Best practices for communicating ownership / management transition
August 26, 2019
by an investor from Western Washington University in Key West, FL 33040, USA
I tried to do a search but didn't have a lot of luck finding what I was looking for.
I am primarily interested in smaller Main Street deals (<$5m rev). I'd love to hear from those of you who have closed a deal in this size range in regards to how you communicated the change in ownership (if at all) to the employees and customers upon closing.
In a company with <30 employees, how did you handle communicating the management transition to them? Did you tell the employees you were the new owner on day 1? Or did you come in as a new "manager" or "business partner" of some type for an interim period before officially announcing yourself as the new CEO/owner after you had had a chance to build some credibility and a relationship with the employees?
Regarding customers, in the typical "Main Street" business the owner is often the primary point of contact for customers. How did you communicate the change in ownership to customers? If you did not communicate a change, how did you handle it when customers asked who you were.
Any learning lessons, pros/cons, best practices, etc. would be greatly appreciated.
from Harvard University in Omaha, NE, USA
1. If you are the new CEO/Owner, then communicate that. Direct, honest communication on the first day. All-hands works best. Have the previous owner start.
2. You are excited to be there. The previous owner and his team (the employees) built an excellent company, and you are eager to pick up the mantel of leadership and work with the team to take the company into the future.
3. One of my investors told me that as the new CEO that you are worried everyone is going to quit on you while everyone else is concerned that you are going to fire them. In my experience, that’s correct. Therefore, you’ll want to communicate that everyone still has a job there. Everyone has a chance, just as you are asking them to give you a chance. (Now there will be changes. Some may quit, and you may fire some. However, like learning, you should leave everyone in place the first six months – a year. Depending on the skill level required, in these smaller companies, the leverage may tilt to some of the employees.).
4. The first six months or so, your focus is on learning the business, transitioning from the previous owner, getting to know the employees, and getting to know the clients. You expect the employees to help you learn. So, you’re not making a bunch of changes out the gate.
a. There’s a good chance some employees might come to you and say that the previous owner promised them something and never delivered, they’re owed a raise, or owed a promotion or some other perk. Kindly thank them for telling you, but you are focused on learning the business, and you are not making any changes now. Also, don’t address anything about benefits, pay schedules, etc. Keep them as is in the beginning until you learn.
5. You may want to discuss other items specific to the company and you, but excitement, people have their jobs, and learning are the three main things that you should communicate.
For clients/customers:
1. Good to have the previous owner draft a message (that you approve) and send it to the clients. The owner should communicate why he/she sold for their reasons (i.e., retirement), that you’re the new owner, and why they’re excited about you taking over.
2. Have the owner identify key accounts. Then you have a few different options. Visit those accounts together with the previous owner, have the previous owner do a call and you visit alone, or you visit alone. I prefer the second option as it gives both you and the owner private moments with customer, but again, approve what the previous owner will discuss. For you, visiting clients alone makes the company feel like yours in their eyes. You can also have more candid conversations about what’s going well, what can be better, etc. (Do get feedback) Certainly after a few months, you’ll be interacting with clients by yourself.
3. Additionally, with clients—communicate your excitement and that your initial focus is to learn so that you can best serve them going forward.
4. Add: “I appreciate the long-term trust that you placed in the company and previous owner for “X” amount of years. I ask and hope to earn your long-term trust as well.” People seem to like that.
5. Get in front of your customers (especially key accounts), and spend time calling others. People do like when they hear from the owner.
6. Survey your clients within in the first six months and establish an expectation to solicit their feedback often. Surveys should be focused on Net Promoter Score, what’s going well, what should you be doing, what should you stop doing. As you survey about more product/service type items, you can use more the of MaxDiff surveying techniques.
from Wake Forest University in Winston-Salem, NC, USA
Great question. First of all, for timing, strongly recommend not disclosing the sale to the employees until after closing. It just puts too much stress on them about the "what if" unknown, versus after the closing it is a done deal and they don't have to fill in all the voids with their deepest, darkest concerns and conjecture. It is also very risky for both the buyer and seller to communicate before closing as you give people the chance to start looking for a job while they are waiting for the uncertainty of a deal coming together or not. Second, I recommend an all hands meeting with buyer and seller to announce (you may want to meet first with the GM or other important employees to tell them in private). And never have this meeting on Friday! Preferably Monday through Wednesday so that you can be around to answer questions/concerns. You don't want them stewing about something over a weekend. Third, communicate openly and transparently about your new role. The challenge with announcing yourself as a manager or business partner is that you aren't introducing yourself in the role you actually fulfill, and let's say they get to know you as the manager, and then find out you are the owner. Not only might they feel misled, but they may not start the pattern and practice of asking you for decisions as you weren't the owner. Then they have to break that habit.
For customers, depending on the size and nature of the customers, you may want to jointly call on the customers with the seller for your bigger customers, or one where there is a relationship. Next would be a joint letter sent to customers. Finally, at the other end, is walk in traffic introduction. Think about the same thing for key vendors.
For both the staff and customer/vendor discussions, you want to convey that buyer and seller are excited about the opportunity to continue the legacy (assuming not a turn around), continuing to provide the same great customer service and products, and that other than a few specific employment benefits upgrades that you will be able to provide (if any) that the staff's jobs and benefits are not going to change.