When mergers and acquisitions have negative consequences for employees

Sierra Pacific Mortgage recently experienced a significant change in its operations when it was acquired by Union Home Mortgage. The news of this acquisition was communicated to employees during an online call led by Jim Coffrini, the president and CEO of the company. However, what stood out to many employees was the lack of empathy displayed by Coffrini during this call, which left individuals feeling unsettled and disappointed.

Poor communication during times of change within a company is not a new phenomenon. Past incidents within the mortgage industry have highlighted the importance of effective communication when delivering such news. For example, Ownit’s sudden closure in 2006 led to criticism that Bill Dallas, the company’s founder, was not readily available to address the situation directly with employees. Similarly, Sebring Capital’s denial of its closure only to shut down the next day left employees feeling blindsided and betrayed.

A more recent example of poor communication during a significant change in a company happened in 2021 when Better laid off 900 staffers. The delivery of this news, particularly through a Zoom call, sparked controversy and ultimately resulted in some leaders leaving the company. CEO Vishal Garg later apologized for the mishandling of the situation, acknowledging the impact it had on employees and the company’s reputation.

The way in which difficult news is delivered can significantly impact how employees perceive the situation. In the case of Sierra Pacific Mortgage, many employees had bought into Coffrini’s vision of the “Sierra Family,” only to have that trust shattered by the abrupt and impersonal nature of the online call. While follow-up calls were reportedly conducted later on, the initial handling of the announcement left many employees feeling disconnected and disheartened.

When company leaders are faced with delivering challenging news, they may be under immense pressure that is not always visible to others. Eric Levin, an executive vice president, suggests that external observers may not fully understand the internal pressures that contribute to how news is communicated. Business owners invest significant time, energy, and financial resources into their companies, and the decision to make significant changes may be the result of various complex factors that are not immediately apparent.

In instances where significant changes within a company are necessary, communication should be clear, transparent, and empathetic. Adam Kessler, the former CEO of Academy Mortgage, set an example by addressing questions and concerns head-on during a sale to Guild in 2024. Offering severance and staying present until all questions were answered showed a level of care and respect for the affected employees that was lacking in other instances.

While not every deal will end amicably, it is essential for executives to handle difficult news with humility, transparency, and compassion. Providing clear reasons for the changes, along with support and guidance for affected employees, can help mitigate negative emotions and perceptions. Effective communication during times of change is crucial for maintaining trust, morale, and overall employee well-being within an organization.