Last fall, Thomson Reuters released a report projecting M&A activity to increase 36% in 2011 driven by the financial and real estate markets. Thousands of key employees are being offered a financial incentive, known as “golden handcuffs,” to stay for an agreed finite period of time. While the financial incentive is too sweet to pass up, by assuming all employees are driven by money the acquiring firm is missing an opportunity to retain some of their key personnel by making the golden handcuffs period more friendly. They can accomplish this by complementing the financial package with a non-financial incentive based on what the employee cares most about.
By learning more about the key personnel, the acquiring firm will not only extract more value by customizing their incentive, but may also earn goodwill in the process which is a positive step towards retaining the employee after the agreed period has been completed.
Examples of non-financial incentives include providing more training and research opportunities to the naturally curious (high theoretical) VP of Engineering, providing incentives that appeal to the highly competitive (high political) VP of Sales, or offering the VP of Human Resources (high altruistic) an opportunity to lead a corporate social responsibility initiative inside the merged organization.
These incentives may or may not retain the employee. However, during the period of time these employees are providing critical input towards facilitating a successful merger transaction, it represents a win-win for the employee and the organization.
In less than a half hour Advisor elegantly provides the ambitions of golden handcuffed employees at a glance, which may provide human capital professionals, consultants and business leaders critical insight in the post merger talent retention puzzle – why they leave.