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  • Writer's pictureNayaDaya

Managing HR Risks in M&A Through Data and Analytics

It is now possible to identify the root causes for the common pain points in mergers and acquisitions – employee turnover and falling productivity – in time.

According to the Harvard Business Review, as many as 70-90 percent of mergers and acquisitions fail. Deloitte, on the other hand, says that "most of the barriers to a successful integration are related to people and company culture".

If the employees of the acquired company do not commit to the new employer or to the integration, they easily end up changing jobs. As the availability of labor becomes more difficult, finding new experts becomes even harder. Replacing even one employee can cost tens of thousands of euros.

Another challenge is the decrease in productivity. According to Deloitte, "in the first 4 to 8 months following an M&A, productivity drops by 50 percent." When you combine these figures with personnel costs, the price tag becomes unbearable.

If the risks regarding employee turnover and productivity are realized, the objectives of the acquisition and growth may not be achieved. The situation is complicated by the fact that circumstances, expectations, and reactions vary. There is no pre-prepared list of actions on how to handle each situation.

Complex Problem, Simple Solution

Even though there is no one single ready-made list of needed actions, it fortunately does not mean that a simple solution can not identify case-specific action points. In practice, it is about finding answers to fundamental questions at different stages of the M&A process:

  • Which case-specific root causes lead to employee engagement, readiness for change, retention and high productivity?

  • What case-specific root causes make productivity to drop or employees to leave their jobs?

  • To where should actions and communication be targeted to engage employees and achieve M&A goals?

To find answers to these questions, you need information about employees' emotions, the root causes for those emotions, as well as about the effects of emotions on employee behavior. Traditional surveys don't help because satisfaction doesn't correlate with engagement.

Key answers can be found in Empathy Analytics based on emotions, science, and data.

A complex problem can be solved in a simple way. Traditional, long surveys are not needed – three standard questions for the employees of the acquired company are enough. Analytics based on Finnish-Swiss innovation and a behavior-predicting algorithm produce an intuitive snapshot that reveals the reasons for 1) commitment and retention, 2) passivity, 3) employee or productivity loss, and 4) resistance to the M&A process at different stages.

The first analysis can be carried out even before the acquisition or investment takes place. This reveals the extent to which and why the employees of the company being acquired are committed to their current employer. Then, after the acquisition, the situation can be compared to this baseline. During the integration, it is worth implementing three analyses – the first one immediately after the deal is completed. In this way, actions and communication can be focused on the root causes that are the most relevant to the employees and have the greatest impact on their behavior.

Empathy Analytics Can Be Standardized as Part of the M&A Process

Rantalainen Group, one of Finland's largest financial management service providers, acts as an example of the use of Empathy Analytics in the M&A process. The company, which is building strong Nordic growth together with Norvestor, has been using the solution since spring 2022.

Kimmo Martikainen, Senior Vice President, M&A at Rantalainen Group, describes the process: "Empathy analytics reveals the root causes of employee engagement and turnover at different stages of post-merger integrations. This way, we know where to focus our efforts in order to strengthen the readiness for change, to inspire people, and to make mergers and acquisitions successful."

The success of company integration depends on people. Empathy Analytics identifies pain points and opportunities and helps guide actions and communication in a way that serves the interests of all parties.

The benefits can be seen in connection with even one acquisition. On the other hand, every company that repeatedly makes acquisitions, such as Rantalainen Group, can use Empathy Analytics as part of its M&A process to listen and to take care of its employees, to realize the objectives of acquisitions, and to build profitable, sustainable growth.

Investors can use the model in their portfolio companies to ensure the growth they are looking for. On the other hand, the solution supports the evaluation of investment targets: does the tendency for employee retention and productivity of a possible investment target indicate growth, or does the root cause analysis indicate risks that should be considered before the final investment decision is made.

If you are interested in giving better consideration to people in the M&A process, I am happy to discuss your situation further. You can book an appointment with me here.

Timo Järvinen

CEO, Co-founder, NayaDaya Inc.

Tel. +358 40 505 7745


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