TM - August 2008 - (Page 53)

returns are driven largely by an organization’s people, their skills, innovative ideas and ability to stay engaged during a difﬁcult transition period. To enhance chances for success, companies need to focus on people-related issues often overshadowed in the scramble to manage M&A deals. And HR plays a pivotal role. Experience shows the earlier the HR function gets involved in the deal, the better the prospects are for successful integration throughout the new organization. The Value of an Engaged Workforce Most companies underestimate the elevated levels of employee disengagement that occur during any organizational transition. Uncertainty, emotional strain and loss of motivation frequently accompany M&As and can take an enormous toll on employees’ performance. transformations, leadership intervention is a critical symbol of the new organization’s culture. Companies that foster a high degree of leadership visibility, involvement and communication during M&As instill a supportive organizational culture with a better-thanaverage chance of success. Leaders hold things together. They share the vision, set the priorities and create the positive business momentum and discipline required during M&As. During periods of transition and disruption, employees look ﬁrst to leaders for guidance, motivation and focus. According to the Towers Perrin 2007 “Global Workforce Study,” leadership becomes the most important driver of engagement as companies transform. 2. Culture: Has HR deﬁned the required strategic culture in clear and tangible terms that will create alignment across the organization in direct pursuit of the strategy? The rate of past merger failures highlights the imporWith mounting evidence that employee engagement tance of aligning cultures in merging organizations. is the engine that fuels business performance, savvy A 2006 white paper from The Economist Intelligence companies lavish attention on employee engageUnit found 67 percent of respondents named cultural ment levels, especially during periods of organizaintegration as the most critical people issue and the tion transition. The more highly engaged employees chief success factor in an M&A deal. are, the more likely they are to put customers and quality at the heart of what they do and the less likely they are to leave the company. Simply put, employee behavior directly inFigure 1: Impact of Employee Engagement ﬂuences customer behavior, and customer behavior directly affects revenue growth Organizations that can increase employee engagement — and proﬁtability. (See Figure 1.) Whether an employees’ willingness and ability to help the company succeed, largely by providing discretionary effort on a M&A or restructuring is focused on growing sustained basis — are positioned to move ahead of the revenue, or trimming cost or both, engaged competition. employees measurably contribute to stronger business performance. The difference in contribution between an engaged and a The M&A Game Plan: Seven Areas of Critical Value A company’s ultimate goal during a transaction is to achieve the strategic business objectives of the transformed organization and maximize long-term shareholder returns. There are seven areas of critical value across the M&A life cycle that, with embedded project and change management support, can deliver measurable results. To some degree, all seven areas come into play during every stage of an M&A deal. Working with these areas of critical value ensures talent managers optimize employee engagement, which is essential to the long-term ﬁnancial success of any deal. 1. Leadership: Does the organization have the capability to lead and manage a complex transformation while continuing to engage employees and customers in the new value proposition of the enterprise? If employees are the key to company performance, then senior leaders are the key to employee performance. In all company disengaged employee, even those with identical ability and experience, can be significant. An analysis of Towers Perrin’s global normative database examined data from 50 global companies, correlating engagement scores for their employees (more than 664,000 globally) with company financial results over a 12-month period. Most dramatic among the findings: • Operating income among companies with high employee engagement improved 19 percent, while it declined 33 percent over the same period among companies with low employee engagement. • Growth in net income was up almost 14 percent for companies with high employee engagement, compared to an almost 4 percent decrease for companies with low employee engagement. • Growth in earnings per share rose 28 percent among companies with high employee engagement but declined 11 percent among those with low employee engagement. A comparable analysis of engagement and financial data from the database focused on changes in operating margins. Net-profit margins showed comparably dramatic differences between companies with high and low levels of employee engagement. August 2008 talent management magazine www.talentmgt.com 53 http://www.talentmgt.com

Table of Contents Feed for the Digital Edition of TM - August 2008

TM - August 2008 Editor's Letter Contents Human Performance Leading Edge Foundations Global Background Screening Does Global Assessment Work? Global Total Renumeration: Creat One Organization Border Insecurity: Immigration Reform and Talent Management The Global Workforce: Communication Across Cultures Around the World in How Many Days? Insight: Exelon: Performance Under Pressure Special Report: Perspectives on Managing People Application: Reinventing Sales Rewards at Motorola Dashboard: Mideast Meets West Dashboard: Mergers and Acquisitions 2008 - Don’t Leave Employees Behind Editorial Resources Advertisers' Index Full Potential

TM - August 2008

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