Capital H blog

Creating the human experience in M&A

August 2, 2019

Meeting the hierarchy of employee needs

Urgency, uncertainty, confusion—just some of the many feelings that employees often experience when they hear their company is undergoing a merger, acquisition, or divestiture. These feelings can quickly become chaotic and eat away at potential deal value if leaders aren’t ready to address them head-on. Given today’s competitive talent market, leaders should make it a point to consider their employees’ perspective and understand how M&A decisions affect their people. Proactively mitigating risks from end to end of the M&A life cycle can make or break a deal.

To unlock full deal value, leadership teams should be prepared to take action and create plans for the future organization. This starts by assessing the needs of the organization and its employees. Leaders often play the most pivotal role in eliminating deal risk and making the deal a success. Profiling, finding, and empowering the next wave of leaders is essential to building the new organizational structure and shaping the culture to effectively execute the new company’s vision.

As leaders are defined and the organization structure determined, the concepts in Maslow’s hierarchy of needs can be an effective touchpoint to lead the change. The model helps leaders anticipate employee concerns and curate a human experience that meets immediate, basic needs and lays out a path to a meaningful future.

Hierarchy of needs for employees in the deal environment
A 76-year-old concept, Maslow’s hierarchy of needs helps think through what motivates humans. In business, the same hierarchy concepts can be used to think through what motivates employees, and what creates the human experience. From job security to continued, sustained growth, the hierarchy can help leaders support employees’ transition into new organizations and find meaning in new ways of working.

Often, there is great emphasis placed on the financial and operational side of deals, while the fundamental needs of the employees who deliver the customer experience are underestimated. This oversight can quickly become costly and quite visible across the organization. Using the hierarchy of needs to anticipate and address foundational and more sophisticated employee needs and aspirations is probably never more important than it is during the disruptive environment of deals, when organizations most need to retain and engage their workforce.

Level 1: Physiological needs—These relate to survival and are assumed to be taken care of outside the workplace, so the human experience in the context of work and deal disruption begins at level 2.

Level 2: Safety—Safety in the context of work translates into job security and rewards security. This is where most organizations traditionally focus. At deal announcement, employees typically immediately think, “What happens to my job?” and “Who will I report to?” Taking the time to figure out how the new company will work structurally is key; the organization charts are the nuts and bolts that will help strengthen employee stability. The first action at this level is to identify the go-forward leadership team as soon as possible so they can select their direct reports and build supporting teams. These first moves give employees across levels more clarity about the organization. The sooner employees know their future roles in the combined organization, the faster stabilization can occur.

At their most basic level, jobs provide employees with a way to put a roof over their heads, meals on the table, and health care for their families. Being able to answer employees’ basic questions, such as “What will happen to my pay?” and “What benefits will be available?” will help them see a future in the organization and know they will continue to reap benefits from their work. Regardless of how passionate employees are about a company and their work, for them to perform—which is needed more than ever when preparing for deal close— they need to have confidence that the jobs and benefits their families rely on are going to exist for the foreseeable future.

Level 3: Belonging—Once their basic needs are met, employees typically begin to assess whether the new company is the right fit. This is where organizations have the opportunity to move beyond a transactional employee experience and instead craft a more holistic human experience. Questions such as “Do I see myself in this new company?” and “Is this the place for me?” arise. The nature of a deal causes unavoidable change, and some employees may feel compelled to leave the new company altogether. To avoid undesired attrition, leaders should consistently emphasize the value they see in their employees as part of the new company. During this transition from close to the future state is where an organization can cultivate a sense of belonging. By championing community, engaging employees to craft the possibilities and priorities for the future, and communicating interactively with employees throughout, leaders can instill a sense of belonging in their people. Taking a “we’re in this together” approach will help employees feel integral to success, making them more likely to work hard for and remain with the new company.

Level 4: Esteem—Once employees feel a part of the team, it is important that they feel their work and impact are valued, respected, and appreciated by others. They should be recognized for their work in a way that aligns with what they value. In a general sense, this requires that companies express gratitude for their contributions, beyond compensation. In M&A transactions, being intentional about showcasing even small individual and team accomplishments toward achieving integration plan milestones can foster this esteem and energize employees for the continued journey. Especially in a post-close environment, it is easy to overlook the importance of these small moments of celebration. Remembering to do so can foster long-term employee loyalty and reinforce the ultimate goal of achieving a fully integrated organization.

Level 5: Self-actualization—Beyond feeling valuable, employees want to see a path for self-actualization, for growth, at the new company. While career paths and trajectory may have been clear in the legacy company, perhaps those opportunities feel more uncertain now. Or maybe they seem more plentiful. It’s important that employees understand what the future holds and can see a path toward growth and development after the deal closes. Building a culture that supports employee advancement and clearly emphasizes the human experience is key to sustained employee motivation and contributes to deal success. At the point where employees begin to wonder whether and how they can grow in the new organization, having a clear answer conveys the new organization’s continued respect for them and desire to provide a meaningful human experience.

A human experience from end to end
Gone are the days of singularly defining Day 1 or closing day as the final or most important chapter in the employee experience team’s work. While it is still critical that detailed plans for a closing day experience exist, the most successful deals seize the opportunity to go beyond basic answers to employees’ foundational questions. Successful deals start out with the goal of creating engaged employees who are emotionally invested in the combined organization, show a passion for their work, have deep connections with their coworkers, and go the extra mile to help their organization succeed.

Leaders who pause, anticipate, and preemptively answer the tough questions outlined at every level of the hierarchy of needs, and who do so as early as the deal’s announcement and then continually throughout integration efforts, can position themselves to get the most out of their workforce. These leaders turn initial deal fear into the driving force that can help propel a company and its employees forward to achieve full potential.

Ami Louise Rich is a principal with Deloitte Consulting LLP’s Mergers and Acquisitions offering, focusing on human capital issues associated with transactions. She has advised dozens of clients on topics ranging from operating model, organization design, culture integration, change management, and HR functional integration across the full M&A life cycle.

Jacqueline Sutro is a senior manager with Deloitte Consulting LLP’s Mergers and Acquisitions offering. She advises her clients on their people-related issues during deal environments with the goal to minimize business disruption, generate cost savings, and accelerate how quickly companies can work together.

Lauren Rogersis a senior consultant in Deloitte Consulting LLP’s Human Capital practice with a specialization advising M&A clients. She helps her clients to develop and deliver strategic organizational, cultural, and operational change solutions to people-related issues experienced throughout the M&A life cycle.

Originally published at Capital H blog