People Strategy

The Importance of Empathetic Leadership During Mergers and Acquisitions

September 26, 2022
November 7, 2023
Jennifer Ernst Beaudry
Lattice Team

Experts say there are two make-or-break moments when the emotional intelligence of company leaders can have an outsized impact on their employees and teams: Layoffs, and mergers and/or acquisitions (M&As). Both company-wide staffing reductions and mergers and acquisitions are times of high stress, anxiety, and instability for employees; these are the moments when not just the decisions leadership makes but how they make — and communicate — them can have lasting effects on company culture and an organization’s industry reputation.

“Mergers and acquisitions are among the most significant forms of organizational change, as they alter roles, ranks, responsibilities, and the ‘order’ of an institution; this creates substantial anxiety and fear,” said Theodore Klein, Managing Partner of organizational development consulting firm Boston Strategy Group. “Empathy is management’s acceptance and understanding of [these emotions], and [their] powerful impact on business function. Empathy is the recognition by management and executives that mergers and acquisitions will always cause major problems that need to be anticipated.” 

During periods of transition, empathetic leaders — and empathetic leadership styles — are essential. Modeling empathy during times of peak organizational strain can be a lifeline to both workers whose positions have been eliminated, as well as the employees who remain. It’s critical for preventing burnout and attrition, but even beyond retention, it’s a crucial quality for business success.  

Here’s why experts say empathy is important during mergers and acquisitions, and how leaders should embody it.

Why Empathy Is Essential

According to Nadya Zhexembayeva, PhD, founder and Chief Reinvention Officer of change consultancy Reinvention Academy, there are a few elements that make mergers and acquisitions uniquely stressful. 

“In addition to complex legal, financial, and operational issues, [employees] are asked to process deeply personal unknowns: ‘Is my job safe? Will I be able to align with the new coworkers? Will my position and respect in the company get diminished?’" Zhexembayeva said. “As a result, confusion, frustration, and anxiety are even more pronounced — and these feelings are absolutely normal and natural.”

Being able to address these emotions head-on and in a productive way is crucial for business success, noted Zhexembayeva. “When you have a group of coworkers experiencing intense emotions, your ability to empathize and express your empathy is the difference between a productive workforce and a disengaged workforce, which translates into a major gain or loss of revenue,” she said. “In other words, empathy is a building block of a successful business and should be treated as a must-have skill across all functions and levels in the organization.”

Suzanne Smith, founder and CEO of social change consulting firm Social Impact Architects, said cultivating a strong culture of empathy can ultimately affect a merger’s chance of success.

Mergers are about negotiation, so practicing empathy makes you better at understanding the other side’s needs and motivations,” said Smith. “Having strong empathy skills is a necessity for finding [a positive outcome for all parties], which is the goal of the best negotiators.”

How to Practice Empathy in Times of Transition

No amount of training can make bad news like layoffs, or complex news like company mergers, easy to hear or accept. But experts said there are proven strategies that Human Resources professionals, managers, and emotionally intelligent business leaders can use to show compassion for employees’ and stakeholders’ feelings and well-being during times of high anxiety. Here’s what they recommend.

1. Be honest and transparent.

One of the best ways to demonstrate empathy, experts said, is to trust your employees with the information they need to know.  

“Fluffy ‘everything is going to be okay’ empathy is the polar opposite” of true empathy in times of change, said Sara Raudenbaush, a Fortune 500 business consultant who works with businesses running M&A integrations and founder of coaching firm Back Pocket Business Coach. “Managing change has to center on reality,” she stressed. “Give employees the respect and benefit of the doubt that they can handle information.”

In cases where managers can’t (or shouldn’t) provide all of the details, they should still be transparent about what they can and can’t share, Raudenbaush said. Trusting employees with an accurate — and as complete as possible — picture of what is about to come allows individuals to not just make decisions for their work and personal lives, but it also keeps business on track. 

“Tough decisions will always happen and employees may not understand the mechanics of layoffs or growth, but fear is worse for productivity than knowing the risk,” she said. 

2. Communicate clearly.

Keeping employees informed means keeping the lines of communication open. In addition to holding group meetings and one-on-ones (both formal and ad hoc) to share M&A-related news and updates, consider creating a document that outlines expected changes and a timeline of when they’ll be happening. A written plan gives employees a clearer picture of what the “new normal” will look like, and something to refer to when things feel chaotic.

Renée Sanábria Lautermilch, VP of Learning and Development at HearingLife, a US-based retail hearing healthcare provider, which was formed entirely through acquisitions, said these types of documents, or “change roadmaps,” can serve not just as an important communication tool, but also as an investment in employees’ mental well-being. “Change roadmaps allow impacted employees to see what will be changing and when, so nothing takes them by surprise, thus eliminating the scary ‘unknown’ element,” she said. 

3. Really listen.

Emily Sander, a leadership coach and founder of Next Level Coaching, said listening skills are essential for leaders looking to build an empathetic workplace. 

“Understand that if you've been part of the decision-making process for days, weeks, or months and someone else is hearing the news for the first time, you need to give them time to process it and catch up to where you are,” Sander said. “Give people the chance to ask questions and provide feedback. Sometimes this is to vent, which may be valid, and holding a space for that can be part of your job. Sometimes the feedback provided can be very helpful — perhaps it's something that hadn't been considered before and you can incorporate going forward.” 

Don’t ignore nonverbal communication, either, experts advised. Taking note of what employees aren’t saying is just as important, added Sander.  

“Everyone processes information differently, so giving people what they need to best do that is helpful, [whether that’s] time, space, more information, [or] a place to voice their opinion and just be heard,” she said.

4. Don’t take it personally.

Employees’ feelings about the changes ahead may be mixed: They may be excited or energized, but the reality is, especially if job cuts are involved, anxiety, sadness, fear, disappointment, and anger are all likely, too. That’s normal — and it’s critical that empathetic leaders don’t take an employee’s feelings about the changes an M&A brings personally and view it as a personal attack.

Klein said managers conducting check-ins with their employees should be prepared for different perspectives, and should “anticipate pushback of all forms.” Accept and recognize any emotional reactions, he advised, and “remove your own emotions from the process.” 

“Trust is essential to the smooth functioning of any organization. What builds trust…is the belief that others have some understanding of [your] personal goals, aspirations, wishes, feelings, emotions, and needs; that understanding is the essence of empathy,” Klein continued. “The less empathy exhibited by an organization, the less trust — and the more dysfunctional — the firm.” 

There’s no doubt that mergers and acquisitions can be incredibly tense and stressful for leaders, managers, and employees alike. But practicing empathy at higher levels of the organization during these times can have a cascading effect on the company as a whole — even, and maybe especially, when different perspectives, opinions, and feelings about the changes exist throughout the firm. If the new company structure is going to be successful, leadership skills will be put to the test, and approaching change with an empathetic mindset is part of the answer. 

“Understanding the stages [employees] are going through and when they're going through them is important. If this isn't done well, it'll translate into negative impacts for morale, personnel churn, productivity, customer service, and revenue,” Sander cautioned.  

But there’s upside, too, said Sander, and it’s considerable. Leadership displaying empathy, consideration, and understanding can go a long way to making an organization’s culture better — and making sure the merger, acquisition, or transition is as smooth and successful as possible for all parties involved.