Life sciences companies are used to the turbulence of mergers and acquisitions. While research by Deloitte suggests that we won’t be returning to the frantic levels of M&A activity of 2021 anytime soon, the potential of recession in 2023 may see many companies using mergers more aggressively to shore up their businesses.
When one company acquires another, there’s often a period of assessment and changes that affect employees’ day-to-day. Without clear communication and alignment, this period of change can lead to confusion, redundancies, and disconnection that affect team members for months to come. This upheaval is challenging in every industry, but it poses particular challenges for life sciences companies.
Some disruption may be inevitable, but with the right tools and processes in place in advance, HR leadership can ensure a smoother, more positive transition for both teams.
Why Mergers & Acquisitions are So Challenging for Life Sciences Teams
Mergers and acquisitions are notoriously challenging for HR teams and employees alike. Don Scales, Global CEO of digital communications firm Investis Digital and author of The M&A Solution: A Values-Based Approach to Integrate Companies, believes that “a merger/acquisition can make or break company culture. When acquisitions overlook values and people, they destroy corporate culture and, ultimately, the company.”
Merging companies often struggle to mesh core values, create cultural alignment, or manage the integration effort effectively. Employees may feel stressed, overwhelmed, or insecure. Many jobs will be cut, and many other employees will look for other opportunities — as many as one in three acquired employees will leave within the first year, according to research by MIT.
While merger integration is challenging for most businesses, it can be particularly tricky in the life sciences field.
Increased turnover has led to recruitment challenges.
According to Jo Taylor, managing director of recruitment agency Let’s Talk Talent, M&As are tough on HR teams in life sciences businesses because they already struggle with recruitment issues: “You don’t want to lose talent in this sector as it’s very hard to replace.”
Nearly three-quarters of life sciences companies plan to increase their workforce in 2022 — but the industry was hit hard by the Great Reshuffle, with voluntary turnover rates of 18%, according to a study by Aon. The inevitable retention issues triggered by M&As will add an extra layer of challenge to a lean talent pipeline.
Data security is a serious issue.
While this might seem like more of an issue for IT than HR, it’s worth considering that 88% of all data breaches are caused by human error, according to researchers at Stanford. In other words, data security is most definitely an HR issue.
And while cybersecurity is a crucial component of any successful merger, it has additional challenges for life sciences companies, especially those in the healthcare and pharmaceutical sectors. In fact, research suggests that the lack of IT integration is one of the most common reasons for M&A failures across the sector.
“Mergers can be complicated for health businesses, particularly when it comes to syncing different user privacy protocols,” said Stephan Baldwin, founder and manager of Assisted Living, a healthcare marketing company. “Each company comes with its individual policies, but you now need to create a standard for moving forward as a single entity.
“This often has significant delays for the merger because either company will need to transfer their previous user data to a possible new system under new operating procedures,” he added. However, this is a crucial step, especially for healthcare businesses. Healthcare is a highly personal industry, so you need to ensure user/patient data is handled carefully and according to specific standards at all times. The last thing you want is to end with a lawsuit.”
Innovation requires a culture of trust.
Life sciences companies are built on innovation — and research shows that innovation takes trust, collaboration, and the sharing of ideas. Unfortunately, trust is often one of the first casualties of an M&A.
“One of the great ironies of M&A activity is that trust, a key ingredient for business success, often quickly dissolves, as M&A activity is usually cloaked in secrecy,” Jennifer J. Fondrevay, the founder of Day One Ready, an M&A consultancy, explained in a 2018 article in Harvard Business Review.
“A workforce can feel blindsided when a deal is announced, eroding trust and transparency in three mutually reinforcing ways: “our” company versus “their” company; the executive team versus frontline employees; [and] who stays versus who goes.”
6 Strategies to Stay Aligned After A Merger
Navigating a merger and mitigating the negative impact requires organizations to focus on communication, trust, and retaining top performers.
Here are six ways to create effective alignment between teams, and ensure a successful integration.
1. Start by rebuilding trust.
Mark Woodbury, co-founder at Minerva Equity, a firm that acquires and invests in small to medium size businesses, suggests that HR teams, and business leaders in general, must aim to secure trust during the integration process.
