Merged companies are struggling to retain staff when employee retention agreements expire, a new Towers Watson report has found.
In a recent study, Towers Watson revealed that only 43 per cent of companies retain staff one year after retention periods expire.
“This has implications for Australian companies buying into growth or divesting non-core assets. The retention of leadership and key staff is usually a critical deal objective and a longer-term driver of success,” said Towers Watson.
However, “an ideal employee retention strategy remains elusive,” the study found.
High retention rates are central to a company achieving its strategic objectives.
“Nearly nine in 10 (88 per cent) high-retention companies (defined as having retention rates over 60 per cent the full term of the agreement) said their transactions successfully met their strategic objectives.
However, “only two-thirds (67 per cent) of low-retention companies (those with retention rates of 40 per cent or less) expressed the same sentiments,” the study found.
“Retaining the right people can make or break a deal,” said M&A leader for Towers Watson in Australia David McNeice.
“Retention starts with properly identifying the talent, roles and functions most critical to the success of the transaction,” said Mr McNeice.
“It’s clearly more efficient to take the steps necessary to keep key talent in place than it is to find, hire and integrate new employees during or just after an acquisition,” he said.
Approximately 48 per cent of employees who left a business before the end of a retention period attributed the decision to the changing organisational culture of the company.
Towers Watson warns companies involved in M&A to build employee engagement, understand the organisational and cultural implications of the deal, and to work with key employees early in the deal process.
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