Transition is a certainty for every business. While the exact details and circumstances are unique for each organization, the ability and necessity to plan for this important event applies across the board. Whether transitioning ownership internally or through a merger or acquisition (M&A), there are many points along the process that impact the overall transaction and its key outcomes. The most important of these considerations are the ones that deal with your biggest asset, your people. These “people points” include those questions, decisions, or actions that rely on the input and opinions of various people during the ownership transition journey.
People points are critically important because they can play a very influential role in the transition process, even impacting the financial transaction when shares are bought and sold. Let’s take a closer look at the role people play in different transition situations.
To Market, We Go – Selling Your Firm
There are three typical exit strategies available to sellers:
- Sell internally to employees
- Sell to an outside buyer
- Close the doors
Selling your firm requires some deep soul searching by you as the founder or owner(s) and most probably some input from your accountant, attorney, and others. There are several key people points to consider when selling your firm.
The selling process is deeply personal and requires significant self-reflection. When we talk about people points, the owners’ insight and input play an integral role in the process and set the stage for everything else. The following are some questions that an owner should ask themselves in the beginning stages of the transition process. The answers may not be immediate, and that’s okay. Taking the time to be thoughtful and deliberate will result in greater success as you move forward.
- Are you in a hurry to sell?
- How much do you need to get from the sale to meet your retirement goals?
- How committed are you to the legacy of your firm?
- Could you see yourself working for someone after being your own boss for much of your career?
Selling to Employees
Once you’ve considered those more personal questions, it’s time to take a closer look at the people who might lead the organization into the future. It’s these people points that can and should create meaningful discussions with your key employees. The questions are designed to motivate people to think beyond today and determine if your firm has what it needs for a successful transition.
- Have you developed next-generation leaders within your firm who “can keep the machine running as well as or better than it does today” so that you have confidence in an internal transition?
- What type of appetite do your next-generation owners have for financing a transition?
- What desire and ability does the next generation have to move beyond technical expertise to be entrepreneurial?
- Are there rainmakers to be found in the next generation ownership?
These are just a sampling of the multitude of questions and resulting discussions that should occur during a transition. The conversations may not be easy ones but should help identify both challenges and opportunities along the way. The answers will impact you, your family, your employees, their families, your clients, and others who engage with your business, whether you decide to sell internally or to an outside buyer.
Selling to an Outsider
Selling the firm with the intent for the buyer to retain your key “assets,” aka your people, requires tremendous effort and time. The most successful mergers or acquisitions rely on the cultures of the two firms being compatible. Anyone who has experienced this type of transition will tell you that people and culture are make or break elements. To fully explore a firm culture means understanding the core values, operational attitudes, and strategic aspirations of both firms at the most basic level. In today’s transition environment, subjects such as work-life balance and compensation philosophies are taking center stage.
With the workforce turned upside down because of the pandemic, many firms have adjusted from a work-life balance to a work-life blend, quickly adapting to a fully remote business. Now, as companies determine what their workforce looks like going forward, some are choosing a hybrid approach to in-office versus remote. As with the switch to remote, a hybrid approach creates potential new challenges: building high-performing teams; developing trust in new team members, the firm, and firm leaders; and the need for further development of communication skills for in-person and the virtual environment.
These and many more people points will directly impact retention of staff and the overall success of the transition.
Whatever transition strategy is right for you, your firm, and your employees, it will require self-reflection, having difficult conversations, leveraging active listening skills, the ability to ask meaningful and powerful questions, and critical information gathering. The decision process puts a spotlight on people points along the way and will have an impact that goes beyond the transaction.
The crucial items covered in this blog are just the tip of the iceberg. Join us for our upcoming webinar when we begin to dig deeper into many of the people points mentioned here and examine the impact people have on transition strategies.
Kate’s 25 years of experience in the Architecture and Engineering industry includes leadership roles as a Consultant, Principal-in-Charge, and National Engineering Director. Her primary focus is on helping clients with transition strategies including ownership transition and mergers and acquisitions. Kate applies a “lead with people” approach as she partners with firms to successfully anticipate and prepare for their future.