Episode 7: Manage and Adapt: Helping Employees Navigate M&A

Sep 8, 2023

Listen as host Rodney Bolden talks with Kate Winget, Morgan Stanley at Work Chief Revenue Officer, to discuss how to support employees during mergers and acquisitions.

Invested at Work Podcast

Episode 7: Manage and Adapt: Helping Employees Navigate M&A


Kate (00:00):

If you can find that opportunity, whether it is through people, innovation, technology, product, whatever it may be, what is the north star of this and articulate that to everybody going through it so it's consistent, and for HR leaders, I think that is one area that they can help drive forward. So they need to be part of, "Why are we doing this? What is the strategy behind this?" Because they need to be able to ensure that they can keep those talented individuals committed and bought into that future and where we're going.

Rodney (00:29):

The decision to grow your company isn't the finish line, it's the start of a whole new journey. Growth can mean anything from a merger acquisition to a spinoff. While these moments are absolutely worth celebrating, it's crucial to communicate these changes to employees so they understand and appreciate how it benefits them. Educating employees about changes can be a challenge but it is necessary. In this conversation, Kate Winget, Chief Revenue Officer at Morgan Stanley at Work, shares insights from overseeing mergers and partnerships, helping your organization embrace growth and change with the times. Kate, welcome. Today, I want to talk to you about company growth. And traditionally when we talk company growth, we think about only mergers and acquisitions, but there are other ways, especially in this difficult economic environment that a company can grow their customer base, grow their footprint. Can you talk about that a little bit?

Kate (01:27):

Absolutely. If you think about the speed of innovation and where companies are trying to find the next opportunity, you layer in technology, you layer in talent and how the skillset of our employees and workforce has shifted significantly in the last decade, companies are going beyond mergers acquisitions. They may be spinning off new business units, they may be spinning off new products, and it's a really exciting time because it does create a new company or a new experience and culture for that organization. But if you look at some of our largest companies within Morgan Stanley at Work, they're also facing those opportunities for the jump off point of a new, again, product, service, solution. And it does grow beyond the merger acquisition or being able to pick up a company or a competitor and taking somebody out and buying a client base. They can do it now in-house more rapidly than ever before.

Rodney (02:21):

If I'm an employee and I'm going through a merger acquisition or a spinoff, I'm thinking, "Okay, how are my workplace financial benefits going to change?" Can you talk a little bit about some best practices or things you've seen because I know you've gone through a lot of different company transitions, and help companies navigate through those transition periods? What should companies be thinking about when it comes to their employees and helping them understand the value of this new entity?

Kate (02:48):

Yeah. No, and one day I'll write a book about my own personal experience in mergers and acquisitions and integrations. No, I think it's nerve wracking for employees, especially if you are on the acquired side or if you're in the spinoff side. Like you said, you come into an organization as a new hire and you have a benefits package, which includes financial benefits, health benefits, all those things. And as you move into the next chapter of your employment, it wasn't your decision. You're just part of the employee base that was moved or integrated into a new company, and so you really didn't have that decision making process of comparing benefits from one employer to another.


And I think it's an important piece that the company and the employers and the HR business leaders, the stock plan administrators, whomever it is, they have to take a step back and realize, "Are we meeting the expectations of now our new combined organization and the employees that are there? Are we hitting upon the considerations around, are they global and do they have cultural impacts or implications to their benefits? Are there expectations in other countries or in other pockets of their organization that maybe it's all with good intent, but if you eliminate a benefit or if you say this benefit will reconsider," which I've also seen that it sends a signal to those employees like, "Is this going to be the right place for me for the future?"


And I think that's a reason too why HR leaders are looking at not single threaded benefit solutions or financial benefit solutions. They're really looking at, "How do I address all of my employees, have multiple solutions for them? Those from earlier in their career all the way up to retirement. Am I addressing every segment of my population, and is this going to be something that grows with them throughout their career?" And so it's also a good opportunity as these companies are growing and evolving to introduce new benefits and take advantage of that moment in time to say, "Oh, well, we're eliminating one benefit because it just doesn't fit within our strategy, but we're adding something new that you or more employees can take advantage of."

