Succession planning 101

We have all been told that succession planning is critical in an acquisition if we are to retain key staff, but how many acquirers remember to undertake the same task in their own operation during the acquisition process?

Vendor staff are not the only ones who are concerned about their future during an acquisition. It is highly likely that the acquirer will lose staff as well.

In the highly charged environment of an acquisition, we are only too sensitive that we need to retain the people who understand the business, have the connections to the customers and supplier and know how to manage the day-to-day operations. We set out to identify these people early in the discussions and ensure that the acquisition and due diligence process locks them down so they are not lost to the business. We can expect these people to be concerned about their future and we go out of our way to assure them of their continued importance to the business.

Back at the ranch, however, there are often unrecognised stresses. Senior executives are taken out of the day-to-day operations to assist with the evaluation, negotiation and due diligence process. Once the deal is done, more time and effort is needed to bed in the new operation and complete whatever intervention and integration activities are required to gain the acquisition objectives. While this is happening, others have to take up the tasks which the executives are not able to.

So in addition to doing their own tasks, some people are required to put in extra time to ensure everything continues to operate smoothly. That is of course assuming that this problem of delegation has been addressed and those assigned the additional tasks are prepared to take them on rather than leaving to go somewhere else where life is a little easier.

This is not the only place where stress will occur in the acquirer. Acquisitions often create organisational changes. Where operations are integrated, the vendor staff need to be accommodated. Few acquirers can afford the wholesale loss of acquired staff with a ‘we are the new owners and we get all the good jobs’ approach. Thus some of the acquired staff will step into senior positions resulting in current staff missing out on promotion. There will be new bosses, new positions, new job descriptions and so on. Life will be unsettled for some period of time and not everyone is going to be happy with the result. In fact, some will leave rather than face the risk of losing out, while others will prefer to go to another company where their future is more stable and certain.

What this means for the acquirer is that effort needs to be put into retaining their key staff and undertaking succession planning within their own business. A focus only on the acquired business will risk undermine the acquisition objectives if this results in serious disruption in their own business. Part of the acquisition process needs to ensure that the current business is secure.

Tom McKaskill is a successful global serial entrepreneur, educator and author who is a world acknowledged authority on exit strategies and the former Richard Pratt Professor of Entrepreneurship, Australian Graduate School of Entrepreneurship, Swinburne University of Technology, Melbourne, Australia.