I suspect that the phrase most often heard and rarely delivered against in the transactions world is ‘people are our most important asset‘. It’s right up there with ‘there’s a natural cultural fit between our two companies‘ and ‘this acquisition will be earnings accretive in x years’! Why does the tendency to make statements based on zero knowledge and little chance of delivery continue in a market situation which has been proven to be notoriously difficult to predict?
Lets deal with retention in this blog. There are a number of urban myths that pervade corporate thinking in the deal space:
- The organisational structure of a business accurately reflects the process of decision making and the relevant hierarchy. It follows therefore that the people at the top of the pyramid are more valuable from a retention perspective than those below them
- People leave organisations going through corporate change primarily because of inadequate financial incentives to stay.
- The purchase of an asset such as a company automatically ties in the loyalty and willingness to cooperate of the people within it.
- Productivity of the workforce is in some way fixed and predictable.
In my opinion, the biggest single reason why deals fail to deliver value rests with these four statements. There are a few questions which you can answer to challenge these statements. Here they are:
In looking at the relationships you have in your company, does their influence match their seniority in the business?
Does your formal job description describe what you do accurately?
Does your job satisfaction relate most closely to what you get paid? What are the other factors that impact on your job satisfaction?
Does your loyalty to your current employer automatically transfer in any change of ownership? If not, what does that transfer of loyalty depend upon?
Is your personal productivity predictable, ie do you wake up in the morning and know precisely what you’re going to achieve that day? Do you see a correlation between the amount of sleep you get and your personal productivity?
There is a curious connection between the collective capability of people engaged in a creative or challenging task and the individual’s sense of security, self worth and level of engagement. Whilst acquirers often look at the former as a prized asset, they rarely look at the components required to achieve it.
Tags: Asset, Business, Collective behaviour, Company, Customer retention, Job satisfaction, Management, Merger integration, Mergers and acquisitions, productivity, retention, Small business, stakeholder management