Rodney (04:50):

I want to pull on something, you talked about retirement, for example. When a company is acquiring another company in another foreign jurisdiction, retirement benefits can look very different. Some overseas countries have guaranteed national pensions, whereas in the US we tend to go through the divine benefit defined contribution route. Tell me about what companies should be thinking when they're going into the international market and it's an international acquisition and how they support employees. Because you talked about being consistent across the board, but is it possible really to be consistent when you're looking at an international acquisition?

Kate (05:29):

We hear the request every time. The reality is, and it's just with almost anything that's at a global, is parody is tough. It's very difficult to find, and it should maybe be the bar we set to try to strive for, but except that it may not be what we get and that's okay. And actually you'd be surprised if you go into the employees that are the frontline or the boots on the ground in those regions or jurisdictions because their expectations are different, we shouldn't overlay our own bias to what they want. I just spoke to someone today that was talking about, "We're acquiring a new company. What do we need to have as considerations?" Well, it's very much through a US lens and so they're hiring an outside consultant to come in and say, "Guide us and advise us because we're acquiring company in India and we don't want to put our bias over this."


So it's an important piece that you just accept that you may not get parity, find outside resources and guidance on how you should approach your employees there. And again, the employee feed back loop is an important piece because you do want to make sure that you're addressing their needs. Like you said, retirement's very different. Healthcare is very different. Employee stock ownership is also culturally different. You could have in some countries where it's more of a family transition or transfer, and so there's some considerations that you have to have that are nuanced to that jurisdiction or region.

Rodney (06:55):

Never even thought about it as a family benefit. Can you elaborate on that a little bit because I've never heard of that?

Kate (07:01):

Yeah. It can be a transition, so stock ownership in certain countries can be more of if you think of how is it considered within the company, it's actually more of a family benefit and you're thinking about family wealth, and you're thinking of, does it go to... Let's use the husband wife scenario, or does it go beyond that to the family? So there's real nuances and considerations that you have to have.

Rodney (07:23):

Wow. I never knew that. Let's talk about the viewpoints. Based upon whether you are an employee at the acquiring company or the acquired company, how do they differ and how are they similar?

Kate (07:35):

There's a day where all of us at the acquire company or acquirer is day one. Well, the day before that we all had careers, we all had a vision of where our path was going and we all had expectations. The day one when the announcement, let's say of a merger acquisition is going to happen, everything changed and then the next day it's changed for everyone on both sides of that equation. The go forward can often feel bumpy, and what I've seen is that the acquired maybe feels like they're a bit more on the defense and that they are to take a step back and just do what is said of them. The reality is that's not why the acquisition is happening. The acquisition is to bring talent together, to bring clients together, to bring product tax solutions, whatever it may be. It's the one plus one equals three.


But I do see and have experienced it myself that somebody has to be there to actually guide the employees through the fact that expectations of leadership is that you're going to come on common ground, you're going to continue to grow the business, continue to do product development, continue to find the opportunities for our clients, but it's not that one has an advantage over the other. And I think that can be the other learning I've had and shared, is the breakdown of acquisitions is the people. It's not seeing again, what was the vision of why these companies come together? And again, it's the one plus one equals three.

Rodney (09:00):

Talking about culture, many companies will have an employee stock purchase plan to create an ownership culture. Now, you've been acquired by a company that does not have an ownership culture. If you were advising in a company going from having an ESBP to only having equity compensation for senior management, what would you say to them as far as communicating to their employees that new workplace culture when it comes to workplace financial benefits?

