Why does this matter to CEOs? It matters because proper management of employees during the divestiture process is critical to ensuring a smooth transition and maintaining business value during and after the break-up.
Divestitures touch all corporate functions and require close teamwork. There are different reasons why companies choose to divest, including strategic fit, market, or regulatory changes. Also, divestitures can take different forms, ranging from creating a joint venture to completely selling off the business.
The divestiture process is extremely complex and delicate, but even more so in sectors like technology, where employees are a company’s greatest asset. In any scenario, however, maintaining business value throughout the divestiture process is a key measure of success.
Since employee productivity is essential to this, keeping people engaged through the transition is critical. Everything affecting employees should be carefully managed and orchestrated through the lens of the individual employee experience. Following are 3 best practices carried out by effective leaders.
1. Retain key talent. Any company transition is easier when leaders are engaged and enthusiastic. In a divestiture, however, leaders may be grappling with their own questions. Providing information as early as possible regarding their individual circumstances can help them move through this phase more quickly.
To this end, companies should institute a formal retention incentive program for key leaders. This signals early on their importance to the transaction and can allay concerns about job security. Having their personal circumstances clarified will help them lead others through the change.
Secondly, if possible, employers should maintain continuity of some or all terms and conditions for at least 12 months or more post-close, to maintain morale and smooth employee communications and change management during the separation.
2. Manage your messaging. Employees can focus on their “day jobs” when they are informed in a timely fashion about changes that will affect them. With strict confidentiality requirements preannounced, sharing information with employees can be a challenge. However, it is always preferable to let them know what is going on regarding a proposed divestiture simultaneous with any public announcement and preferably before the “grapevine” kicks in. Plan carefully to ensure this happens.
As the deal progresses, leaders should communicate “guiding principles” for terms and conditions and other important factors, as well as provide regular updates regarding deal progress. This way, employees can stay focused and productive, knowing when they will receive more information and what general time frames will impact them.
3. Set up for integration success by working with the new company to set the tone prior to employees moving to it; let them know what to expect in terms of business goals, culture and basics such as benefits, location, payroll, etc. Properly addressed, this helps soften the abruptness of the company transfer at close.
To execute this level of change, C-suite execs should invest in detailed, advanced planning. This involves identifying and leveraging “early planning” HR experts to understand employment issues, requirements and risks under various scenarios and across in-scope countries.
Unlike acquisitions, which largely represent growth to the parent company, divestitures can create anxiety and loss of productivity, potentially eroding the value of the deal. Effectively executing on HR due diligence, and the overall employee experience, helps drive divestiture success by ensuring that employees remain productive and motivated throughout the process—a major success factor in sustaining business momentum and value before and after closing the deal.