’ has talked about four principle issues identified with cultural conflicts are highlighted: ambivalent and cultural issues inside the consolidated element, legitimate management of social incorporation, securing and hierarchical society and improper cultural integration process among the merged firms. The result of his paper was that associations need to build up a framework before mix, which must support appropriate correspondence among representatives from top to downwards. This methodology will prompt reducing the gravity of ambiguities found among the staffs amid the merger procedure.

Daniel (2010) in her paper discussing about corporate’s duty to staffs during a merger: organizational value and staff loyalty. She has talked about that how staff perspectives of the merged firm vary by their pre-merger foundation and to describe the effect of the inadequately perceived organizational goodness on staff’s value, emotional reaction to the merged firm including fulfilment, psychological contract, job stability and integrity. She has observed that view of organizational empathy; warmth and uprightness were emphatically related with worker loyalty, job stability, satisfaction and emotional attachment.

Sammer and Miller, 2005 Most of the article has added to distinguishing what successful organizations with M&A experience are doing in their top management of individuals. Likewise to distinguish key HR Practices that separate top performing from non-top performing organizations with full combination three years after acquisition. The study has affirmed that fundamentally different strategic HRM practices are embraced by effective organizations. Taking care of HR issues during the integration procedure is a hard and critical task that can improve HR Practices and contribute decidedly to the organization’s outcomes . Linda , 2000 Human resource experts can play a critical role during the due diligence process required in an M&A process. Apart from their transactional role as a contributor in the survey, assessment and integration of staff benefit policies; they can likewise help with the planning of workforce needs as far as talent pool and their role, in the evaluation and administration of legal liabilities. Strategic planning and early inclusion of HR teams during the M&A procedure can move toward boosting the potential for achievement .

Challenges In Employee Retention Post Merger & Acquisition

The employee perception of post-merger HR interventions into the various issues arising out of mergers or acquisitions was ascertained through the multiple talent retention survey and articles . After thorough analysis of various reports, following challenges are listed down in retaining talent post M&A:-

A. LACK OF SHARED VISION: The integration of organizations vision is significant from M&A point of view. It is not as simple as to design any module. An M&A with a refined objective and pragmatic vision lead to successful integration process in terms of high return of shareholder value. New vision should be comprises of strategic growth for both the organization as well as high retention of talent which would be future leaders for the firm. Visions are borne from competent objectives, usually enhanced by visionary executives in multiple discussions and meetings. The issue is that several concepts look encouraging at the primary level, yet turn out to be futile later on. During the process of M&A, Two different organizations with unique vision integrate which result in ambiguous direction for the talent. In these situations, it is really challenging for the employee to scrutinize the actual vision of the firms and it takes a very long time figure out the revised shared vision of new firm. A synergistic approach is persistently co-composed with the business leader and proper partners to adjust to the necessities and timing of the association. Every association has its own mantra and must build up its own particular Shared Vision, mission, values, sustaining strategy and procedures – Its own particular Corporate Identity.

B. MANAGEMENT LEADERSHIP CLASH: Several management gurus have persisted on the significance of how executives can successfully oversee and inspire talent during merger and acquisition. Therefore, it is important for the executives that they play the role of leader when it has just been publically announced about the merger and acquisition of their organization. He has concluded in one of his paper that a strategy based model is always crucial while dealing with any such integration process. Their model highlights on the stage of M&A that they characterize as the most difficult one for executives. That stage is the first in an M&A procedure and it is described by lack of data, mostly because of the requirement for approvals of management, ambiguity and uncertainty. This phase also influences both executives and employees. Officials of the acquired firm are dealt with as though they had been overwhelmed, making them feel humble and experience lost social positioning.

C. CULTURAL MISMATCH: Cultures are most important part of a company. Few research scholars propose that culture is to an association what personality is to an individual. As such, they recommend that cultures serve as bonding between organizational members, creating a feeling of union. Culture development is not a planned activity. It does only depend on the thought, vision and ideas of the managers, yet it is, to a remarkable degree, an inward response to outside goals. Organizations involved in the merger process may have different culture and it is crucial for the both entities to manage their culture which leads to either success of the merger or the failure of the merger. A firm’s culture is constituted of shared convictions and values that enable the people of the firm to get the meaning and allocate them with the guidelines for the way they behave in their firm (Davis30, 1994). The value of culture is not by and large perceived inside the firms, because keys preferences and assumptions parameter and decision lead to operate at a primitive phase.

D. MISALIGNED STRUCTURES: It refers to the process that how restructuring process was accepted by both the organization post-merger and acquisition. The future of talent is highly dependent on the restructuring model adopted by the firm. Most of the organization has not been able to realign themselves according to the pre decided strategies which result in attrition of talent from their team as well as organization. Restructuring process not only limited to change in the policies but it also involve change in reporting managers, change in clients and many more. As we all know that, a change is never desired and always feared to accept. It is the last things that an HR wants to anticipate in their organization.