Kate (09:30):

ESPP is becoming almost like table stakes. When you think about from startup to public company, there is an opportunity to have your employees be a part of that ownership. And ESPP on the public side is a very complimentary way to say option or stock in a private company where hopefully people are going to see an event. Also, we hear this, the generation in the workforce is different than it was 10, 15, 20 years ago. It matters to them that they're part of that conversation with their company. It matters to them that they can get the ownership and the accountability, and it is a huge acquisition retention for employees. But I think where we see the decisions made to not have it is just really not understanding what the benefits are of it and where the outcome is for the employee.


It's a cultural piece, but it's also you're saying to your employees, "We're investing in you, invest in us, go along this journey with us." They feel the sense of accomplishment when there are those growth metrics shared at the end of a quarterly earnings and they feel that sense of, "I accomplish this with you." And so it is a very positive way for the employer and employee to work together. On the other side of that, executive compensation has for a very long time included equity, and it was the way to signal to an executive, "You're staying with us. We will reward your success."


E S P P can be the same signal. It's just telling employees, "If you participate in this and we continue to see the stock price increase and we continue to see the growth of the company, you're going to reap those benefits right alongside with us." I think it's misunderstood or misaligned and it's the benefit ranking of, "How do we roll it out, who should we roll it out to? How do we get this off the ground?" But as we start to see more innovative companies, again, the startups that are coming into the space, it's much more competitive and it is going to be table stakes.

Rodney (11:20):

Let's talk about some of the other ways to grow. Let's talk about collaboration, partnerships. Tell me about the potential impact for the employees in situations like that. Is there any impact to the employees?

Kate (11:32):

From my seat and my experience, I think partnerships are a fantastic means of growth, and you often see that in distribution strategies, go to market strategies, product strategies. What I've also seen is you have to have both sides of the partnership on the same page. It can't be imbalanced because there's going to be an investment not only financially, but from the human capital side, from both sides of it. There should be a commitment to ensure that whatever metrics you set out on for this partnership to make, again, the one plus one equals three, you're all on the same page.


With that in mind, if there is an imbalance or it doesn't feel like both sides of the partnership are coming together, one team can feel like, "Well, wait a minute. We're carrying the weight of this. Why did we even get into this situation? Why are we the ones that are having to do the product development, the integrations?" I mean, you name it, and I think it can happen when there's also an imbalance in the size of the company's partnering. So you'll see that as part of many large firm growth strategies, and many partnerships die in the vine because these smaller companies are so excited thinking, "David and Goliath, I'm going to have this massive opportunity to work with this company," and then it never really clicks, and it's often because the David in this situation is carrying the lion's share of the workload and that's not always sustainable.

Rodney (12:52):

Are there any strategies in a situation like that, that you would recommend to help the David and the Goliath work better together in that partnership?

Kate (13:01):

If there is executive sponsorship at the very top of the house of the Goliath, I think that has more opportunity to be successful, but if it's floating around in different layers of the organization and it's just not really getting that buy-in and traction and executive sponsorship, it just may not be worth the time. But I've seen other ways where you just have a C-suite executive who just sees this as a great opportunity, is all bought in on it, is able to direct their teams to say, "This is one of my top five strategies for growth in the next X amount of years," then you get the support behind it. The other piece or challenge, it's like a watch item, is large organizations, global organizations, because they're having to shift their strategies a little bit more frequently than before, what one quarter may be the most important thing within a quarter or two could be sidelined and put on the back burner, and that kind of whip sign and worry from the smaller company that's expecting that can be really challenging and detrimental to their own growth story.

Rodney (14:05):

Now, we are in a challenging economic time and mergers and acquisitions seem to be slowing down, any advice for a company that really sees the value but is concerned that it might not be the right time?

Kate (14:19):

If it's in your gut that you should wait or if the executive team really sees this as more of a wait and see, follow that because it is not easy. No matter which side of the fence you're on, it's not going to be an easy process. You need to have full commitment. You need the right market conditions, and you need to ensure that what may be a down cycle on the macro level, it doesn't necessarily sideline what you want to do from your own growth or vision, but you do need to know, "Is that going to have an implication? Is it going to push this out longer? Are we going to see the benefits of this merger acquisition immediate or is it going to be now a few years out?"


