Shyam was an offshore business head in a large technology company, Big Tech Inc. Big Tech had recently acquired a focussed company called Nimble Verifiers. Shyam was given the accountability to take over Nimble Verifiers and integrate them with Big Boss.
The team at Nimble Verifiers, had not seen their salaries raise for about 18 months. Their salaries were in the bottom quartile of the industry. They were told that post the acquisition, they would reap the benefits of BIg Boss, which was in top one-third of the industry pay.
Shyam started to meet the team at Nimble Verifiers, and he soon realized their expectations – when will their long overdue salary change happen, and also in line with BIg Tech salaries. Big Tech, despite being in the top one-third had deferred the salary hike for all its employees recently, as their margins had plummeted to just 3%. They were making only a limited number of counter-offers (About 0.25% of the team per month).
Shyam noticed that the financial projection by the exiting owner of Nimble Verifiers had forecast a moderate increase (8% – 12%) in salary, as necessary, to retain the team. The outgoing leader had tabled this request to Big Tech management, as the need to stop the resignations. However, when Shyam saw the resignations that came in (5.5% of the team in his first month, 6.0% in the next month), he noticed the team was jumping with a very high increase in their salaries (50% – 120%).
When Shyam spoke to those who had put in their papers, they were ready to stay back provided, Shyam promised and guaranteed they would all get a counter-offer. They, otherwise,liked their work and the organizational culture.
How would you balance between the organizational salary freeze, and the acquired company employees expectations?
How would you handle the counter-offer request from the employees?
What would you do with the financial request that was tabled by the outgoing leader?
Suggested Solution:
Given it is a services organization, it would be reasonable to assume that Big Tech had acquired Nimble Verifiers for its capability (including the people).
Even though Big Tech was in a salary freeze, once Shyam realizes that the purpose of the acquisition includes retaining the talent, it becomes effective to mindfully strategize. Given the 5.5% – 6.0% attrition, Nimble would lose nearly 70% of its talent in a year. So the price paid for the acquisition would have lost its relevance. This should be a good starting point for Shyam to get the management to intervene despite the salary freeze, I think.
Handling the request for counter offer is very tricky, especially with 11.5% of them in the notice period.
In this condition the counter offer would work only if you match the offer on hand. These offers are between 50% – 120%, so that would mean an average of 80% increase. Once you give the first few, the others who are waiting in the org, will actively look out – so that they can also get a match (Remember Nimble is in the bottom quartile – so these jumps are extremely possible). Only if there are a few people – who are very uniquely skilled in the org and important, would not recommend a counter offer. On the other hand would suggest that Shyam pushes the org. to act on a holistic plan very quickly.
From the info. provided it appears apparent that the financial plan already tabled will be not useful in the prevailing environment. Big Tech management, is going to let Shyam know that the counter offer rate – is not going to be possible to afford for the entire org.
Shyam will have to balance out here. He will have to be willing to bite the bullet – maybe not include the bottom quarter or even a third for an intervention plan. It’s a hard decision (as they are not necessarily underperformers). Or he has to figure out, people whose skills are relatively easier to replace – and keep them out of the intervention plan. He could discuss a 20% – 25% exclusion in the first plan to Big Tech management, to reduce the extra salary budget. During the negotiation process (most likely to happen in this situation), he needs to be prepared to increase the exclusion list to may be 33% – 40% eventually.
He also has to increase the quantum for those in the retention list to may be 50% (given that is the lowest jump thus far!). He can also use the existing similarly skilled people in Big Tech as a reference point – to buttress the need for such a large quantum of jump.
Typically when the Nimble team sees this quantum, it is quite likely they will start trusting the acquirer now to take care of them. So the propensity to look out will reduce. Also the gap between the market and them will not be as attractive, as in the past – so you would see the team intending to stay on.
While all this is happening, Shyam should keep the communication running in with the team. He also has to keep the senior leadership aware of the risks of delay (and large exclusions).
He needs to be sincere with the acquired team, not raise the hopes to a level that cannot be met, but not make it appear it will be impossible for them to build a great future in Big Tech over the years.
Tough balancing act – but Shyam cannot please all at this time. Despite the intervention, Shyam could find some of those who got the salary jump, could still leave – but hopefully it will become a trickle from the current flood!
