Mergers and acquisitions, generally called as ‘M&A’ is a broad phrase that refers to abundant sorts of economic and financial transactions that combine institutions, firms or assets. Businesses frequently reorganize and restructure through such consolidation methods to survive and succeed in a constantly shifting environment. Through M&A projects, firm boundaries are redrawn and internal work processes are reorganized. These changes may normally alters the scope and type of work, sometimes resulting in job losses for its employees. Uncertainty, anxiety, and stress brought on by such occurrences may also have a significant influence on employees at companies going through a M&A project, which is the reason why research suggests that employees exhibit increase in psychiatric medication usage, and even suicide tendencies following a M&A project. Employees with lesser cognitive skills and those in ‘blue-collar’ jobs are more likely to have the highest impact. In this article, we look at how M&A projects effect employees’ mental health and how we can avoid them to a certain extend.
What is Mental Health?
Our emotional, psychological, and social well-being are all part of our mental health. It has an impact on the way we think, feel, and act. It also influences how we deal with stress, interact with others, and make decisions. Mental and physical health are both significant aspects of a person’s overall well-being. It’s crucial to keep in mind that an employee’s mental health normally fluctuates over time, based on a variety of circumstances both inside and outside the workplace and their personal life. Employees’ mental health is further damaged when demands such as M&As are placed on them that are normally above their resources and coping capacities. Individual well-being and economic progress are both influenced by such impact on mental health. According to the World Health Organization, depression and anxiety disorders cost the global economy a massive $1 trillion in lost productivity each year.
How does M&A’s impact employees mental health?
Because of the possible influence of the firm’s reorganization on the employees’ career progression and work-life balance, M&A projects cause tremendous anxiety and tension among employees. Although, it is vital to note that working for a larger company with more market power, a larger internal labor market, and better access to finance is a benefit for employees as it may give the employees a level of income and employment security that is favorable to their mental health. However, one problem is that M&A’s are primarily triggered by a firm’s economic or financial crisis, but the underlying factors generating corporate distress might as well be the primary cause of worker dissatisfaction. Employees in acquired firms also experience deterioration in their mental health, but this is unlikely to be due entirely to the target firm’s economic or financial problems.
Although mergers and acquisitions are commonly associated with job displacement, they often involve a variety of restructuring strategies that aren’t limited to job layoffs and can affect workers’ mental health. During M&A integration, the merging of human and physical capital from enterprises frequently results in staff cutbacks and the reallocation of retained employees to different locations, functions, or responsibilities. As a result of M&A, expected promotions may be delayed or never occur, employees may be relocated to fewer desirable roles within the company, or their workload may be significantly increased. This way, an M&A transaction can drastically affect a company’s relationship with its employees. The M&A-driven reorganization is also likely to influence expectations regarding career advancement inside the merged firm. As a result of the career demands and uncertainties brought on by such a significant change in one’s employer, anxiety and work-related stress develop. Depression and other mental illnesses may develop in more severe situations, leading to the use of (possibly addictive) psychiatric drugs, hospitalization, and even death.
So, what can organizations do?
Employees who stay on after a merger or acquisition, also known as ‘survivors’ or ‘stayers,’ generally have a tough time adjusting to the changes. Employees may find it difficult to focus on their jobs as they worry about their future with the new organization. During and after M&A integration, job satisfaction and dedication to the organization tend to dwindle significantly. As a result, it’s critical for businesses to be proactive when it comes to employee wellness during and after a M&A project.
If this isn’t managed properly, it could result in any of the following risks: inadequate communication and management methods; restricted employee participation in decision-making; low employee support; unclear tasks or organizational objectives; low motivation and commitment; increased turnover rates.
The negative effect of M&A on mental health is quantitatively similar to marriage, but with the opposite signs. Research suggests that the mental health issues caused by M&A’s and wedding lasts up to 5 years, however latter can ease much quickly. However, it is also important to note that women are more likely than men to recognize health problems and seek medical help, and they do so sooner when difficulties develop. Organizations can use these gender differences to better understand the mental health effects of M&A’s on male and female employees.
A guide from the World Economic Forum highlights steps organizations can take to create a healthy workplace, including:
• Awareness of the workplace environment (especially during M&A) and how it can be adapted to promote better mental health for different employees.
• Learning from the motivations of organizational leaders and employees who have taken action.
• Not reinventing wheels by being aware of what other companies who have taken action have done.
• Understanding the opportunities and needs of individual employees, in helping to develop better policies for workplace mental health.
• Awareness of sources of support and where people can find help.
In addition to this, the establishment of policies, procedures, and processes that support employee wellbeing is also an important part of attaining a healthy workplace. Employees actively contribute to the working environment by promoting and safeguarding the health, safety, and well-being of all employees in a healthy workplace.
Interventions and good practices that protect and promote mental health in the workplace during M&A’s include:
• Implementation and reinforcement of health and safety policies and practices, including identification of distress and providing resources to manage them
• Informing staff that support is available, especially from HR
• Involving employees in decision-making, conveying a feeling of control and participation
• Programs for continuous career development of employees
• Recognizing and rewarding the contribution of employees
What can employees do?
Employees across the organization must understand the scope and purpose of the M&A project before adopting and supporting it. Understanding these signals early is crucial, because management will try to convey them regularly through different means, however individuals tend to learn information only after multiple efforts. Employees must take self-initiatives by remaining involved with one another, providing feedback, and gathering ideas from the integration teams. Employees should be on the lookout for communication patterns such as emails, announcements, focus groups, surveys, social media campaigns, and community-building activities that leaders launch to involve employees more broadly to the new organizational goals. This type of communication engages employees and make them realize that the changes were driven by the business as a whole rather than imposed from on higher leadership.
The following steps highlight the components employees need to be alert for:
• Identify multiple routes of communication (e.g., one-on-one meetings, group sessions, newsletters, intranet updates).
• Focus on the themes of change and progress by highlighting projects that are going well and action items that are being delivered on time.
• Identify the common themes of the M&A to increase understanding of the rationale behind the transaction.
• Grab opportunities in M&A involvement or feedback.
• Understand that there will be problems, and work hand in hand with the management as well as integration team so that the problems will be accurately identified and addressed as early as possible.
The World Health Organization’s Mental Health Action Plan (2013-2030) establish important concepts, objectives, and implementation strategies for promoting good mental health in the workplace on a global basis. Initiatives such as addressing social determinants of mental health, such as living standards and working conditions; activities for prevention and promotion of mental health, such as activities to reduce stigmatization and discrimination; and increasing access to evidence-based care through health service development, including access to occupational health services, are among them. These initiatives demonstrate that businesses have begun to pay deep attention to mental health, and measures will continue to be implemented across the board.
In addition to this, due to the high failure rate associated with M&A projects, firms have begun to place a higher focus on personnel involved in the M&A process, as these individuals can have a significant impact on the success of the M&A process. During the M&A process, there has been a greater emphasis on employee wellbeing in the last 15 years. Keeping key employees on board during the M&A process is critical to its success. At the same time, it’s critical that employees comprehend the organization’s wider goals, as well as the economic and financial implications. Understanding the big picture aids in the development of necessary patience and cooperation, as well as the improvement of relationships, particularly during M&A initiatives. This understanding can help to prevent a drop in morale, assure dedication and motivation, and so avoid any negative effects on mental health