E. EMPLOYEE EMOTIONAL CHANGE: Various psychological changes has been observed before merger & post merger in the employee behaviour. The emotional changes begin from confusion, bargaining, focus, enthusiasm, exhaustion, letting Go, crystallization and integration. Below mentioned graph has been plotted between emotional responses of the employee during the course of integration to the time period of 12 months. The initial information about M&A leads to confusion and later on disengages the staffs which results, top performers are the first who leave the organization. When talent become disengage, it takes less time for consumers and shareholders to lose the brand value and switch to other product.

F. POOR COMMUNICATION: During the process of mergers, staffs are usually kept oblivious about the buy or sale of the enterprise. They often get the information about merger and acquisition after the merger and acquisition, through the corporate grapevine or through the media communication. This can lead to a misrepresented or distorted picture of the merger’s repercussions and to counterproductive exercises by staffs, which might be on edge about possible employment losses. So companies should inform all the staff timely and also discuss their concern to minimize the anxiety. This thing can built the cooperation and mutual trust among staffs furthermore gives them confidence that the new management is prepared to listen their concerns and feelings (Johnson 28, 2000).

G. POOR CHANGE MANAGEMENT: In an M&A deal, change management is a core C-suite responsibility—from creating urgency and building buy-in with the board of directors to communicating with employees to reassuring shareholders and, of course, customers. It should be the prime responsibility of the executives to consider change management as a critical issue and design a roadmap for their team members and for the organization as well. With introducing the change management analysis in the premerger phase which comprises of target identification, due diligence and development strategy of the acquisition process can increase the success rate of merger or acquisition process for their organizations.There are various techniques and methods for change management, but they all address the same basic questions: What kind of specific change and organization is trying to bring and reason behind that? Who is affected by the change? How should the change be implemented to realize the desired business benefits? Timely communications, training, and leadership engagement (both at the senior and middle-management levels) are the instruments required for managing a successful change.

Ways To Retain Employees

1. Financial remuneration

Financial payment in the form of retention incentives has been considered a important factor after merger or acquisition and this cost is also considered as a part of cost of M & A. Companies believe that providing financial benefits are sufficient to retain the employees. However, the retention incentives can only make a bridge to build the trust of the employees on organization during M & A.

Monetary benefits alone will not rebuild employee trust for long term. The company should consider other factors also to regain employee trust. Otherwise, once the retention incentives are paid, employees may start to look for other job opportunities.

2. Organizational support

Organizational support is considered most important factor for retention of employees. It has been observed that if employees feel that their organization respects and support them , organization value their contribution and care about their welfare then they never quit the organization.

Sufficient access to information

Organizations should provide information about merger & acquisition proactively to the employees, management should share the reason and benefits of M&A. Communication should be face to face and it should be make sure that message been communicated in the intended sense, not communicating anything to employees have negative effect on them.

Ongoing learning & professional development

Sometimes during the merger & acquisitions management do not provide training & development facilities to employees to cut off the cost. Management should rethink this practice since the costs of attrition can far outweigh continuing to give employees some level of discretionary resources. In addition, training that is clearly linked to job performance can be another example that reinforces the message that the organization values their employees and wants to help them improve their job-related skills.

3. Managerial support

Managers play very important role in employee retention post merger & acquisition because it has been observed that employees perception about how manager value their contribution and cares about their well being affect the employees decision whether to stay or quit the job.

According to a survey conducted in 2004 it has been found that managers can retain employees in the following manner:

  • Checking employee workload regularly
  • Communicating regularly with employees to communicate both organizational and managerial support
  • Providing employee feedback on a regular basis.

Checking workload regularly

During the merger & acquisitions employees are required to take extra workload. So managers should check their workload regularly and communicate about their extra workload to employees so that they may also understand that manager and organization is considering their contribution. Also managers should help the employees in acquiring new skills to perform the new task.

Meeting with employees

Regular meeting with employees should be held regularly with employees to communicate their contribution, their extra roles, workload and also the well-being of the employees.

Providing employee feedback regularly

Organizations should prompt performance management process to evaluate behavioural and professional competency development and the feedback should be provided by managers to employees one on one basis. Monitoring performance and providing feedback to employees should be encouraged.


Employee retention is a major task post merger & acquisition. Some incentives are required to retain the employees and employers should retain their human capital to foster their business and to operate the organization effectively. The retention incentives are provided to employees to convince them that a new job is not a better option and in current organization you will get chances to show your value.

Financial incentives can be most important factor to retain the employees but financial incentives has its own limitations. Additional money will work to retain the employees for a short period of time, after a certain period their expectations will increase more. That means financial incentives will not buy long term loyalty of employees. Management should retain the employees other than financial incentives also. Organization should try to build trust of employees on organization, Organization should demonstrate to its employees that we are doing right thing for our employees. Organizations should provide managerial support and direction, clear communication about vision, mission and objectives, clear communication about business learning opportunities and strong leadership. Organizations should also communicate the benefits of merger & acquisition for the employees.

In order to decrease post-M&A employee turnover in long term, organizations and managers must take steps to improve employee commitment and employee retention by providing organizational support and managerial support. These types of effort can to retain the human capital.


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