When we start planning for the sale of a company, many owners ask me about sharing information with employees. They are naturally concerned that an ownership transfer will cause their workers to seek more secure positions elsewhere.
This is true whether you anticipate an external sale to a third party, or an internal sale to employees and/or family. It usually isn’t the new owner who is feared, it’s the absence of the old. If you are the founder of your business, the problem is especially acute.
Most owners don’t harbor delusions of grandeur. They know that building a business is mostly hard work. You have to be smart, but not necessarily a genius. A reasonably intelligent person with the proper skills could likely do your job, especially if you’ve developed management talent throughout your organization.
Selling the business is also something of a self-fulfilling prophesy. If it really can’t survive without you, it isn’t saleable anyway.
Any ownership transfer takes some time. Marketing for and negotiating with a third-party buyer may encompass a year or more. Transitioning to internal buyers is usually a multi-year process. The timing of announcements to employees is driven by both external and internal considerations.
The external forces are defined as those that require cooperation from key personnel. If your managers are to be the buyers, the need is obvious. When you are selling to a third party, the cooperation of key management is usually needed to prepare listing and due diligence information.
If you are informing key personnel early in the process, it is also a good time to discuss “stay bonuses;” incentives for working through a post-closing period. We’ll discuss structuring those in another column.
In most cases, I recommend making a general announcement to employees as soon as a deal is certain. For an internal sale, that is usually when all the ownership acquisition documents are signed, even if the final transfer is several years away.
In an external sale, “certain” is a less definable concept. It is not certain when you sign a Letter of Intent (LOI). It probably isn’t certain when you sign the purchase agreement. After any necessary financing is in place, and the buyer has cleared all the contingencies to purchase, it is usually time to make the announcement.
There are three “internal considerations” that drive the timing of a general announcement to employees.
- Clarity: Presenting them with a fait accompli, including details regarding the new owners and timeframes, avoids unnecessary speculation about what might happen.
- Control: As you disseminate the news to customers, vendors, bankers and other professionals, it will get out. You want the employees to hear the real story from you, not second- or third-hand.
- Inertia: The longer the time frame between your announcement and the actual event, the more likely the employees are to settle in and take a “wait and see” attitude.
Handled correctly, an ownership transfer offers your staff more security, not less. Ask them if they thought you were immortal. Unless they are deluded, logic dictates that some arrangement was needed to keep their jobs after you moved on. As a caring owner, you’ve taken steps to secure their future.
Do you know a business owner who would enjoy Awake at 2 o’clock? Please share!
Part of this “phenomenon” is the truncating of Generation X. Sociologists (I guess that’s who labels generations) have decided that GenX was a “shorter” generation than any other. Where previous generations are consistently of 20 years duration, GenX is less. Most measure it from 1965 to 1982, although I’ve seen some that claim it only applies to people born from 1966 (lengthening the Boomers’ reign to 21 years) to 1980 (starting the Millennials a full 5 years early.)
Once an employee has mastered the basics; showing up every day, starting on time, following instructions, they quickly move on to a “real” job. They begin seeking a career path. Most understand that the next step may take years instead of weeks or months.
It is ironic that the very behaviors that make your life easier appear to be threats in the eyes of a prospective buyer. You know that they could pose a problem, but they haven’t so far. Why fiddle with what’s working?
When taking a car service to the airport in Denver on Friday, I noticed a new hotel under construction out on the prairie. There were 6 building cranes huddled around it like mother storks over a communal nest. (Or perhaps that is why we call them cranes?)
The boomers and the millennials should appreciate the strength, knowledge and understanding of each generation, by so doing an effective structure can emerge which could yield high valuable growth and benefits for both generation.
I believe it all comes down to empathetic listening on each generational level. This takes active listening to another level where you connect with another’s core emotional being, in addition to understanding the message. Seek first to understand and apply the platinum rule (treat others the way they want to be treated). Working with multiple generations also requires informed leadership styles: not the leadership based on the “seat of your pants”, but leadership that is adapted based on the study and application of leadership principles. Yes, different generations are products of their political, economic, and cultural environments; but this isn’t a bad thing. It has been established through many studies that the more diverse a team is, the stronger it is!
I’m adding my two cents to elaborate on this in your article: “The “Generational Differences” seminars that business owners need aren’t just about how to deal with employees who think differently and hold different values. We need some idea of how to deal with workers who . . . are being told that the blame rests squarely on the boss.”
Okay, first a warning: Millennials probably should not read my comment or listen to my podcast: Some millennials are among the kinds of employees increasingly destroying small businesses. (And undermining larger employers.) Not all of them, but a certain kind. At the risk of offending some people, but with the intent of helping employers, my brief podcast may be enlightening (it’s on my website): http://partneroncall.com/kinds-of-employees-increasingly-destroying-small-businesses/