The Success of Bank M&As Can Hinge on IT Talent Retention

It is critical for banks to retain top tech performers during mergers -- and money alone just won't cut it anymore.

In these days of accelerated mergers and acquisitions, it's important for banks to remember the people who keep the institutions running -- IT workers. Technology staff are usually on the front lines of any M&A activity and are vital to ensuring that there are no interruptions in operations and service. Unfortunately, however, they also are often at the front of the line when it comes to receiving pink slips.

Bank IT staff warrant special care when an organization undergoes a merger, argues Bradford Newman, chair of the Silicon Valley Employment Law Department and leader of the International Employee Mobility and Trade Secrets practice with the New York law firm Paul Hastings Janofsky & Walker. "They are the people who know where the bodies are buried," he quips. "IT folks are often the unsung heroes of [M&A] integration efforts. You may have some outsourcing activity in IT, but there will always be a core IT function within the financial institution to integrate the acquired institution's systems."

Retaining top tech talent at both the acquired institution and the acquirer is of utmost importance, Newman adds. "These are the people who understand the systems, the technologies, the security processes and how to protect the data," he stresses.

Mission-Critical Personnel

Just who these people are must be determined by the bank during the due diligence phase of the merger. The deciding factor regarding retention is the mission-critical nature of someone's duties. If they are deemed noncritical to the functioning of the bank, Newman says, they would probably be let go. "A vice president of IT security, for example, would likely have a role at the bank both during the due diligence and post-close since it's his duty to explain what the bank is looking at in terms of customers, assets and modeling flows," he explains.

Acknowledging that many of the surviving banks today have M&A experience, Newman says IT nonetheless is still the victim of some of the most dramatic personnel cuts post-merger. "Whenever you can trim cost because of redundant head count, you'll do what you can," he explains. "The IT organization usually sees the most trimming when there's a merger because you're looking for this redundancy." If such paring is done right, it's those in the lower ranks who are cut due to replication of their functions at both entities involved in the merger, Newman adds.

No matter one's function at a bank, however, uncertain times can cause anxiety and suspicion, which is why it is vital for banks not to take their most talented individuals for granted, according to James Kerr, president and managing partner with Best Practices Enterprise Group, a Cromwell, Conn.-based consultancy. Banks must engage their employees and gain their commitment to creating the new organization, making people feel like they are part of something bigger than themselves, he says.

"[Employee engagement] starts by articulating exactly where the bank is heading during and immediately following the merger," Kerr explains. "The next step is to provide a compelling description of how each staff member will play a role in getting there." But, he adds, he hasn't seen many banks adopt this concept when they are involved in merger activities.

"Most M&A specialists are focusing on the financials and cost-cutting elements," Kerr continues. "They are leaving the human asset issues on the floor to be swept up post-merger. But that's too late."