And ensure that you're aligned on those points because it's going to help with the teams that are going to have to do the heavy lifting and the work to bring these firms together and clients together and what the long-term vision is, and that might have to shift or hit pause. It also is an important piece of prioritization. Again, the day one, day two, what the company was the day before versus what the company is the day after could look very different. And so if you deprioritize, which often happens in down cycles, that's okay, but did you have expectations to then ramp this back up when the good times hit? And so making sure that, that prioritization is also aligned is an important piece.

Rodney (15:36):

I'm glad you talked about day one, day two. Let's talk about day 100. How can HR leads make sure that they are communicating in an effective fashion to prepare employees for that change from day one to day 100?

Kate (15:50):

Having now been on the day zero sub 30, 50, 60, that preparation has to be done then, and it is in close coordination with the two teams and your HR on both sides of the house, making sure that the employees don't have gaps, the employees don't feel any of the new, what could possibly be also financial benefit provider transitions. And so you make sure that day one feels consistent and then by day a hundred or whatever that may be, if you're going to start rolling out or adopting new benefits for those employees, you've got the communication plan, you've got the registration, open enrollment plans, you've got all of that laid out for them because it is a time of uncertainty. And so giving them that calm or that sense of, "We've got you. We're going to take care of whatever the benefits are that you need, they will transition with you or we'll expand upon them," that will keep people of interest focused and also ensuring that they're not maybe in the job market.

Rodney (16:53):

A couple more questions. When going through whatever form of company growth, whether it be mergers and acquisition, collaboration, partnerships, what are two or three key takeaways that you want to communicate to our HR leads, our equity plan admins that they should be thinking about, especially in that run up to day one?

Kate (17:16):

It is all about the employees. So it is make or break based on the employees and the people that are part of this. We do it for growth, we do it for the clients, we do it for product and innovation, but ultimately the success of this is based on the employees and those that are there. So that prep work that you can do and alignment across teams from acquirer to acquired, making sure that you are ready on day one and in sync on what that is and bringing transparency to conversations where you can is critical. The other thing I would say is you may not get it right out of the gates on day one, but the employee feedback loop is incredibly powerful in those early days or early months, let's call it.


And so being able to know and have a pulse on the people and making that part of your integration strategy, what's the employee temperature or how are the employees doing, and how do you get that? Maybe it's through surveys, maybe it's through round tables, however it is, making sure you're keeping a pulse on the employees through those early days and having honest conversations because leaders need to know where there might be challenges or where there might be some pain points and how do you course correct that in those early days.


And then the last piece I would share is really around, again, we all come into this with a bit of a bias and we all have our own perspective, but the expectation of this is that the sum of the parts is going to be greater. And so if you can find that opportunity, whether it is through people, innovation, technology, product, whatever it may be, what is the north star of this and articulate that to everybody going through it so it's consistent, and for HR leaders, I think that is one area that they can help drive forward. So they need to be part of, "Why are we doing this? What is the strategy behind this?" Because they need to be able to ensure that they can keep those talented individuals committed and bought into that future and where we're going.

Rodney (19:13):

Last question. When thinking about your career, Kate, what makes you do what you do? In other words, what makes you invested at Work?

Kate (19:23):

I always start with when people ask me, "Who are you?" And the first thing I say is, "I'm a mom, and I'm a mom of two daughters." And as a woman in the financial services industry, as somebody who has been all over the map on their career, I think that what makes me invested at Work and what makes me really proud of where I'm going or where I've gone is being able to show my daughters one who is 16 and the other 13, "You can do anything. There is no ceiling, there is no limit. You really can do anything," and I want them to see that.



The decision to grow your company isn’t the finish line; it’s the start of a whole new journey. While growth—which might take the form of a merger, acquisition or spinoff—is something to celebrate, it can also be a challenging time for employees.


How can you help your employees, including any newly acquired team members, buy into the changes, embrace this growth and adapt to this next phase of the company?

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