“A culture of trust is essential for any merger to play out successfully,” he explained. “Prioritize gaining the trust and the confidence of employees from both the new company and the acquired company to avoid starting off on the wrong foot.”
How can HR teams foster a culture of trust during a merger? Start by modeling empathy. Empathetic leaders are good listeners, open and transparent communicators, and able to accept strong emotional reactions from employees without becoming emotional themselves.
“Lead with transparency, especially at the onset of the merger, so that there won’t be any room for doubt or malice,” Woodbury advised. “The goal is to motivate employees to be team players, and not alienate them, by looping them in essential decision-making.”
2.Plan for challenges.
“It’s rarely a smooth journey integrating teams post-merger, so the leadership team should run all possible scenarios before the event and have a plan in place,” said Gerard Milligan, founder of Caledonia Resources, an organizational development consultancy.
By conducting scenario planning well in advance, HR teams can develop a more proactive change management strategy and get ahead of the potential issues. For instance, Milligan suggests that you can identify top-performing talent in both teams, and focus your attention on retaining them during the inevitable attrition that will follow any M&A.
3. Create a strong internal communications strategy.
During times of change, strong communication maintains trust, and gives employees clear expectations of what’s going to happen.
“Communication is key from a general sense to keep people informed, but there’s an extra level of storytelling that can help to aid in alignment in what the intent is and why the organizations are merging,” said Catherine Rymsha, a lecturer in Managerial Leadership and Leadership Processes at the University of Massachusetts Lowell. “Sharing this can help people clearly see the synergies and how they fit in. Having leaders from both organizations tell the same story is a practice I’ve seen help.”
Milligan agrees that communication is crucial to making mergers work. His advice is to create ample opportunities for two-way feedback, whether that’s an all hands or one-to-one meetings with the CEO for senior leaders in both companies: “Getting everyone aligned and clear on what to expect is a key factor in a transaction such as a merger.”
4. Use surveys to track the impact on employees.
In addition to offering ample communication channels for managers and employees, HR should proactively collect and monitor confidential feedback from the workforce in general. Mergers and acquisitions can often be a sensitive and challenging time for company culture. Initiatives such as employee surveys are a great way to make sure that employees feel heard throughout the process.
You may also want to identify and track key metrics to uncover any areas of concern. Examples of relevant KPIs would be:
- Employee satisfaction rating
- Net promoter scores
- Employee performance
- Employee engagement ratings
You can find a free merger and acquisition survey template in our Resources for Humans library.
5. Use OKRs to bring teams into alignment.
Creating shared goals is a powerful way to bring both teams onto the same page.The OKR (objectives and key results) framework can be particularly helpful after a merger, because they are structured to bring both transparency and clarity to the goal-setting process. If everyone in the team can see the top-level objectives they are working towards, and have an explicit oversight into how their own work contributes towards those shared goals, they are far more likely to feel they are pulling in the same direction.
Using OKRs can also be reassuring to the new team who have joined an existing company culture. While they may experience culture shock and have to learn new systems and new ways of working, the OKR framework will help to show them that they are still working on similar projects with a similar goal in mind. This can mitigate feelings of disconnection and reduce post-merger attrition rates.
6. Find out what matters to top performers.
While exit interviews are important for helping you to understand why people are leaving, stay interviews can have an even greater impact, particularly during times of upheaval and change. Stay interviews are one-on-one meetings between an employee and a manager or a member of the HR team. They can be helpful to gain qualitative insights into the impact of the merger on your workforce, identify issues that could result in turnover, and support employees’ performance and engagement.
Ask open-ended questions, such as:
- How satisfied are you with the support you’re receiving at work right now?
- If you could change one thing to improve morale, what would it be?
- Do you have suggestions on how we could improve employee engagement?
- Have you been provided with enough development opportunities?
- Is there anything we could do to make your job easier?
Building a High-Performing Team Starts with Alignment
There’s no doubt that going through an M&A can be challenging — and nowhere more so than in the complex and innovation-driven field of life sciences. However, when everyone is on the same page about goals and priorities, HR teams can help to align, engage and motivate employees in all organizations involved to continue to perform at their best.
To learn more about how to connect business performance with employee performance, download our free ebook, Building a Culture of High Performance in Life Sciences.