Union Bankshares doesn’t want to repeat the mistakes of the past.
The $8.6 billion-asset parent of Union Bank & Trust, which endured employee attrition after its 2014 purchase of StellarOne Financial, has taken steps to improve the odds of keeping more people after its pending acquisition of Xenith Bankshares.
Executives, since announcing the deal in May, have spent time on the road visiting employees. A video featuring the CEOs of both companies has also made the rounds in an effort to allay fears while promoting the merger’s long-term value.
The realization is that other banks will aggressively court nervous lenders and support staff, while the hope is that better communication will persuade anxious performers to stay at Union.
“Competitors immediately assume that there will be disruption and angst so they decide to approach your customers and your employees,” said John Asbury, Union’s president and CEO. “We knew that was going to happen. It’s important that we control the message immediately.”
StellarOne, an acquisition completed by Asbury’s predecessor, taught the current management team a harsh lesson about retention. More than 10 StellarOne commercial lenders left after the deal closed, which factored heavily into flat loan growth in the first year.
The experience isn’t unique to Union, but it does underscore how critical it is to be proactive with employees. Staying out in front of people with the right message can be challenging, industry experts said.
“It’s one of those things you can go crazy trying to deal with,” said Tim Chrisman, founder and principal of the executive search firm Chrisman & Co. “It’s become a bigger issue because of the availability of talent. Lenders are the franchise.”
Before they announced the Xenith deal, Union’s executives reviewed missteps tied to StellarOne, Asbury said. Management, which largely focused on the communication strategy, determined that it would quickly get as much information out to employees as possible.
Accurate and timely disclosure is critical, particularly when addressing the company’s strategy and an employee’s future, industry experts said. Failure to do so can spur employees to look for opportunities elsewhere.
“Role clarity and honest and clear communication of the … vision are the two things that must occur,” said Robert Voth, who leads Russell Reynolds’ consumer and commercial financial services practice. “If you don’t have a clear and transparent message … you can’t have the merging of two cultures into one working toward one unified goal.”
Discussing layoffs can be an uncomfortable process, which is why some executives avoid the subject. Avoiding such a conversation can often lead to uncertainty and attrition that may have otherwise been avoided.
“There is great fear in a merger,” said Tim Scholten, president of Visible Progress, a consulting firm. “There’s a culture change, a system change, technology change, leadership change. … There’s never a more fearful time than that.”
Union and Xenith, both based in Richmond, Va., filmed a 15-minute video of Union’s director of corporate communications interviewing Asbury and T. Gaylon Layfield III, Xenith’s CEO. The executives discussed the merger’s timing, post-closing priorities and how the deal would benefit clients. The video, which also had a transcript, was distributed to employees after the deal was announced.
Videos can provide additional insight that employees may not get from written correspondence, while allowing well-prepared CEOs to let their personalities sell the deal, said Trent Fleming of Trent Fleming Consulting. People may be more apt to watch a video than wade through a lengthy memo, he said.
“Video is where communication is going,” Fleming said. “People turn to YouTube and other media for everything. If you use video, then people can see" a CEO’s likability or honesty. "No other medium other than an in-person meeting gives you that.”
Sellers also run a risk of losing key staff, which can be particularly damaging in rare instances where a deal is called off, industry experts said.
“As the seller, you’re concerned about being able to hold together the kind of team you need to operate until the deal occurs,” Layfield said. “You never know with 100% certainty that any deal will occur, so you have to plan for that very remote possibility.”
Union and Xenith made an attempt at “harmonized” communication, where each CEO sent a message to employees the deal the deal was announced, along with a customized list of frequently asked questions for staff at Xenith and Union.
After completing conference calls with media and analysts, Asbury and other Union and Xenith executives visited Xenith’s headquarters, along with offices in Virginia Beach and northern Virginia, to meet with employees.
Outreach continues. Both banks have mechanisms in place for employees to let the integration teams know if something is working well or if any improvements are needed. Asbury has also continued to meet with Xenith’s employees.
“Communication is critically important,” Layfield said. “We both ascribe to that point of view. It’s a lot better for the organization as we go through the changes that inevitably happen from a merger with the two of us working in tandem. That’s the appropriate tone that two CEOs should take.”