Here are the headlines:
· 70% —to— 90% of transitioned businesses FAIL within 3 years due to lack of “People” plan.
· The key to people retention is a solid communication strategy, combined with a well-structured benefit plan.
· This then creates the golden thread. Where Succession Planning and Employee Group Benefits Meet—Merge—Continue…
As certain as death and taxes, businesses will transition at some point.
· They pass onto another family member.
· Are sold to a third-party.
· Or close their doors entirely.
Make no mistake, with more than $2-trillion in assets, the “silver tsunami” is here.
76% of Canadian businesses are posed to exit—transition within the next decade, yet less than 10% have a plan.
To an entrepreneur, their business is, by all accounts, their single largest investment. Selling that business for its fair market value is essential. This means that someone or some entity needs to be willing to invest heavily in what has been built. Of course, they’ll only do this IF they “see” the future worth and a return on their outlay within a reasonable period of time, usually with a three year projection.
Note, not all businesses are sellable. But let’s concentrate on those businesses with a plan, able to attract a buyer and do sell. Then what?
Tragically, more than 70% of these transitioned businesses FAIL within three years
The root cause of the failure is the lack of a “people” plan.
While the human capital forms a substantial portion (80-90%) of the value of a company, somehow, somewhere during the process of negotiation and finalizing the plan, the people are overlooked, taken for granted, perhaps, simply forgotten as the essential element of the organization.
Without a strategic communication plan—clarity—employees, without ever being formally informed “know” the transition is in process, which creates upheaval, chaos, and job security is at risk. At that point, according to MIT Sloan and Harvard Business School, 47% of key staff—the top talent of the business—jump ship for another company within the first year of being acquired by another company.
Replacing these employees can cost up 400% of their annual salary, having a detrimental impact to the expected return on investment and set purchaser back in terms of loss of knowledge wealth, customer satisfaction and retention, and overall escalated uncertainty for remaining staff members.
Overall, 33% of the total workforce that were acquired in the transition leave within 18-months of the deal finalizing, leaving the new ownership with 30% of the workforce that are considered redundant but likely see with no better options and stay.
By the third year, studies show that 75% of the workforce from the purchased company are gone.
And this is why 70%-to-90% of transitioned business FAIL within the same three year period, meaning they fail to achieve intended financial returns, goals, or simply close their door.
The golden thread
Communication is the number one differentiator which separates a successful acquisition from failure. A non-discloser agreement (NDA) does not prohibit effective communication with team leads and staff. Said another way, an NDA is not full silence.
Even within the parameters of the NDA an effective communication strategy can be built and there is no one better to take the lead on this then your succession certified benefit consultant because they are already working with human resources and the employees on many levels with a significant number of planned touch points.
While the success of an acquisition can never be guaranteed, as your succession certified benefit consultant we work to:
· safeguard staff engagement through strategic, on-going, consistent, relevant, communication,
· engage with team leads to gather feedback from staff to pivot, or refocus the messaging, where necessary
· hold regular staff sessions to share updates, address concerns, and foster a sense of unity—we’re all in this together—nobody has been forgotten
· carefully work to preserve existing culture, while understand the new culture “fit”
· integrate buyers’ values, goals, and future aspiration into the overall “benefit plan” for the corporation.
· ensure employee benefits continue to promote expected productivity,
· promote areas of coverage which will assist with employee coping with the stress and uncertainty of change
The real ROI
The real legacy of a business is its ability to effectively transition into another’s hands and be equally or more successful than when it is first sold.
Let’s have a conversation.
Learn more about the step-by-step roadmap for succession planning by downloading the book.
Reach out if you would like to explore your corporate benefit options, like:
· The KPI for benefit ROI.
· The “people first” disconnect
· What really retains employees. The chicken dinner example
Note: this was written without the aid of Artificial Intelligence (AI)
Disclaimer: Please note that the information provided, while authoritative, is not guaranteed for accuracy and legality. The site is read by a world-wide audience and employment, taxation, legal vary accordingly. Please seek legal, accounting and human resources counsel from qualified professionals to make certain your legal/accounting/compliance interpretation and decisions are correct for your location. This information is for guidance, ideas, and assistance.
