Change can be unnerving. For employees, when a company is acquired by or merged with another, the change in ownership is often a fraught time filled with uncertainty while staff await their new management. Questions swirl over whether the change in ownership will mean a change in corporate culture or a loss of employment.
The first challenge for the new owner coming in to lead the legacy team is to navigate those concerns and get employees on board with the company’s new direction.
Colleen von Eckartsberg, a partner at Bain & Co. who leads the consultancy’s M&A practice for the Americas, says when CEOs begin leading a new employee base, including after a merger or acquisition, it’s important to get it right.
Typically, von Eckartsberg says, companies on the acquired end of an M&A deal are ones where employee engagement is already high—because firms with switched-on staff tend to be well-performing, which are the type of company sought after by acquirers. Maintaining that high level of engagement is often vital for the company’s continued success.
In von Eckartsberg’s words, “engaging your employees is not just a nice thing to do, it actually statistically significantly impacts performance.”
But just because a company is already performing well doesn’t mean there aren’t things it can do better. Explaining why changes need to happen is paramount for new management, von Eckartsberg says, and it helps to, in the process, give credit to the good things the company has already done as well.
“Bringing that level of appreciation and respect to what predated you, even if you’re going to turn that into what needs to be different going forward, is a very, very powerful trust builder,” von Eckartsberg says.
Of course, not every incoming CEO follows these rules. To my mind, when Elon Musk entered his bid to takeover Twitter for $44 billion in April last year, the entrepreneur’s bombastic communication style served as a masterclass in how not to win rapport with the cohorts of staff coming along for the ride.
During Musk’s tortured acquisition, where the Tesla CEO tried to unwind the deal over inflated concerns about bot numbers, Twitter’s stock price dropped 40% through July as shareholders doubted the deal would go through. Shares in Musk’s other ventures plummeted too, and Twitter staff hanging in limbo took to the social media site to publicly air their grievances with their prospective new boss.
When the deal finally closed, Musk quickly issued an ultimatum to the remaining staff demanding they either sign up for an “extremely hardcore” work culture—the antithesis of Twitter’s previous culture—or be let go. Media reports claim the snap regime change had the unintended fact of pushing out vital employees, forcing Musk to soften his tone.
Von Eckartsberg says that when any new CEO attempts to implement a radical change at a company without giving recognition to the good work that went before, they risk “alienating great employees” and that their departure could have a “cascade effect” where loyal subordinates follow respected managers out.
Sometimes that loss might be unavoidable. But, if new CEOs are clear and respectful about why those changes have to happen, the transition can at least be a little smoother.
Eamon Barrett
eamon.barrett@fortune.com
IN OTHER NEWS
Free to criticize
On the topic of earning employee trust, a recent ruling from the National Labor Relations Board asserting that employers can no longer include non-disparagement clauses in severance agreements could lead to a lot more public airing of dirty laundry when employees are let go. As this Fortune op-ed writes, “While this may seem like a dry contractual legal change, it actually materially impacts the way we can communicate about our bosses, our financial compensation, and our actual work duties in the public eye.”
Accountability at the top
Subcontracts are a regular fixture of business, with major corporations farming out low-level work to third-party enterprises. But, as this Fortune op-ed notes, when those subcontractors violate labor laws, their employers often escape accountability. “Without accountability at the top, there’s nothing to stop corporations from finding another low-bid contractor with similarly exploitative practices,” the authors say. Trust and accountability need to go hand-in-hand.
TikTok goes to Washington
TikTok CEO Shou Zi Chew endured a grilling from Congress on Thursday, answering questions on the Chinese-owned company’s data security practices and the app’s content policies. Lawmakers are pushing for a ban on the wildly popular app, which some politicians have framed as a tool for Chinese state surveillance and propaganda. This is not the first time TikTok has suffered scrutiny for its Chinese heritage but the pressure for parent company Bytedance to spin off the American-centric TikTok is growing.
Don’t trust the others
OpenAI CEO Sam Altman warned that other companies developing AI tools like his company’s ChatGPT might not “put some of the safety limits that [OpenAI] put on” its products, suggesting OpenAI’s competitors could be less trustworthy. But OpenAI suffered its own crisis of confidence this month when it released its updated chatbot, GPT4, without disclosing any information about how the tool was trained. OpenAI says the secrecy is for safety; critics and former fans say the decision undermines the “open” part of OpenAI’s mission.
TRUST EXERCISE
In the wake of recent banking woes, the International Monetary Fund says central banks must enhance transparency to build trust.
“Economic and financial turbulence calls for greater transparency from policymakers. As central banks raise interest rates to curb inflation, stakeholders increase their scrutiny. In some countries, policymakers face growing calls to reign in their autonomy. To maintain public trust, safeguard independence, and enhance policy effectiveness in the face of such challenges, monetary authorities must focus on transparency and accountability.”
